The group of Australian companies, commonly known as the ASX 50 Index are the 50 largest companies listed on the Australian Stock Exchange. The index is a market capitalization index similar to the ASX20 and ASX200 Shares Index in which the larger the company, the larger its weight in the index.
The company weightings in the index is proportional to its make up in the aggregate value of all of the 50 companies in the index.
The list is broken down by market capitalization and sector. The values of the companies changes on a day to day basis as its share price changes. The market cap figure is rounded to the nearest hundred million and should be used as an indicative ranking order only.
The minimum size for companies to be included in the ASX 50 is estimated to be $5.0 billion market capitalization (share price times total shares on issue and excluding debt) and the average value of all of the company is $23 billion.
The key deciding factors aside from the company market cap is the degree of its share that are considered free float which is a proxy for liquidity. This is portion of the shares outstanding that is not locked up, tightly held by private investors and are freely traded.
Long Term Index Investing
Index funds track the returns of market indices. Long term passive investors can use index funds to piggy back the performance index.
The return of the ASX 200 matches to a large extent to the 50 index because while ASX 200 include 200 companies, there is an overlap as both index share the same 50 positions in the index.
Periodically, the index is rebalanced as companies value changes overtime. Standard and Poors’ set a quarterly rebalancing frequency in which when companies in the index are replaced either when the value of one of the index member drops or another company rises that it is now one of the 50 largest listed companies on the ASX.
ASX 50 Index Fund
Lets face it, it is hard for individual investors to even keep track of a top 10 shares list let alone an index of 50 companies. Index funds has the the advantage of providing a low cost option to track the index.
S&P ASX 50 ETF (ASX SYF) is an ASX listed fund which tracks the ASX 50 index. The goal of the fund is to replicate the the performance of the index. The fund invests proportionally in each of the companies included in the index. There are a number of advantages of using ETF including a powerful way of achieving market returns if the investor does not have the skill set or time to mange capital themselves.
It is extremely cost effective where the annual cost of SYF ETF is only 0.286% per year and it bypass the need for additional layer of financial adviser fees. Savings from fees is an important factor in increase returns as academic research shows that more than half of fund managers under perform their benchmark after taking into account of fees charged.
ASX 50 Index Components
|Rank||Name||ASX||Size||Share Price||P/E Ratio||Sector|
|2||Commonwealth Bank of Australia||CBA||113||$64.03||11.60||Financial|
|5||National Australia Bank||NAB||57||$17.88||16.10||Financial|
|6||Australia and New Zealand Bank||ANZ||51||$18.02||12.30||Financial|
|21||Aristocrat Leisure||ALL||16||$26.51||10.20||Consumer Discretionary|
|22||Ramsay Health Care||RHC||15||$69.24||26.80||Healthcare|
|36||DEXUS Property||DXS||9||$8.97||6.30||Real Estate|
|31||James Hardie Industries||JHX||11||$26.40||32.20||Industrial|
|43||Treasury Wine Estates||TWE||7||$10.06||17.60||Consumer Staples|
The list shows the companies in the top 50 ASX index is dominated by resources, financials and real estate sectors.
Major Sectors In the Index
Similar to the sector breakdown of the broader ASX 200 index in this case the financials and resources still make up around 40% of the total value in the index. This can be considered highly concentrated on an individual stock basis as the financials are mostly made up of the big 4 domestic banks.
Real estate is one of the largest sub sector within the financial component of the index. For historical comparisons, one should note that REITs were broken out from the financial segment in 2016.
The Australia Stock Exchange is known to be the preferred listing option for the mining sector. Even with hundreds of mining companies, the market capitalization of BHP and RIO dominates the resources sector.