Ready to buy an ETF? Great, you can follow the quick steps below you get started.
Otherwise, read on for more detailed instructions on how to go about choosing and buying an ETF.
ETFs are traded on the stock market the same way that stocks are, so to access them you'll need to sign up to a share trading platform or investment app.
The first step is to make sure you choose the right platform for your ETF strategy.
For instance, many ETF investors prefer to invest once or twice a year or less into their ETF. So it makes sense to find a platform that doesn't charge any monthly or ongoing fees.
Other investors might want to invest small amounts regularly. In this case, you may prefer to sign up with a platform that charges a low trading (brokerage) fee. Some ETF brokers will charge $0 brokerage fees and instead charge a monthly fee.
Other options include micro-investment or robo-advice platforms such as Raiz Invest or Spaceship. These typically allow you to invest in a portfolio of multiple ETFs based on your risk profile, and you can typically set up an automated investment option where you choose how much and how often you invest.
Ultimately, the lower the fees the better, but it is important to match your platform with your needs.
Also read: Australia's best ETF trading platforms
ETFs are bought and sold just like regular stocks, so you'll need to sign up with an online broker to start investing in ETFs.
Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Once you've chosen a trading platform or broker, you'll need to sign up for an account.
It's generally free to sign up and most platforms let you sign up online (or via an app).
However, you'll need to provide some personal information and documentation during the sign up process. This will include:
The sign up process normally takes a few minutes, but it may take longer for your account to be verified.
ETFs are a relatively low-risk form of investing, but there's still a lot of variety in the types of ETFs you can invest in, especially in terms of risk and potential returns. According to our data, the best performing ETF over the last 5 years is the Betashares NASDAQ 100 ETF, with an average annual return of 22.68% (last checked 29 July 2024).
ETFs are broken up into 2 broad categories: passive and active.
If you choose to invest in a passive ETF, the managers will seek to replicate the performance of a broader equity market, sector or trend. Think of the ASX 200 or S&P 500 indices. If you take a passive approach, you'll likely just track this market.
On the other hand, some managers will choose to actively invest. The aim here is to increase returns, but it will generally cost you more in management fees and can come with more risks.
Learn more about the different types of ETFs.
Now that you've done the hard work, the next thing to do is actually buying the ETF. You can do so by following these steps:
If you're still struggling to pick an ETF to buy, here's a list of the top 5 best-performing ETFs over the last 5 years:
This list was last checked on 10 July 2024.
Now that you own an ETF, all that's left is to see how it performs.
ETFs are normally a long-term investment, but you should track your performance of your ETF against the wider market and if you feel like it's underperforming (or no longer matches your investing strategy), don't be afraid to look elsewhere.
Ask an expert: What are the main benefits of buying an ETF?
ETFs are a great option for those just getting started with investing as they give investors greater visibility to a number of companies and sectors. The stock market can be very intimidating for those just getting started, but ETFs offer diversification that can otherwise often take a long time to build if investing in individual stocks.
There is also generally a cost saving that comes with investing in ETFs as you're able to save on brokerage by buying units of a singular stock as opposed to paying for multiple trades for stock in every company you're interested in. You can also build a diversified portfolio of stocks more quickly – without needing a large amount of money upfront. Investing in ETFs also helps you reduce your risk, as you don't have all your eggs in one basket – or all your money in one company.
John Winters
Superhero, co-founder
The humble ETF has evolved from its start as a simple passive investing index. Nowadays, you can get an ETF for pretty much anything ranging from your more traditional passive approach to an active strategy, a thematic strategy and everything in between.
Here are the different ETF types you might want to trade:
Also known as indexed ETFs or index funds, these funds aim to replicate the returns of a specific index or benchmark. For example, you may want to invest in a fund that tracks the performance of the S&P/ASX 200 (Australian stock market) or the S&P 500 (US stock market).
Also referred to as exchange traded managed funds (ETMFs), active ETFs aim to outperform the market or a particular index. These sometimes come with a higher level of risk and usually have higher management fees.
These combine both active and passive strategies. They typically track an index but factor in additional variables, such as a higher weighting of smaller companies. Smart beta ETFs track non-traditional indices designed to invest in a selection of company stocks based on their own set of rules. The idea is to outperform the market.
Synthetic ETFs are where things start getting a little bit more complex.
ETFs access investment assets in 2 ways: physically or synthetically. ETF issuers of a physical (or standard) ETF have purchased the underlying assets on the index it aims to replicate.
Structured or synthetic ETFs try to replicate the performance of their underlying assets through the use of derivatives. This is because it's not always practical to hold physical assets. For example, gold or commodity ETFs are often synthetic due to the fact that storing large amounts of gold is often difficult. Instead of investing in an actual lump of gold, you're investing in a contract that promises returns based on the commodity's price movements.
Warning: Because structured products may use complex investment strategies, they can be much riskier than a standard index ETF.
You can read more about synthetic ETFs here.
Commodity ETFs, or exchange traded commodities (ETCs), track the performance of an underlying physical commodity, such as gold, natural resources or agricultural products.
"The best part about ETFs is that they are a basket of shares. There's no need to stock-pick or guess what the winning company will be. Plus it saves you money on all the brokerage fees you'd be paying if you were picking individual shares. It's no surprise that low-cost diversified ETFs are growing in popularity across Australia. They are affordable, diversified, and a great way to get into various sectors, markets, and countries without much effort. They can be a good addition to an investors portfolio. However, one thing to remember is that investing does come with risk. The market can be volatile, so knowing your risk tolerance and timeframe is important when investing in ETFs. Talking to a professional can help you tailor your goals and plans as you embark on your investing journey. "
When you invest in an ETF, the first cost you'll be aware of is the ETF unit price. However, there are other less obvious costs you need to be aware of. While ETFs typically charge lower fees than unlisted managed funds, this isn't always the case.
You should always read the PDS provided by the ETF issuer for full details of any fees that apply and how they will affect your investments. Here are the main costs to take note of:
| Response | |
|---|---|
| 1 | 19.53% |
| 2 | 17.16% |
| 3 | 15.38% |
| 5 | 12.43% |
| 4 | 10.65% |
| 10 | 5.33% |
| 6 | 3.55% |
| 8 | 3.55% |
| 12 | 2.37% |
| 7 | 2.37% |
| 20 | 1.18% |
| 30 | 1.18% |
| 9 | 1.18% |
| 14 | 0.59% |
| 17 | 0.59% |
| 19 | 0.59% |
| 47 | 0.59% |
| 50 | 0.59% |
| 65 | 0.59% |
| 90 | 0.59% |
Some ETFs pay dividends if the underlying company stocks pay dividends. However, it also depends on whether the fund manager chooses to pass this on, so check this first if this is a priority. This information should be available in the ETF's product disclosure statement.
Most of the time, ETFs will pay their dividends on a quarterly basis, though this isn't a rule. If you're interested in ETF dividends, check the yield, how often it's paid and whether you can reinvest the payments back into the ETF if you choose or if it's paid into your account.
You can already buy some Ethereum ETFs in Australia and more may be on the way soon.
We've selected 5 top ETF brokers for Australians based on fees, features and available funds.
Commodity ETFs can be used to hedge against inflation. Here's what they do, why they should be on your watchlist and how they can help your portfolio.
Your guide to the best ETFs offering exposure to S&P 500 companies.
If you're looking to purchase Bitcoin ETFs but are not sure how, here is our explainer guide to buying the latest thematic ETF.
If you’re looking for ways to gain exposure to Bitcoin and other digital currencies, cryptocurrency ETFs could be worth exploring. Find out what crypto ETFs are and how they work in this introductory guide.
Steps to owning and managing iShares S&P 500 ETF units.
These ETFs have the lowest fees on the market, but does that make them the best?
Here are the 10 most popular ESG ETF options currently listed on the ASX.
The best-performing ETF delivered a return of more than 111.71% over the last 12 months.
which is the best ETF for gold
Hi Kathy, we can’t recommend any products however the following ASX-listed ETFs are gold-themed: The VanEck Gold Miners ETF, Betashares Global Gold Miners ETF, Global X Physical Gold, VanEck Gold Bullion ETF, Perth Mint Gold ETF, Betashares Gold Bullion ETF. Which you pick depends on your personal goals and circumstances. Remember that some gold-themed ETFs track gold mining companies and other track the price of gold bullion in either AUD or USD.
are there any Australian Vanguard etfs that pay monthly?
Hi Alexander, I’m not aware of any Vanguard ETFs that pay monthly. Distributions are typically paid once a quarter or once a year. However it’s worth reaching out to Vanguard directly to double check this.