The S&P/ASX 200 is an index of the 200 biggest companies on the Australian Securities Exchange (ASX).
It's the leading Australian stock index and the local equivalent of US stock indices like the S&P 500 and Nasdaq 100, making it a popular choice with local investors.
What's the best way to invest in the ASX 200?
Like any market index, the best way to invest in the ASX 200 is buying an exchange-traded fund (ETF) that specifically tracks the performance of the ASX 200.
An ETF is simply a fund that invests in all the companies that make up a certain index (in this case the ASX 200), making it much easier and cost-effective for investors looking to get exposure to those companies.
ASX 200 ETFs
There's quite a few ETFs that track the ASX 200, but these are some of the most popular, based on total assets under management (AUM):
Betashares Australia 200 ETF
iShares Core S&P/ASX 200 ETF
BetaShares FTSE RAFI Australia 200 ETF
SPDR S&P/ASX 200
Of course, you could also just buy each of the 200 individual stocks that make up the ASX 200 index, but that would be pretty foolish.
The ASX requires you to purchase a minimum of $500 of shares when you first invest in a company.
If you wanted to invest in the entire ASX 200 index manually, that means you'd need to spend a minimum of $100,000 (plus trading fees).
Or you could just buy an ETF and save yourself the additional time and money.
You could either go with a full-service broker like Morgan Stanley, or you can use an online share trading platform for about a tenth of the price. You can compare popular trading platforms below.
While a professional broker can help actively manage your portfolio, if you're only looking to invest in an ETF, it might be simpler and more cost-effective to do so yourself through a trading platform.
We currently don't have that product, but here are others to consider:
How we picked these
Finder Score for share trading platforms
We've scored over 30 share trading platforms assessing them for their core features, fees, customer experience and accessibility. Our experts give each platform a score out of 10.
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.
Follow these steps to invest in the ASX 200:
1. Compare trading platforms
As you'll be buying an Australian ETF, you'll want to look for a platform that offers low brokerage fees on ASX trades. According to our research, CMC Invest, Vanguard, Betashares Direct and Webull offer $0 brokerage on ETF trades (up to a max of $1,000 per ETF, per day for CMC Invest).
2. Create an account
Once you've picked a trading app, you'll need to sign up for an account by providing some personal information and verifying your identity.
3. Fund your account
After you've been verified, you can deposit funds into your account by bank transfer.
4. Find the ETF you want to buy
Once your account has been funded, navigate to the trading section and search for the ASX 200 ETF you want to buy. Again, you're looking here for the ASX 200 ETF with the lowest fees. According to our research, the BetaShares Australia 200 ETF has the lowest management fee of any ASX 200 ETF, at 0.04%, followed by the iShares and SPDR ETFs, which have fees of 0.05%.
5. Buy the ETF
Once you've found the ETF, select how much you want to buy, review the transaction and then hit "Buy" to complete the trade.
Finder survey: How long have people been investing for (outside of super)?
Response
Female
Male
I have never invested
43.95%
26.35%
Over 20 yrs
6.97%
19.11%
Between 10-20 yrs
7.3%
10.2%
Between 5-10 yrs
6.63%
9.09%
Between 2-3 yrs
8.29%
7.24%
I am not invested anymore
5.47%
7.05%
Between 1-2 yrs
6.8%
6.12%
Between 3-4 yrs
5.31%
6.49%
Between 4-5 yrs
4.15%
6.12%
Less than a year
5.14%
2.23%
Source: Finder survey by Pure Profile of 1145 Australians, December 2023
What companies make up the ASX 200?
The ASX 200 is a who's who of huge Australian companies. Think big banks like the Commonwealth Bank and Westpac, as well as mining giants like BHP and Rio Tinto.
In fact, the ASX 200 represents around 80% of the value of the entire Australian equity market. Standard and Poor's rebalances the ASX 200 every quarter based on the performance of the companies that make up the index.
Is the ASX 200 a good investment?
The ASX 200 has delivered positive returns over the last 5 years, and its total return (including dividends) is stronger than price changes alone suggest.
Australian shares tend to pay higher yields than many international markets, and dividends – especially when reinvested – are an important component of long-term performance. Dividends can make a significant contribution to total return, compared to looking at price increases only.
When comparing with US markets like the Nasdaq 100, it's a good idea to use total return data rather than price-only figures, as most long-term data shows US tech-heavy indices outperform broad Australian equities over extended periods.
Over the past 5 years, the ASX 200 has delivered an estimated total return of around 10-12% per year once dividends are included, while the Nasdaq-100 has returned closer to 18-19% per year over the same period. This highlights why Australian shares can look underwhelming on price alone, but still perform reasonably well once dividends are factored in, even if US tech has clearly led this cycle.
Investing in an index like the ASX 200 means backing the broader economy and accepting that annual performance will fluctuate, but over long horizons, there's a historical tendency for growth. Always check whether quoted returns include dividends and consider seeking independent financial advice tailored to your financial situation.
Expert insight: Dividends versus diversification
"One of the biggest benefits of investing in the ASX is that many Australian companies pay dividends. Dividends are payments made by the company to its shareholders in the form of income. Now, the additional benefit to this is that some companies also provide franking credits. These credits have a rebate attached to them, that consists of the amount of tax that was already paid by the company. Ultimately, these franking credits have the potential to offer significant tax savings to investors. This is something unique to Australia, which is why the ASX can be a consideration for investors when building their investing portfolio. However, investing just in the ASX means that a portfolio is limited to just Australian companies, in which case it may be worth talking to a financial advisor to tailor your investing needs based on your risk tolerance, timeline and to ensure that you have ample diversification."
It's easy to get confused around trading and investing terms as the two can be fairly interchangeable.
However, when it comes to stock market indices it's an important distinction.
Investing in the ASX 200 typically refers to an index fund, which is a relatively safe way to invest. But you can also trade stock market indices through leveraged CFDs which are much riskier.
When you trade CFD indices, you're betting on the price movements of the index. This means you have the potential to earn a profit whether the index is rising or falling.
This makes it a popular tool for traders. It's considered a high-risk product because both profits and losses are amplified through leverage.
With an index fund investment or even shares, you never lose more than you invested; however, this is not the case with CFDs.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.
Kylie Purcell is an experienced investments analyst and finance journalist with over a decade of expertise in a wide range of financial products, including online trading platforms, robo-advisors, stocks, ETFs and cryptocurrencies. She is a sought-after commentator and regularly shares her insights on the AFR, Yahoo Finance, The Motley Fool, SBS and News.com.au. Kylie hosts the Investment Finder video series and actively contributes to the investment community as a judge and panellist. She holds a Master of Arts in International Journalism, a Graduate Diploma in Economics, and ASIC-recognised certifications in securities and managed investments.
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