Are these the best ETFs to buy and hold in Australia? [2023]

Decide which is the best ETF to buy and hold in Australia

Stock price and year to date data as of 23 August 2023. Rest of data as of 31 July 2023. Source: ASX and ASX Investment Products - July 2023.

*The list of funds mentioned is ranked by assets under management (AUM). When deciding what exchange-traded funds (ETFs) to feature, we analyse the financials, recent news, state of the industry, and how actively traded they have been on Stake.

👉 If you need more information before diving in, check out this comprehensive guide on how to buy ETFs in Australia→

How have these ETFs performed long-term

Data as of 31 July 2023. Source: ASX Investment Products - July 2023.

Discover if these are the right ASX ETFs to buy and hold

1. Vanguard Australian Shares Index ETF ($VAS)

Assets under management (AUM): $12,473.64m

Stock price (as of 23/08/2023): $88.86

Stake Platform Bought / Sold (1 Jan 2023 - 22 Aug 2023): 65% / 35%

The Vanguard Australian Shares Index ETF is a popular choice amongst Stake investors. The ETF reflects the general performance of Australia’s share market by tracking the performance of the largest 300 companies by market cap. Buying the index fund is a low-cost way to gain exposure to established, dividend-paying, large-cap stocks, such as Australian banks, as it comes with an expense ratio of 0.07%.

It is featured in our article on 'Which Vanguard ETF to buy?' and won the People's Choice as a part of our Stockest 100 (was also the second most traded asset on Stake in 2022).

2. Vanguard MSCI Index International Shares ETF ($VGS)

Assets under management (AUM): $6,267.88m

Stock price (as of 23/08/2023): $108.23

Stake Platform Bought / Sold (1 Jan 2023 - 22 Aug 2023): 66% / 34%

VGS is an index fund that has holdings in approximately 1,500 companies in developed markets such as the U.S., Japan, Canada, and Switzerland. The international ETF can be part of a diversified investment strategy, as it excludes Australian stocks when tracking the return of the MSCI World index, but does not include exposure to emerging markets. It provides access to larger firms when considering market cap, rather than being a small-cap ETF or mid-cap ETF.

🆚 Compare VGS and VAS→

3. iShares S&P 500 ETF ($IVV)

Assets under management (AUM): $6,016.89m

Stock price (as of 23/08/2023): $440.39

Stake Platform Bought / Sold (1 Jan 2023 - 22 Aug 2023): 68% / 32%

This ETF tracks 500 of the largest publicly traded companies in the U.S. by market cap and gives investors exposure to the American stock market. It’s amongst the more popular ETFs, which has well-known holdings such as Apple ($AAPL) and Microsoft ($MSFT), as well as an expense ratio of 0.04%.

It’s worth noting that while being a broad-based index fund, this ETF does come with currency risk as shifts in the exchange rate between the Australian Dollar and the U.S. Dollar could affect its overall performance.

4. Betashares Australian High Interest Cash ETF ($AAA)

Assets under management (AUM): $3,071.48m 

Stock price (as of 23/08/2023): $50.20

Stake Platform Bought / Sold (1 Jan 2023 - 22 Aug 2023): 76% / 24%

The Betashares Australian High Interest Cash ETF provides access to bank and cash term deposits, held in Australian Dollars at Australian banks. The index fund aims to generate returns greater than the 30 day Bank Bill Swap Rate after its expense ratio. While not giving exposure to the stock markets, the product enables investors to buy ETFs and sell ETFs at any point, rather than meeting the requirements of specific banks. The monthly distributions could also interest long-term investors.

💡Related: What are the best bank shares to buy in Australia?→

5. BetaShares Active Australian Hybrids Fund ($HBRD)

Assets under management (AUM): $2,025.35m

Stock price (as of 23/08/2023): $10.04

Stake Platform Bought / Sold (1 Jan 2023 - 22 Aug 2023): 59% / 41%

The BetaShares Active Australian Hybrids Fund can help investors gain exposure to a portfolio of hybrid securities, bonds and cash run by a fund manager. Hybrid securities allow banks and companies to borrow money from investors, it’s a set-up that combines parts of debt and equity securities. It’s not exactly a bond ETF, but does largely contain fixed-income products and provides monthly distributions.

It’s worth noting that actively managed ETFs tend to have higher expense ratios than broad-based index funds, as they usually need the ETF issuer to take on more tasks.

6. BetaShares Global Cybersecurity ETF ($HACK)

Assets under management (AUM): $745.2m

Stock price (as of 23/08/2023): $9.60

Stake Platform Bought / Sold (1 Jan 2023 - 22 Aug 2023): 61% / 39%

HACK ETF is focused on companies whose products and services fall in the cybersecurity industry. It is an international ETF, but the stocks are predominantly listed in the U.S. While ETF investing is known for providing diversification, these types of sector ETFs can be a way of gaining additional exposure to specific trends in global stock markets. This product has also been amongst the best-performing ETFs in this list in terms of five-year returns. 

7. Global X FANG+ ETF ($FANG)

Assets under management (AUM): $333.22m

Stock price (as of 23/08/2023): $19.12

Stake Platform Bought / Sold (1 Jan 2023 - 22 Aug 2023): 67% / 33%

The Global X FANG+ product is another sector ETF, which contains large and influential tech firms. Popularly known as the "FAANG" stocks, these include Facebook ($META), Apple ($AAPL), Amazon ($AMZN), Netflix ($NFLX), and Alphabet's Google ($GOOG). The ETF only had ten holdings in total as of 31 July 2023, with Tesla ($TSLA), and NVIDIA ($NVDA) also featuring. The resurgence of the tech industry and the emergence of artificial intelligence (AI) have helped it become the top ETF by performance when considering one-year returns.

💡Related: What are the best technology stocks to invest in?→

8. BetaShares Diversified All Growth ETF ($DHHF)

Assets under management (AUM): $261.42m

Stock price (as of 23/08/2023): $29.65

Stake Platform Bought / Sold (1 Jan 2023 - 22 Aug 2023): 67% / 33%

The BetaShares Diversified All Growth ETF provides access to large, mid and small-cap equities from Australia, and various developed and emerging markets. With a 100% allocation to shares and its holdings being over 8,000 companies across over 60 exchanges, it could be amongst the top ETFs for a diversified portfolio. However, the ETF doesn’t really have exposure to different asset classes, having no fixed income or currency hedging strategies.

While having stocks across multiple geographies and sectors, this ETF is still set up for passive investing, rather than being an active equity ETF.

💡Related: Discover ASX emerging markets ETFs→

9. BetaShares Global Robotics and Artificial Intelligence ETF ($RBTZ)

Assets under management (AUM):$207.21m

Stock price (as of 23/08/2023):$12.16

Stake Platform Bought / Sold (1 Jan 2023 - 22 Aug 2023):71% / 29%

The BetaShares Global Robotics and Artificial Intelligence ETF focuses on investing in firms that design, manufacture, and implement robotics and AI technologies across various industries. ETFs focused on the tech industry have been some of the best-performing ETFs in 2023, as this sector of the stock market trends has had particularly high returns. Many long-term investors also expect that ongoing technological advancements in automation and AI could have a large impact on the economy in the years ahead.

💡Related: Are these the best AI stocks on ASX?→

10. BetaShares Australian Dividend Harvester Fund (Managed Fund) ($HVST)

Assets under management (AUM): $186.58m

Stock price (as of 23/08/2023): $12.08

Stake Platform Bought / Sold (1 Jan 2023 - 22 Aug 2023): 60% / 40%

This dividend equity ETF product aims to generate income from franked dividends that exceed the amount from the general Australian share market on an annual basis. Their Australian equity fund portfolio usually has between 40 and 60 stocks from the largest 100 by market cap and is adjusted every three months to provide high dividend yields.

Like other actively managed ETFs, it does have a relatively high expense ratio when compared to general passive ETFs. However, investors do benefit from monthly distributions

Why are these ETFs worth investing in?

The ETF products are commonly traded on the Stake platform, being bought at a relatively high rate when compared to the number of sell orders. While some are newer products, these index funds all have at least a three-year performance record and AUM of $150m. The average returns of various asset classes, such as fixed income and sector ETFs, are expected to fall across different ranges and usually have a tradeoff with other factors, namely risk.

As the stock market moves, the best-performing ETFs shift over time. Some ETFs can be used to access major indexes, whereas others follow emerging megatrends that could become bigger parts of the economy in the long run. It really depends on an individual's investment strategy to determine which are the best ETFs. For some regular distributions are a key factor in finding the top ETF choices, while others might think there’s long-term value in emerging markets.

Other types of ETFs products, such as inverse or geared products tend to be more frequently traded to capture returns. They could be used as a hedge against shorter-term trends or specific events, such as interest rate announcements. These ETF products also often magnify the performance of the index tracked, which means greater volatility and potential risks. 

How to compare ETFs?

At the end of July 2023, there were over 300 ETF products available on the ASX. While exchange-traded funds can be described as providing instant diversification, it really depends on the specific product and what role it could play in your investment portfolio. Investors can usually find information online about the expense ratios, which indexes are tracked by passive ETFs or whether it’s an actively managed ETF.  

Which geographies, sectors and companies the ETF provides exposure to should also be found on the ETF issuer websites. These could significantly differ between two products such as gold ETFs or ethical ETFs. The ASX also has data on the funds under management and past returns of index funds. More funds usually means greater liquidity and a longer track record could indicate the product has been viable for multiple years. 

Should you hold ETFs long-term?

ETFs can be well suited for long-term investments and are commonly used in ‘set and forget’ scenarios, as index funds tend to follow general stock market or sector movements. Individual stocks can be impacted by events or internal matters specific to the firm and face constant pressure from competitors. Researching the financial situation and keeping up to date with all these potential situations for multiple firms can be a time-consuming task.

Whether the ETF fits with your investment strategy and provides diversification to your portfolio will be different for each person. Personal goals tend to shape investment choices, especially around time horizons and the idea of what’s a long-term period is not always the same. Simply being an ETF, does not mean the product will be a good investment decision. The general stock market might also have periods of negative returns.

More resources:

✅ What is a core-satellite investing approach?→

✅ Looking for high dividends ETFs in Australia?→

✅ Find the best tech ETF in Australia for you→

This does not constitute financial product advice nor a recommendation to invest, it is for informational purposes only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking appropriate financial or taxation advice from a licensed adviser before investing.