Invest in Exchange-traded Funds in Australia

Exchange-traded funds (ETFs) are one of the most popular financial assets traded by investors globally. They are versatile and generally considered low-risk investments. Some other benefits of ETFs include:

• ETFs allow investors to buy a basket of shares in a single trade - a great way to diversify your portfolio.
• ETFs are a low-cost asset to trade with a low management expense ratio (MER).
• ETFs are easy to trade and can be bought and sold during the regular ASX trading hours (or during U.S. stock exchange trading hours for U.S. ETFs).

ETFs are managed funds that exchanges, like the Australian Securities Exchange (ASX), provide to investors to buy and sell. They are passive investments that might follow an index like the ASX200, a theme or a commodity such as gold. ETFs don’t attempt to outperform the market but follow the value of the assets they track.

The most actively traded ASX ETFs by volume on Stake are $VAS, $IVV, $VGS, $NDQ and $VDHG (YTD as of 19 September 2023).
If you want to research ETFs based on their returns, check out our article on the best-performing ETFs in Australia.

There are risks associated with any investment, and ETFs have some specific risks you need to be aware of. Some of the main risks that you can face trading ETFs include:

• Lack of liquidity in volatile markets.
• Any changes that a government or regulator could introduce which impacts the value of securities in which the ETF is invested in.
• Some ETFs may use OTC derivatives that have higher exposure to counterparty risk.
• ETFs taxation treatment can vary differently to shares, so it's important to take advice from a taxation adviser for your own financial circumstance.

Australian ETFs pay dividends just like any dividend-paying stock. However, ASX ETFs typically pay out dividends on a quarterly basis, with the payouts from all relevant stocks pooled together. Like individual stocks, the dividends can be paid out through the issuance of additional stock or cash. Learn about some of the top dividend ETFs in Australia.

The minimum investment required to buy ETFs in Australia is $500. Stake is a CHESS-sponsored platform and this means that there’s a minimum marketable parcel under your own HIN. Once you already hold shares of a specific ETF and want to buy more, there’s no minimum purchase size.

The largest exchange-traded fund on the ASX is the Vanguard Australian Shares INDEX ETF ($VAS), with $12.90b of assets under management (AUM) as of 19 September 2023. Learn more about the top 10 Vanguard ETFs in Australia.

ETFs can make a great long-term investment and have historically shown a higher rate of success when held over a longer term compared to holding individual stocks. When you invest in ETFs over a long period of time, this allows you to compound any earnings received from dividends and cut down on costs like brokerage fees.