Which Australian ETF has the highest return?

Data provided by investment research house Morningstar shows that – among Australian-listed ETFs – the best performing was fund provider Global X's spot bitcoin ETF , which more than doubled investors' money with a 153.50 per cent return for the 12 months to the end of March.

Can an ETF become worthless?

If you diversify across all sectors and countries through an ETF like IWDA, it's very, very unlikely your investment will become worthless . Because it would mean that all major companies in the world have gone bankrupt.

How do you make money with exchange traded funds ETFs?

Most ETF income is generated by the fund's underlying holdings. Typically, that means dividends from stocks or interest (coupons) from bonds . Dividends: These are a portion of the company's earnings paid out in cash or shares to stockholders on a per-share basis, sometimes to attract investors to buy the stock.

How can you buy the fund exchange traded funds ETFs?

You'll need a brokerage account to buy and sell securities like ETFs . If you don't already have one, see our resource on brokerage accounts and how to open one. This can be done online, and many brokerages have no account minimums, transaction fees or inactivity fees.

What is the safest investment with the highest return in Australia?

Investors seeking maximum returns in Australia should consider investing in Australian shares for long-term gains, as they offer high potential returns. Government and corporate bonds also present a safe option for low-risk, fixed-rate returns.

Why is ETF not a good investment?

ETFs are subject to market fluctuation and the risks of their underlying investments . ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.

What is the downside of buying ETFs?

For instance, some ETFs may come with fees, others might stray from the value of the underlying asset, ETFs are not always optimized for taxes , and of course — like any investment — ETFs also come with risk.

Has an ETF ever gone to zero?

Over even longer time horizons, every percentile (except the 100th) of the ETF's value will eventually converge to zero.

Should I just put my money in ETF?

If you're looking for an easy solution to investing, ETFs can be an excellent choice . ETFs typically offer a diversified allocation to whatever you're investing in (stocks, bonds or both). You want to beat most investors, even the pros, with little effort.

How much should a beginner invest in ETFs?

ETFs don't have minimum investment requirements -- at least not in the same sense that mutual funds do. However, ETFs trade on a per-share basis, so unless your broker offers the ability to buy fractional shares of stock, you'll need at least the current price of one share to get started.

What is the difference between an ETF and an exchange traded fund?

What is the difference between exchange-traded and mutual fund? Exchange-traded funds (ETFs) trade on stock exchanges throughout the day, while mutual funds are bought or sold at the net asset value (NAV) at the end of the trading day, and ETFs often have lower expense ratios than mutual funds.

How many ETFs should I own as a beginner?

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.

Exchange traded funds (ETFs) - Moneysmart.gov.au (2024)

Exchange traded funds (ETFs) are a low-cost way to earn a return similar to an index or a commodity. They can also help to diversify your investments. You can buy and sell units in ETFs through a stockbroker, the same way you buy and sell shares.

How ETFs work

An ETF is a managed fund that you can buy or sell on an exchange, like the Australian Securities Exchange (ASX) or Cboe Australia (CXA).

When you invest in an ETF, you don't own the underlying investments. You own units in the ETF and the ETF provider owns the shares or assets.

ETF units can be created or redeemed to match investor demand. This helps the price of the units to stay close to the net asset value (NAV) of the ETF. This differs from shares in a company or units in a Listed Investment Trust, where the price fluctuates based on investor demand.

The ASX ETF investor course can help you learn more about how ETFs work.

Types of ETFs

Passively managed ETFs

In Australia, most ETFs are passive investments that don't try to outperform the market. The role of the fund manager of a passive investment is to track the value of:

Active ETFs and Hedge Funds

Exchange traded managed funds (also known as ‘Active ETFs’) and exchange traded hedge funds are actively managed investments. For these funds, investment managers may use high risk trading strategies to try to outperform an index.

Physically-backed and synthetic ETFs

ETFs can be either physically-backed or synthetic.

Physically-backed ETF – invests in all the securities in the index or a sample of the securities in the index.
Synthetic ETF – hold some of the underlying assets and use derivatives to copy the movements of an index or asset. This type of ETF may use the word 'synthetic' in its name. Synthetic ETFs have an additional risk that the counterparty to the derivative could fail.

What you can invest in through an ETF

ETFs are available for a range of asset classes and individual assets.

These include:

Australian shares
international shares
sectors of the Australian or international share market, such as mining or financials
fixed income investments like bonds
precious metals and commodities
foreign currencies
crypto assets
diversified across multiple asset classes

Visit the ASX or CXA websites for the ETFs you can invest in.

Pros and cons of investing in ETFs

Weigh up the pros and cons before you invest in ETFs.

Pros

Diversification – ETFs allow you to buy a basket of shares or assets in a single trade. This can help to diversify within an asset class. ETFs also allow you to invest in markets or assets it can be difficult or expensive to access. You can also diversify across ETFs so there's less chance of loss if an ETF provider collapses.
Transparency – ETFs publish the net asset value (NAV) daily. This can help you track how the underlying asset are performing and if the price of the ETF is close to the NAV. Most ETFs publish the list of assets owned by the fund, so you know exactly what the ETF is invested in.
Low cost – a lot of ETFs have a low management expense ratio (MER). They're usually cheaper than equivalent managed funds.
Easy to trade – you can buy and sell ETFs during the trading hours of the exchange, through a broker. You can typically buy smaller quantities of ETF units than unlisted managed funds.

Cons

Market or sector risk – the market or sector the ETF is tracking could fall in value. For example, if the ASX200 declines, the value of your ETF investment will also fall.
Currency risk – if the ETF invests in international assets, you face the risk of currency movements impacting your returns. Some ETFs are 'currency hedged' which removes this risk.
Liquidity risk – some ETFs invest in assets that are not liquid, such as emerging market debt. This can make it difficult at times for the ETF provider to create or redeem securities.
Tracking errors – an ETF's return may differ from the index or asset it's designed to track. This can be due to differences in the assets owned by the ETF and the index it is designed to track, fees, taxes and other factors. This means you could buy or sell when it's not trading at the indicative net asset value (iNAV).

How to buy and sell units in ETFs

You can buy and sell units in an ETF through a stockbroker. It's the same as buying and selling shares. You buy and sell at the market price at the time of the trade.

Settlement of trades takes place two business days after you buy or sell the ETF. You have to pay brokerage fees when you buy or sell an ETF.

You may also be able to buy and sell units in the ETF fund directly with the ETF provider. These transactions will occur at the end of the day with a price reflecting the NAV of the units.

Compare the price and NAV or iNAV

You can check if an ETF is fairly priced by comparing its price on the ASX or Cboe with the NAV or the indicative or intraday NAV (iNAV).

The NAV is calculated by taking the assets of the fund, subtracting the liabilities and dividing this by the number of units in the fund at the end of the day. The iNAV is a real-time estimate of the NAV, published during the day.

ETF providers give updates of the NAV:

on the ASX at the end of the day
generally on the ETF provider's website

The price to buy and sell an ETF should be close to the NAV per unit. But at times, such as on days with large changes in prices of the asset classes, the price of the ETF may move away from the NAV.

You can use the iNAV as a reference point during the day to understand if an ETF you're buying or selling is at, or close to, the NAV per unit. You can see the latest iNAV from your broker by adding 'Y' before the ETF ticker. For example 'YABCD' for the ETF ticker 'ABCD'.

When to buy and sell ETF units

To get an ETF price that is more likely to represent its underlying value, place your trades at least 30 minutes after the market opens.

It's also better to buy or sell ETFs when the market for the underlying asset is open. For example, if you're buying or selling an ETF that tracks Asian shares, place your orders when the Asian sharemarkets are open.

Check the product disclosure statement before you invest

A product disclosure statement (PDS) contains a lot of information you'll need to know about an ETF. It includes information on:

what index, sector or asset the ETF returns aims to replicate
the fees and costs
how to buy or sell units in the ETF on market or, if allowed, directly with the ETF provider
the risks of investing in the ETF
how to complain if you have a problem with the ETF

If you have questions about an ETF you can contact the fund manager or get financial advice. You can also check recent market announcements for new information on an ETF.