If you’re looking for Australian share ETFs, you can use the free ETF database at bestetfs.com.au.
However, in this article, we’ve made it even easier for you and provided an overview of the three most popular (some might say ‘best’) Australian share ETFs which use an index fund strategy.
They are the Vanguard Australian Shares ETF (ASX: VAS), BetaShares Australia A200 ETF (ASX: A200) and iShares Core S&P/ASX 200 ETF (ASX: IOZ).
To understand index funds, watch the following video from our Rask Finance education website:
Why Buy An Australian Shares ETF?
Most people in the Australian sharemarket for dividend income (including fully franked dividends) and/or long-term growth. Notice how I said long-term growth.
In the short-term (that’s anything less than five years) investing in shares is very high risk and often characterised by lots of volatility (that is, large ups-and-downs).
However, if you look at investment data going back decades, for example, to the 1970s, you’ll find that the average yearly returns from Australian shares, global shares and property have trumped the returns from bonds and cash. That’s right, even when term deposits were paying 10% or 15% in interest per year it would have been better to invest in shares or property (aka “risky” investments) for the long run.
Using a broad, low-cost index fund shares ETF has proven to be an easy way to invest in the Australian sharemarket. So without further ado, here are the Australian share ETFs…
1.
With a yearly management fee (MER) of just 0.10% it’ll cost you just $2 per year in management fees to get exposure to Australian shares with Vanguard’s VAS ETF. The Vanguard VAS ETF provides exposure to the largest 300 Australian shares, based on market capitalisation.
VAS is issued and operated by Vanguard Australia, which is one of Australia’s largest ETF providers, both by number of ETFs and total money invested (called ‘funds under management’ or FUM). Part of the global Vanguard Group Inc, Vanguard’s history dates back to the mid-1970s.
What I think is great about owning a Vanguard ETF like VAS is that the organisation actually wants to lower fees — not increase them. In 2019, Vanguard lowered the management fees for VAS.
2. BetaShares Australia A200 ETF (ASX: A200)
At a very low MER of just 0.07%, investing in the A200 ETF is — as far as we know — the lowest cost exposure to Australia’s largest blue shares for everyday investors like us. Excluding brokerage costs, of course, it’d cost just $1.40 per $2,000 invested in A200.
The BetaShares’ A200 ETF was labelled as a ‘game-changer‘ because the ETF is really taking the fight to low-cost incumbents like Vanguard and iShares.
The Betashares A200 ETF provides exposure to the largest 200 Australian shares, based on market capitalisation but it uses a shares index provided by Solactive — not the usual S&P 200 index.
BetaShares is one of Australia’s largest ETF issuers, by number of ETFs issued on the ASX. At the end of 2018, Betashares had $6.1 billion of money invested across all of its ETFs.
3. iShares Core S&P/ASX 200 ETF (ASX: IOZ)
Costing just $3 per year in management fees (MER) per $2,000 invested, the iShares IOZ Australian shares ETF provides a pure index fund exposure to the largest 200 shares on Australia’s stock market. The ‘core’ in its name hints that IOZ might be best used as a core shares exposure in a diversified portfolio — much like A200 and VAS.
With one investment, the iShares Core S&P/ASX 200 ETF could be used by investors to get exposure to a broad basket of Australia’s largest public companies. These companies are likely to pay dividends (often with franking credits) and grow in value over the long run (10+ years).
Blackrock is the company behind the huge issuer of ETFs called iShares. In fact, it is one of Australia’s and the world’s largest ETF issuers, both in terms of the number of ETFs issued and the money invested.
Picking The Right Australian Shares ETF
Choosing ETFs might sound daunting but we think that so long as you choose from a list of reputable ETF providers, keep it low cost, diversified, simple (e.g. index fund strategies) and you know the risks of the thing (e.g. shares) that the ETF is exposed to, the chances of making a really bad decision are relatively low.
Having said that, we strongly encourage Australian investors to take our free ETF investing masterclass course so you know what to look for and how to evaluate an ETF.
And to be clear, investing in shares is high risk and each ETF has specific risks of its own, so it’s smart to read the ETF’s Product Disclosure Statement (PDS) available on the provider’s website before investing.
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Disclosure: At the time of publishing, Owen owns shares/units in the BetaShares A200 ETF.