BUILD YOUR WEALTH WITH ETFs

Exchange traded funds have made it easy for Aussies to invest in a wide range of assets. They are a one-stop shop with low fees and instant diversification. Our comprehensive guide sets out how ETFs can be used as building blocks for a portfolio that will help you achieve your financial goals.

- PAM WALKLEY

Ten years ago, the Australian exchange traded fund (ETF) industry managed just under $7 billion in funds. In January 2013, there were only 90 ETFs and exchange traded products (ETPs). There were no thematic-oriented products on the market and most of the money was tracking the S&P/ASX 200 index.

Today, funds under management are closer to $143 billion, more than 20 times higher than in 2013. There are now 312 ETPs, including 46 that listed in the 12 months to March, according to the March 2023 ETP report by Rainmaker Information (publisher of Money magazine). The options now available to Australian investors cover regions, countries and even specific sectors or assets.

ETFs are the most common and most wellknown ETP, but ETPs also include exchange traded notes, commodity pools and other product types.

More growth to come

ETFs are becoming the most popular way for Australians to invest, according to the Stockspot ETF Report 2022. Many investors are turning to ETFs instead of their traditional active managed funds and listed investment companies (LICs) due to erratic performance and high fees.

The ETF market continues to expand at a faster rate than LICs and managed funds, with ETFs growing at 38% a year over the past five years, three times the rate of LICs and eight times the rate of managed funds, according to the report.

Despite this growth, ETFs still only make up around 4% of the total funds market in Australia. This compares with 25% in the US, highlighting the potential for further growth in the Australian ETF sector.