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Compare Exchange Traded Funds (ETFs)

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Helpful Information on ETFs

What is an Exchange Traded Fund (ETF)?

An exchange traded fund (ETF) is a pooled investment option that can be traded on the share market. Like a managed fund, an ETF allows you to invest in a basket of assets or companies with a single trade.

The federal government’s Moneysmart website says most ETFs are “passively managed” which means they’re designed to move in line with an index or commodity, such as the S&P/ASX 200 or the gold price.

This is in contrast to many managed funds, which are often more actively managed, which means a fund’s trades are overseen by a professional fund manager whose aim is to outperform the relevant market index.

Consequently, ETFs can have significantly lower management fees than an actively managed fund.

There are a variety of ETFs available in Australia and listed on exchanges abroad, providing investment exposure to anything from an entire market (e.g. S&P/ASX 300 or FTSE China 25) to a specific sector such as cybersecurity or healthcare.

For example, if you invested in an ETF such as the ASX:STW, that tracks the S&P/ASX 200, you are in a way investing in each of the top 200 companies traded on the Australian Stock Exchange (ASX).

But it’s important to note that when you invest in an ETF you own shares in the fund, not the underlying company shares, commodities or other assets owned by the fund. You will, though, get a share in any dividends the companies pay to the fund.

How do Canstar’s ETF Awards work?

Canstar’s Provider of the Year Award for Exchange Traded Funds recognises the ETF provider that has cumulatively scored highest in our assessment which considers how closely an ETF tracks its benchmark, associated costs and fees, as well as the information and educational support they provide to investors.

You can view the ETF Award for Provider of the Year here.

ETFs may be ideal if you’re an investor looking for a low-cost product with broad diversification and a steady return. If you want to protect your wealth while growing it, you might appreciate an ETF as its diversified nature can help to mitigate the effects of volatility in the market.

Before choosing an ETF or other investment product, you should know your own risk profile. There are a variety of different funds to suit varying levels of risk tolerance.

Broadly speaking, there are four common risk profiles:

  • Conservative: An investor who seeks to minimise the risk of losing their accumulated wealth and is comfortable with lower returns and a higher degree of stability.
  • Balanced: An investor who is willing to accept modest risks to seek higher long-term returns than a conservative investor.
  • Growth: An investor who is comfortable with short-term fluctuations and/or losses in exchange for the potential of higher long-term returns than a balanced investor.
  • Aggressive: An investor willing to endure extensive volatility and significant losses, particularly in the short-term, in the hope of maximising long-term returns.

Your own risk profile will largely determine the asset classes you choose to invest in with an ETF, from shares to property, bonds or cash. Different mixes of the assets carry varying levels of investment risk and potential returns.

There are many types of ETFs in Australia and they are often categorised based on a number of factors including how they invest. For example:

  • Australian ETFs: Australian broad-based, Australian sector, Australian strategy-based
  • International ETFs: international broad-based, international sector
  • Other ETFs: commodities, currency, fixed income and cash

Actively managed ETFs

While most ETFs tend to be passively managed, as explained earlier, there are some that are considered as actively managed ETFs. These offer more strategic fund management than an ETF that simply tracks an index, but they tend to come at a higher cost.

Read more: Active vs. passive investing – what’s the difference?

Ethical ETFs

Ethical ETFs are an option for investors who want to make sure their money is funding activities that are considered ethical.

Ethical investment funds can “screen in” companies that actively invest in ethical or sustainable activities such as healthcare or green energy, and “screen out” companies that invest in activities such as coal seam gas, tobacco production, forced labour, or certain forest logging.

Choosing ethical investments is a growing trend, with more people wanting to make sure their money is not funding activities that go against their personal values.

So if you’re interested in investing in ethical ETFs you need to look carefully at what a fund you’re interested in says it does and doesn’t invest in to make sure it aligns with your values.

There are many pros and cons to ETFs and Moneysmart says you should weigh up both before considering investing your money.

The main pros are the relatively low cost of investing in funds that can offer a very diversified and transparent investment mix. ETFs can also be traded easily during the opening hours of the exchange where they are listed.

But you also need to consider the risks associated with investing in ETFs. Since they usually follow a particular market or sector they are prone to mirror movements in those markets. While markets may rise, they may also fall, in which case the value of your investment could fall as well.


Author: Nina Rinella

As Canstar’s Editor-in-Chief, Nina heads up a team of talented  journalists committed to helping empower consumers to take greater control of their finances. Previously Nina founded her own agency where she provided content and communications support to clients around Australia for eight years. She also spent four years as the PR Manager for American Express Australia, and has worked at a Brisbane communications agency where she supported dozens of clients, including Sunsuper and Suncorp.

Nina has ghostwritten dozens of opinion pieces for publications including The Australian and has been interviewed on finance topics by the Herald Sun and the Sydney Morning Herald. When she’s not dreaming up ways to put a fresh spin on finance, she’s taking her own advice by trying to pay her house off as quickly as possible and raising two money-savvy kids.

Nina has a Bachelor of Journalism and a Bachelor of Arts with a double major in English Literature from the University of Queensland. She’s also an experienced presenter, and has hosted numerous events and YouTube series.

You can follow her on Instagram or Twitter, or Canstar on Facebook.

You can also read more about Canstar’s editorial team and our robust fact-checking process.


Josh Sale, Exchange Traded Funds Ratings Manager

Headshot of Josh Sale, CanstarAs Canstar’s Ratings Manager, Josh Sale is responsible for the methodology and delivery of Canstar’s Exchange Traded Funds Star Ratings and Awards. With tertiary qualifications in economics and finance, Josh has worked behind the scenes for the last five years to develop Star Ratings and Awards that help connect investors with the right product for them.

Josh is passionate about helping people get hands-on with their finances. Josh has been interviewed by media outlets such as the Australian Financial Review, news.com.au and Money Magazine.

You can follow Josh on LinkedIn, and Canstar on Twitter and Facebook.

This content was reviewed by Editor-in-Chief Nina Rinella as part of our fact-checking process.

Important information

For those that love the detail

This advice is general and has not taken into account your objectives, financial situation or needs. Consider whether this advice is right for you.

Canstar does not rate or compare every provider in the market and we may not compare all features relevant to you. Brokerage fees and other trading costs may apply when buying or selling ETF’s. These costs will depend on the broker you use and the amount invested or traded. Please confirm all fees and costs with the broker or provider you choose before making an investment decision. Star Ratings are only one factor to take into account when considering products. Check current product details and investment options with the product issuer. 

Past performance should not be relied upon as an indicator of future performance; unit prices and the value of your investment may fall as well as rise. In some circumstances, trading can be suspended and in that event, unitholders will not be able to buy or sell units in that fund. There can be no assurance that there will always be a liquid market for units or a fund's investments. ETFs are considered by ASIC to be complex financial products. Some are more complex and risky than others. The table(s) above include only funds that are passively managed and seek to track an index. Synthetic ETFs and Inverse ETFs are not included in the list above. For more information on ETFs and risks associated with them, see ASIC’s Moneysmart website at https://moneysmart.gov.au/managed-funds-and-etfs/exchange-traded-funds-etfs.

Any advice on this page is general and has not taken into account your objectives, financial situation or needs. Consider whether this general financial advice is right for your personal circumstances. You may need financial advice from a qualified adviser. Canstar is not providing a recommendation for your individual circumstances. It’s important you check product information directly with the provider. Consider the Product Disclosure Statement and Target Market Determination (TMD), before making a purchase decision. Contact the product issuer directly for a copy of the TMD. For more information, read our Detailed Disclosure.

What is a Target Market Determination?

A Target Market Determination (‘TMD’) is a document that explains which people particular financial products may be suitable for (the target market) and sets out any conditions around how financial products can be distributed to consumers.

Why do product issuers provide Target Market Determinations?

From 5 October 2021, TMDs are compulsory for most financial products.

Issuers and distributors of financial products must take reasonable steps that are likely to result in financial products reaching consumers in the target market defined by the product issuer.

We recommend that you consider the TMD before making a purchase decision. Contact the product issuer directly for a copy of the TMD.

Canstar may earn a fee from its Online Partners for referrals from its website tables, and from sponsorship or promotion of certain products. Fees payable by product providers for referrals and sponsorship or promotion may vary between providers, website position, and revenue model. Sponsorship/promotion fees may be higher than referral fees. If a product is sponsored or promoted, it’s an ad and it is clearly marked as such. An ad might appear in different places on our website, such as in comparison tables and articles. Ads may be displayed in a fixed position in a table, regardless of the product's rating, price or other attributes. The location of an ad doesn’t indicate any ranking or rating by Canstar. Payment of fees for ads does not influence our Star Ratings. See How We Get Paid to find out more.