Which ETFs Have The Highest Return On Investment?

Exchange traded funds (ETFs) are popular among many Aussie investors, so which on our database have generated the highest returns on investment?

The popularity of ETFs in Australia has soared over the last decade. According to investment adviser Vanguard, the Australian ETF market surpassed $61 billion in assets under management in 2019, with record inflows of over $13.7 billion for the year.

If you’re thinking of investing in an ETF, this article will explain some of the main types of ETFs available in Australia and show which ones on our database have delivered the highest returns to their investors over the past year.

What are ETFs?

ETFs are a form of investing that pools your money into a widely diversified portfolio of stocks with a single investment. They are overseen by a professional fund manager.

ETFs can be an option worth considering for investors who are interested in shares or similar assets, but are looking for relatively low-cost, lower-risk products that could provide slightly lower and steadier returns than some other products. This investment product is traded on the share market and can be accessed with an online share trading platform or through a broker.

What are the different types of ETFs?

ETFs don’t have a one-size fits all approach – there are many different types, including:

  • Australian Broad Based ETFs
  • Australian Sector ETFs
  • Australian Strategy ETFs
  • International Broad Based ETFs
  • International Sector ETFs
  • Commodity ETFs
  • Currency ETFs

Note: Returns alone are not the only indication of an ETF’s quality – rather they are typically a sign of the performance of the asset category or index they are tracking. There are many other ways to assess the quality of an ETF, including its management team and value.

According to ASIC’s MoneySmart website, one of the key ways to determine an ETF’s value is to look at its tracking error. The tracking error of an ETF is the difference between the ETF’s performance and the performance of the index it is tracking. It can be measured as the amount by which an ETF’s return, as indicated by its net asset value (NAV), varies from the actual index return.

There are Passive and Active ETFs. Passive ETFs track an asset or market index and generally do not seek to outperform the market. Active ETFs mean the fund manager is actively trying to outperform the market or index. Because Passive ETFs rarely meet an index or category’s performance, it could be a good idea to look for an ETF with the smallest tracking error.

As well as one-year returns, the tables below display returns data for the past:

  • One month
  • Three years
  • Five years

Each table of products shown is sorted by one-year returns, meaning products that have delivered the highest returns over that time will feature more prominently. Bear in mind that past performance is not a reliable indicator of future performance and that when comparing ETFs, it could also be helpful to consider factors such as fees, tracking error and price relative to NAV before making a decision one way or another.

To compare the performance of more ETFs over your preferred length of time, visit Canstar’s ETF comparison page.

Highest one-year returns – Australian Broad Based ETFs

Australian Broad Based ETFs are the most common form of Domestic Equity ETFs. Broad Based or ‘Index’ ETFs track a broad index such as the S&P/ASX 200 or the S&P/ASX 50. They invest in multiple sectors across the Australian market, and as a result tend to be highly diversified, investing in small, mid and large-cap stocks.

The table below displays the Australian Broad Based ETFs on Canstar’s database with the highest one-year returns (sorted from highest-lowest and then alphabetically by provider name). Performance data is updated monthly. Before committing to a particular ETF, check upfront with your provider or financial adviser and read the PDS to confirm whether it suits your needs. 

Highest one-year returns – Australian Sector ETFs

Sector ETFs invest in specific ‘sectors’ of the market, such as banks, resources or property. Therefore, Australian Sector ETFs buy groups of Australian stocks from these sectors.

Because there are a number of different sectors within the Australian share market, Sector ETFs can have different levels of performance. For example, according to investment adviser Stockspot’s 2019 ETF Research Report, property and resources ETFs delivered an average one year return of 28.6% and 25.7% respectively.

As a general rule, Sector ETFs tend to be more concentrated on large stocks than smaller ones, which are often seen as riskier investments.

The table below displays the Australian Sector ETFs on Canstar’s database with the highest one-year returns (sorted highest-lowest and then alphabetically by provider name). Performance data is updated monthly. Before committing to a particular ETF, check upfront with your provider or financial adviser and read the PDS to confirm whether it suits your needs.

Highest one-year returns – Australian Strategy Based ETFs

The investments in Australian Strategy ETFs are selected according to certain investment strategies, like high-dividend yield or maximised capital growth. They tend to only include a limited number of different Australian stocks, rather than a broad index.

The table below displays the Australian Strategy Based ETFs on Canstar’s database with the highest one-year returns (sorted highest-lowest and then alphabetically by provider name). Performance data is updated monthly. Before committing to a particular ETF, check upfront with your provider or financial adviser and read the PDS to confirm whether it suits your needs.

Highest one-year returns – International Broad Based ETFs

International Broad Based or ‘Broad Market’ ETFs work in a very similar way to Australian Broad Based ETFs, except that instead of Australian indices they track global ones, such as the American stock market index the S&P 500.

The table below displays the International Broad Based ETFs on Canstar’s database with the highest one-year returns (sorted highest-lowest and then alphabetically by provider name). Performance data is updated monthly. Before committing to a particular ETF, check upfront with your provider or financial adviser and read the PDS to confirm whether it suits your needs.

Highest one-year returns – International Sector ETFs

In a similar way to Australian Sector ETFs, International Sector ETFs aim to capture the performance of stocks in specific sector segments, but in overseas markets. International Sector ETFs can offer affordable access to global markets.

The table below displays the International Sector ETFs on Canstar’s database with the highest one-year returns (sorted highest-lowest and then alphabetically by provider name). Performance data is updated monthly. Before committing to a particular ETF, check upfront with your provider or financial adviser and read the PDS to confirm whether it suits your needs.

Highest one-year returns – Commodities ETFs

Commodities ETFs invest in physical commodities like agricultural goods and precious metals such as gold. When an investor buys a Commodities ETF, they don’t own a physical asset. Rather, they own a set of contracts backed by the commodity.

The table below displays the Commodities ETFs on Canstar’s database with the highest one-year returns (sorted highest-lowest and then alphabetically by provider name). Performance data is updated monthly. Before committing to a particular ETF, check upfront with your provider or financial adviser and read the PDS to confirm whether it suits your needs.

Highest one-year returns – Currency ETFs

Australian Currency ETFs track the performance of the Australian Dollar (AUD) against other select currencies. Currency ETFs may be worth considering for those investors who want exposure to currency movements without actually buying physical tender. These are a relatively new type of ETF in Australia, with the first fund listed in 2012, and according to Stockspot.

The table below displays the Currency ETFs with the highest one-year returns (sorted highest-lowest and then alphabetically by provider name). Performance data is updated monthly. Before committing to a particular ETF, check upfront with your provider or financial adviser and read the PDS to confirm whether it suits your needs.


Pros and Cons of ETFs

If you are considering investing in ETFs, it could be a good idea to familiarise yourself with some of their potential advantages and disadvantages.

Pros

A key advantage of an ETF can be its cost (although some are more cost-effective than others). Some ETFs can invest in upwards of fifty listed stocks, and in many cases their standard brokerage fee and management fees may be lower than those of a managed fund.

Many ETFs enable investors to diversify their money across broad markets or individual sectors. You can also access all of the usual benefits of stock trading, such as receiving dividends from your investments.

Cons

Although some ETFs may be less volatile than individual stocks due to the diversification they offer, ETFs still involve trading and as such you could still lose money on your investment due to the variety of factors at play in the market.

ASIC’s MoneySmart advises that since ETFs typically come with fees and taxes, it is highly unlikely that they’ll ever exactly match the indices they track. Returns on ETFs historically have been lower than that of the best-performing individual stocks, but ETFs can balance this out with diversification and ease of entry. If you invest in a Currency ETF or an international ETF, fluctuations in the Australian dollar can impact your returns and MoneySmart warns that you could even be hit with foreign taxes.

It is worth noting that ETFs are considered by ASIC to be complex financial products. Some are more complex and riskier than others. For more information on ETFs and some of the risks associated with them, see ASIC’s MoneySmart website.

Want to trade ETFs? The table below displays a snapshot of online share trading platforms on Canstar’s database for ‘casual investors’, and with links to providers’ websites. Please note that these results are based on an average of 2 trades per month and are ordered by Star Rating, then alphabetically by providers’ name. Before committing to an online share trading platform, check upfront with your provider and read the PDS to confirm whether it meets your needs. 

You can also compare other investment products with Canstar, such as international share trading platforms, managed funds and superannuation.

Original author: William Jolly

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About Tamika Seeto:

Tamika SeetoTamika is a journalist at Canstar. She joined the team after completing a Bachelor of Journalism and Bachelor of Laws (Honours) at QUT, and has past experience writing for a variety of publications across news, music and the arts. At Canstar, Tamika’s writing mainly tackles superannuation and insurance, but she also covers everything from politics to ethical investment to roundups of the latest money-making apps worth downloading. Tamika understands the world of finance can seem daunting at times, so she strives to break it down in a way that is relatable and easy to understand.
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