Best ETFs to Invest in Australia in 2025

Maybe you’ve heard about Exchange Traded Funds ETFs recently. They are a great way to invest in new markets and broaden your investment horizon by making your portfolio more diverse. Plus, they are (most of the time) more affordable than investing in individual stocks.

The even better news? They are also a really easy way to start your investment journey. Whether you are totally new to investing or already an experienced investor, they offer an ideal way to gain exposure to different industry sectors around the world.

I’m Matt Wilson, the Vice President and Chief Market Strategist at Moomoo. I have over 40 years of experience working in financial markets and am an avid investor.

I’ve put together this guide to help you get started and offer you all the info you need to get up and running with ETFs. Let’s explore some of my picks for the best ETFs in Australia and my reasoning and methodology for why I believe these are the ETFs Australian investors should research.

But first, let’s review some of the basics, such as what ETFs are and what the different types are.

What are ETFs？

Exchange-traded funds are a type of pooled investment security. ‘Pooled’ in this context just means you’re getting a predefined basket of assets rather than an individual share for the price of one investment.

You could say it's like a luxury hamper. But instead of artisanal crackers and Pinot Grigio, the ETF hamper contains a diverse set of stocks, bonds or commodities. You invest in a hamper rather than buying one stock at a time, meaning you can access various assets all at once.

ETFs are bought and sold on stock exchanges, such as the ASX. You can purchase them as you would a regular stock during trading hours.

Like a trip to Costco, an ETF lets you buy in bulk, meaning it’s more affordable and usually less risky than investing in individual stocks. Also, you can get broader exposure to the market.

What’s the difference between an ETF and a managed fund?

You might be wondering, "Aren't managed funds also a mix of different assets? What's the deal with ETFs then?"

First up, most ETFs are like self-driving cars—they're passively managed. The fund company's primary responsibility is to ensure that the ETF tracks the performance of a specific index. On the other hand, a managed fund is akin to having a personal chauffeur, relying on a fund manager's stock-picking skills to potentially generate some extra returns.

This difference means ETFs generally have lower fees. You're looking at an annual cost of around 0.1% to 0.8% for most ETFs. Some big ones that track mainstream indices can even go as low as 0.02%. Meanwhile, actively managed funds often charge over 1%.

ETFs are also easy to buy and sell like shares on a stock exchange at any point during market hours. This makes it easy for investors to trade and adjust their investments as needed. Plus, the entry barrier is pretty low—if you can buy a single share, you're in the game.

In contrast, managed funds mostly trade off-market, meaning you can only buy or sell them at the end-of-day price. Investing in managed funds usually requires meeting a minimum investment amount, which varies depending on the fund's rules.

What are the different types of ETFs?

I can’t go through every ETF type here as we’d be here all day, believe me, so I have compiled all of the crucial ones and organised them into different categories.

Categorising ETFs by asset classes

As a beginner ETF investor, asset classes are the most important categories to learn. Here are five you need to know.

Categorising ETFs by management style

ETFs can either be managed passively or actively. This applies to all the investment categories I detailed in the previous table above.

I should note that there is a third (and much less common) management style called ‘semi-transparent active management,’ which is a mix of both passive and active management styles.

With ST ETFs, the portfolio manager only discloses information about the fund’s holdings periodically (usually every quarter). This prevents other market participants from copying strategies, which means you don’t have an overview of the fund’s holdings or trading activity.

Categorising ETFs by strategy

ETF strategy is often overlooked, but it's incredibly important as it can significantly impact the goal of your investment. Here are four you need to know.

Categorising ETFs by market capitalisation

We can also segment ETFs based on market capitalisation, which means the company’s value is based on its outstanding shares of stock. Generally, smaller ETFs mean more risks but more opportunities for high returns.

Small-cap ETFs are also known as penny stocks. They’re the cheapest ETF to invest in. That alone makes them an enticing choice for newbie investors. But be cautious. Small-cap ETFs are risky and volatile. There’s a reason they’re the subject of The Wolf of Wall Street.

Categorising ETFs by specialised strategies

Finally, we’ve got specialised strategies encompassing all ETFs that use niche, highly specific tactics. These ETFs are a bit more complex than the rest and are ideally suited to experienced investors.

What are the best ETFs in Australia?

Got the basics down pat? Awesome. Now, I’ll get into the good stuff. These are the best ETFs in Australia today.

But first, let’s learn more about how I shortlisted these candidates using an easy-to-follow methodology based on four factors.

How to choose the best ETFs in Australia?

I don’t take picking the best ETF providers lightly. There are four things in particular I was looking for when deciding on the best-performing ETFs.

• Past performance: I chose ETFs with a strong historical performance in relation to their benchmark index. I won’t recommend any opportunities if there’s no evidence to back up their credentials.

• Total assets under management (TAM): This is just market speach for an ETF’s size in dollar terms. I aimed for ETFs with a large market cap, which means they have more liquidity (easier to buy and sell).

• Expense ratio: Also known as ‘how much money you have to spend to invest’ This is a ratio of the fees charged against the amount you have to invest. I shortlisted ETFs based on how much they charge investors—the lower the fee, the more of your money that will be invested.

• Dividend reinvestment plan (DRP/DRIP): I like ETFs that offer a DRP/DRIP – this means instead of receiving any dividends as cash they are automatically re-invested into your ETF. It helps to compound returns over time.

Let’s get into my top-performing picks for each category.

Australian broad-based ETFs

Let’s begin with the big players in the market.

For first-time investors who may not have the time or expertise to pick individual stocks, broad-based ETFs focused on large-cap Australian shares can be an attractive option, providing extensive market exposure.

These ETFs can play a vital role in almost any investment portfolio, depending on the investor's objectives, risk tolerance, and asset allocation strategy.

They are often used in a core-satellite investment approach, forming the core of the portfolio, while select securities or active investments complement them in an effort to achieve market outperformance.

The table below displays the largest Australian broad-based ETFS on ASX by AUM (Asset Under Management):

Potential benefits:

• Diversification: Achieve diverse exposure to sectors and markets.

• Long-term growth: Diverse funds enable long-term capital appreciation over time.

• Income potential: Chance to receive regular returns through dividend payments.

• Lower fees: Passively managed funds have lower expense ratios and management fees, making them more accessible to beginner investors.

Potential risks:

• Market dependence: Volatility in the market can make or break ETF performance.

• Limited control: Investors have limited control over assets held within the portfolio.

Australian sector ETFs

While investing in the entire market could give you those solid benchmark returns, setting your sights on specific booming sectors might boost your returns even more.

Enter sector ETFs—a hassle-free way to tap into specific parts of the market. Instead of cherry-picking individual stocks, you get the convenience of diversification, which helps lower your investment risk.

Take the resources sector, for example. It’s like having a mini-portfolio with heavyweights like BHP, Rio Tinto, and Woodside Energy all rolled into one. Or consider a banking sector ETF, which includes Australia's 'Big Four' banks.

You can pick an ETF based on your industry outlook, and Australia now offers ETFs across eight different sectors.

So, whether you're bullish on resources, finance, or another industry, there's likely an ETF for that.

Potential benefits:

• Targeted growth: Focuses on an emerging sector with high growth potential.

• In-depth exposure: Comprehensive exposure to specific industries and sectors.

Potential risks:

• Higher volatility: Focusing on one specific sector means more volatility and risk.

• Sector dependence: You rely entirely on the performance of the sector you invest in.

Australian strategy-based ETFs

Unlike traditional ETFs that typically track a broad market index or a certain sector, strategy-based ETFs use predefined rules and criteria to select and weight securities in order to implement a specific investment approach.

Some common strategy ETFs include high-dividend, low-volatility, ESG, and so on.

High-dividend ETFs focus on companies that pay high or stable dividends, appealing to income-seeking investors. Low volatility ETFs aim to provide investors with exposure to equities that exhibit lower price volatility compared to the broader market. And Certain ETFs now focus on investing in socially responsible companies that align with ESG (Environmental, Social & Governance) criteria.

Potential benefits:

• Targeted exposure: exposure to specific investment strategies or market segments that align with their goals.

• Diversification: reducing the impact of any single investment's performance on the overall portfolio.

Potential risks:

• Strategy dependence: Each strategy carries its risks. For example, low volatility ETFs may underperform in bull markets, while thematic ETFs might be highly concentrated and susceptible to specific downturns.

• Complexity: Some strategies can be complex and may not be suitable for all investors, particularly those who do not fully understand the intricacies.

International broad-based ETFs

If you are familiar with the financial markets, you surely haven't overlooked the recent AI boom. Well-known tech stocks like NVIDIA, Meta, and Google have all seen remarkable gains, but they are all listed as American companies.

If you also want to get involved in Australia, then international broad-based ETFs might be an option.

Potential benefits:

• International exposure: exposure to a wide range of global markets, sectors, and economies.

• Risk management: mitigating country-specific risks and benefiting from the growth potential all over the world.

Potential risks:

• Currency risk: movements in currency exchange rates can impact the returns of international investments, potentially eroding gains or amplifying losses.

• Tax implications: Dividends from international companies may be subject to foreign withholding taxes, which can affect overall returns.

How to invest in ETFs in Australia?

Moomoo makes buying and selling ETFs globally easy for Australian investors like you.

To explore ASX ETFs, simply tap on Markets> AU> ETFs.

Investors can choose from a variety of ETFs that invest in different classes, including index, equity, fixed income, property, and more. Each category includes numerous ETFs that can be tailored to investors' specific preferences.

Images provided are not current and this is for illustrative purposes only.

To explore ETFs that track a particular index, such as the S&P/ASX 200, tap on ASX 200 and sort the ETFs by a variety of criteria, such as asset under management (AUM).

Images provided are not current and this is for illustrative purposes only.

Investors can easily access detailed information about each ETF by tapping on Fund > Profile.

Once you’re up and running and building your ETF portfolio, you can track performance and gain insights into your current holdings with easy-to-understand graphs and breakdowns.

Our trading platform is easily accessible via desktop and mobile, giving you everything you need to start investing with confidence. View moomoo pricing to learn more about our fees.

What are some common ETF investing strategies?

ETF investment strategies are vast, and there’s no shortage of options. Here are a few common approaches to give you an idea of your choices.

• Buy and hold: This involves purchasing ETFs for the long term and holding them regardless of market fluctuations. It is good for consistent growth. In the crypto sector, this has also been popularised by the term ‘HODL,’ which stands for ‘hold on for dear life.’

• Dollar-cost averaging: Buying a fixed amount of an asset periodically (say weekly or monthly) to build up stock over time. It helps you stay on top of market volatility and can help you smooth out market fluctuations over time.

• Sector rotation: Moving units between sectors based on market conditions. Good for balancing risk if one sector gets ‘hot’, ‘cold’, or economic conditions change.

• Core/satellite strategies: Dividing a portfolio into a core of low-cost, broad ETFs for stability and specialised or actively managed satellite holdings for potentially higher returns.

What are some important things to consider?

Informed decision-making means familiarising yourself with the investment landscape. Here are some things to consider:

• Capital gains tax implications: Understand tax obligations associated with ETF transactions. This is essential for managing overall returns and factoring in what profit you walk away with after tax has been paid.  

• Risk tolerance: Know how much risk you want to take. It will determine the ETFs you choose. Higher risk can mean higher returns but you may experience much higher volatility.

• Portfolio rebalancing: Continually review and adjust your portfolio to maintain balance and reduce risks.

• Constituent and portfolio weighting: Take stock of your ETF composition regularly and diversify where possible.

• Time horizon: Consider how long you intend to hold investments to reach your goals — use this as a guide when picking the right ETFs.

Summing up

Knowing what to look for in the Australian ETFs doesn’t need to be complicated. If you’d like to start building your ETF portfolio, Moomoo makes it incredibly easy to do so. Learn more about our ETF trading platform today.

If you have any questions or feedback about this article, feel free to connect with me on LinkedIn. I’d be more than happy to answer any questions you might have, or you can directly reach out to the moomoo support team using their toll-free number: 1300 086 668.

Want to dive deeper into the world of investing? Check out our expert investment guides, or join Moomoo’s investment community and follow our market news.

Frequently asked questions

What are index ETFs?

Index ETFs track a specific index, such as the S&P 500, the ASX 100, or the Nasdaq 100. Index ETFs can be found on all major stock exchanges.

What is an equity portfolio?

An equity portfolio is a term used to describe a collection of investments, such as stocks or equity securities. Equity holders own a share in the company they invest in and can be classified into two major buckets: Common stock and preferred stock.

What is a management fee?

A management fee is a fee that ETF providers charge for allowing investors to participate in their financial products. It is usually shown as a small percentage of the provider's funds under management.

What is a product disclosure statement?

A product disclosure statement (PDS) is a document an ETF fund manager provides that details the benefits, fees and potential risk associated with the investment.

It is also very common for these statements to contain a percentage breakdown of the investment portfolio the ETF invests in, such as Australian shares or global equities for their investment product.

A PDS usually contains a risk statement for the funds under management and any other relevant disclaimers or disclosures.

How are ETFs taxed in Australia?

It’s always sensible to get personal tax advice and this is general in nature let’s say, for example, you invest in an ASX ETF. If you sell it for a profit under a 12-month period, then you’ll be subject to capital gains tax (CGT). If you hold that ETF for one year or longer and decide to sell, you currently receive a 50% discount on the CGT that.

If you are a trader and you buy and sell ETFs or ASX shares regularly or use leveraged trading, then different tax rules may apply, as you could be taxed as a ‘trader.’

Important: It is important to talk to a registered tax accountant or financial planner before making any investment decisions regarding your investment portfolio so you are aware of all of the risks and tax implications.