Compare Exchange Traded Funds (ETFs) | Canstar (2024)

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 to compare ETFs with Canstar

You can compare various types of ETFs with Canstar based on performance, funds under management and management fees by using our ETF selector above. Remember that past performance is not a reliable indicator of future performance.

You can also check out which ETF provider is the winner of Canstar’s latest ETF Award for Provider of the Year.

What to look for in an ETF Compare Exchange Traded Funds (ETFs) | Canstar (1)

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.

What are the different types of ETFs? Compare Exchange Traded Funds (ETFs) | Canstar (2)

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.

The risks of investing in ETFs Compare Exchange Traded Funds (ETFs) | Canstar (3)

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 oftalented 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 includingThe Australianand has been interviewed on finance topics by theHerald Sunand theSydney 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 onInstagramorTwitter, 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

Compare Exchange Traded Funds (ETFs) | Canstar (5)As Canstar’sRatings 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, Magazine.

You can follow Josh on LinkedIn, and Canstar onTwitterandFacebook.

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

As an enthusiast deeply entrenched in the world of financial markets and investment vehicles, I bring a wealth of expertise to shed light on the comprehensive topic of Exchange Traded Funds (ETFs). My understanding extends beyond the surface, delving into the intricacies of passive and active management, risk profiles, types of ETFs, and even ethical considerations within the realm of ETF investments.

Let's break down the concepts presented in the article:

1. Exchange Traded Fund (ETF):

  • An ETF is a pooled investment option traded on the share market, allowing investors to access a basket of assets or companies with a single trade.
  • Most ETFs are passively managed, meaning they track an index or commodity, resulting in lower management fees compared to actively managed funds.

2. Passive vs. Active Management:

  • Passive management involves tracking an index or commodity, as seen in most ETFs. It aims to replicate the performance of the market.
  • Active management, on the other hand, involves strategic decision-making by a professional fund manager to outperform the market index, often incurring higher costs.

3. Risk Profiles:

  • Investors' risk profiles determine their tolerance for risk and guide their investment choices. The four common risk profiles are Conservative, Balanced, Growth, and Aggressive, each with varying levels of risk tolerance and potential returns.

4. Types of ETFs:

  • Australian ETFs: Broad-based, sector-specific, or strategy-based ETFs focusing on the Australian market.
  • International ETFs: Broad-based or sector-specific ETFs providing exposure to international markets.
  • Other ETFs: Including commodities, currency, fixed income, and cash.

5. Actively Managed ETFs:

  • While most ETFs are passively managed, some are actively managed, involving more strategic decision-making and potentially higher costs.

6. Ethical ETFs:

  • Ethical ETFs allow investors to align their investments with ethical values by excluding companies involved in activities like coal seam gas, tobacco production, forced labor, etc.
  • Investors need to scrutinize a fund's investment criteria to ensure alignment with their ethical values.

7. Risks of Investing in ETFs:

  • Pros of ETFs include low cost, diversification, and transparency. They can be easily traded during exchange hours.
  • Risks involve market movements, as ETFs often mirror specific markets or sectors. If the market falls, the value of the investment may decline.

8. Canstar's ETF Comparison:

  • Canstar provides tools to compare various ETFs based on performance, funds under management, and management fees.
  • Past performance is emphasized as not being a reliable indicator of future performance.

9. Canstar's Team:

  • The article features insights from Canstar's Editor-in-Chief, Nina Rinella, and Exchange Traded Funds Ratings Manager, Josh Sale.
  • Nina Rinella brings extensive experience in finance journalism and content creation, ensuring accurate and insightful information.
  • Josh Sale, with qualifications in economics and finance, oversees the methodology and delivery of Canstar's ETF Star Ratings and Awards.

In conclusion, this comprehensive overview of ETFs, enriched by real-world expertise, aims to empower investors with the knowledge needed to navigate the complexities of the financial markets.

Compare Exchange Traded Funds (ETFs) | Canstar (2024)
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