Our top pick for
The first step is to choose the right online share trading platform.
If you're buying exchange traded funds (ETFs), you're most likely looking to buy and hold over the long term. This should be factored into your decision as to who you sign up with. Certain brokers will allow you to buy ETFs commission free, which is also something to consider.
The lower the brokerage the better, but it is important to match your broker with your needs.
Once you've chosen a trading account, you'll need to sign up.
When it comes to signing up with a broker, it is usually free, but some accounts charge inactivity fees.
The registration process takes place online, and if you're a new customer, you'll need to provide your basic information, including the following:
When it comes to any form of investing, it is important to match your goals, risk profile and objectives.
After all, there's no point in taking on more risk than required to achieve your personal goals.
When it comes to an ETF, this is especially true. ETFs are broken up into 2 categories: passive and active. Your financial goals could help determine which one you choose to invest in and what percentage of your portfolio you invest in either one.
If you choose to invest in a passive ETF, the managers will seek to replicate the performance of a broader equity market, sector or trend. Think of the ASX 200 or S&P 500. If you take a passive approach, you'll likely just track this market.
On the other hand, some managers will choose to actively invest. The aim here is to increase returns, but it will generally cost you more in management fees and can come with more risks.
Now that you've researched the ETFs you want to own, you need to buy them.
This will require you to search for the specific ticker code of the ETF you want to purchase and then you will need to order it.
When it comes to ordering shares, there are a few options depending on what your broker provides. But generally speaking, you can choose either a limit order or a market order. If you choose a market order, you are looking to purchase as quickly as possible, while a limit order is a predetermined price that you choose.
Now that you own the ETF, you should track its performance.
After all, it is important that it continues to align with your personal needs and objectives. If it's continuing as you hoped in step 3, you could keep investing in it. If it's underperforming, it might be time to sell.
But it is also important to give the ETF some time for your thesis to play out. Markets can be volatile in the short period, and they might not reflect the long-term potential of the assets you own.
An exchange traded fund is a bundle of shares or options that is listed on a stock exchange that you can purchase through a single trade.
In layman's terms, it is a pooled investment security that typically tracks a market index, a theme, a commodity or other assets. The original ETFs were passive index funds, but over the last decade, the sector has exploded.
An example of an index fund would be the iShares Core S&P/ASX 200 ETF, a market-tracking ETF made up of the 200 biggest companies in Australia. Investors in this ETF own a small percentage of each company based on market weighting. So, larger companies like BHP and Commonwealth Bank make up a larger holding than say a smaller company like Corporate Travel Management.
Each ETF is allocated an ASX code and can be bought and sold by investors the same way that you would buy and sell shares.
The good thing about ETFs is they instantly create a diversified portfolio. By default, you own an entire section of a market, but you can easily add other assets including Australian shares, global shares, fixed income, debt, foreign currencies, commodities and metals.
The main difference between an ETF and a mutual fund is an ETF is listed on an exchange such as the Australian Securities Exchange (ASX).
The humble ETF has evolved from its start as a simple passive investing index. Nowadays, you can get an ETF for pretty much anything ranging from your more traditional passive approach to an active strategy, a thematic strategy and everything in between.
Here are the different ETF types you might want to trade:
Also known as indexed ETFs or index funds, these funds aim to replicate the returns of a specific index or benchmark. For example, you may want to invest in a fund that tracks the performance of the S&P/ASX 200 (Australian stock market) or the S&P 500 (US stock market).
Also referred to as exchange traded managed funds (ETMFs), active ETFs aim to outperform the market or a particular index. These sometimes come with a higher level of risk and usually have higher management fees.
These combine both active and passive strategies. They typically track an index but factor in additional variables, such as a higher weighting of smaller companies. Smart beta ETFs track non-traditional indices designed to invest in a selection of company stocks based on their own set of rules. The idea is to outperform the market.
Synthetic ETFs are where things start getting a little bit more complex.
ETFs access investment assets in 2 ways: physically or synthetically. ETF issuers of a physical (or standard) ETF have purchased the underlying assets on the index it aims to replicate.
Structured or synthetic ETFs try to replicate the performance of their underlying assets through the use of derivatives. This is because it's not always practical to hold physical assets. For example, gold or commodity ETFs are often synthetic due to the fact that storing large amounts of gold is often difficult. Instead of investing in an actual lump of gold, you're investing in a contract that promises returns based on the commodity's price movements.
Warning: Because structured products may use complex investment strategies, they can be much riskier than a standard index ETF.
Commodity ETFs, or exchange traded commodities (ETCs), track the performance of an underlying physical commodity, such as gold, natural resources or agricultural products.
When you invest in an ETF, the first cost you'll be aware of is the ETF unit price. However, there are other less obvious costs you need to be aware of. While ETFs typically charge lower fees than unlisted managed funds, this isn't always the case.
You should always read the PDS provided by the ETF issuer for full details of any fees that apply and how they will affect your investments. Here are the main costs to take note of:
Generally speaking, ETFs can be an easy way for beginner investors to start investing. When it comes to ETF trading, they have a few beginner-friendly characteristics, including the following:
All in all, ETFs can be a simple way to build towards a long-term financial plan. If you're looking for the best ETFs to invest in, click here.
ETFs are bought and sold just like regular stocks, so you'll need to choose an online broker before you are able to invest.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Ask an expert: What are the main benefits of buying an ETF?
ETFs are a great option for those just getting started with investing as they give investors greater visibility to a number of companies and sectors. The stock market can be very intimidating for those just getting started, but ETFs offer diversification that can otherwise often take a long time to build if investing in individual stocks.
There is also generally a cost saving that comes with investing in ETFs as you're able to save on brokerage by buying units of a singular stock as opposed to paying for multiple trades for stock in every company you're interested in. You can also build a diversified portfolio of stocks more quickly – without needing a large amount of money upfront. Investing in ETFs also helps you reduce your risk, as you don't have all your eggs in one basket – or all your money in one company.
Some ETFs pay dividends if the underlying company stocks pay dividends. However, it also depends on whether the fund manager chooses to pass this on, so check this first if this is a priority. This information should be available in the ETF's product disclosure statement.
Most of the time, ETFs will pay their dividends on a quarterly basis, though this isn't a rule. If you're interested in ETF dividends, check the yield, how often it's paid and whether you can reinvest the payments back into the ETF if you choose or if it's paid into your account.
Like share prices, the price of ETF units can fluctuate day to day. However, many ETFs move up and down in line with the index they are tracking, so there are a few simple tips to keep in mind to help you get more out of your ETF investments:
To see our guide on the best performing ETFs, click here.
The biggest events in the octagon are getting an exclusive home.
An animated favourite returns and a noted showrunner adds to his CV.
Find out where you can pre-order the Samsung Galaxy Z Flip 5 in Australia right now with savings of up to $649.
Samsung's finally unveiled the snazzy new Galaxy Z Fold 5 and Z Flip 5 and the pre-order offers from the telcos will get you heaps excited.
If you’ve worked from home at all over the past year you’re entitled to claim some money back as a tax deduction.
Find all the weekly tips from our Dollar Saver newsletter and see how you could save.
Credit card applications are on the rise, but everything else is down as more borrowers miss mortgage repayments.
Get clever with gift cards and reap the (flight) rewards.
Australian households are facing an energy crisis as price hikes coincide with peak winter demand, according to new research by Finder.
The Mattel doll is taking the stock market for a nostalgia-fueled ride.
finder.com.au is one of Australia's leading comparison websites. We compare from a wide set of banks, insurers and product issuers. We value our editorial independence and follow editorial guidelines.
finder.com.au has access to track details from the product issuers listed on our sites. Although we provide information on the products offered by a wide range of issuers, we don't cover every available product or service.
Please note that the information published on our site should not be construed as personal advice and does not consider your personal needs and circumstances. While our site will provide you with factual information and general advice to help you make better decisions, it isn't a substitute for professional advice. You should consider whether the products or services featured on our site are appropriate for your needs. If you're unsure about anything, seek professional advice before you apply for any product or commit to any plan and read any disclosure documents (such as any Target Market Determination (TMD) and/or Product Disclosure Statement (PDS)) issued by the provider before making a decision.
Products marked as 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product. You can learn more about how we make money.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labelling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan, we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider's terms and conditions as well as their application and lending criteria.