ETF Bloke

Australian ETF Investing Explained

Best Australian ETFs of 2023

Here is your guide to the Best ETFs in Australia to invest in for 2023.

This list only includes ETFs that are listed on the ASX – those that Aussies can easily buy!

Don’t have time to read the full guide? Jump straight to each sector to find the Best Australian ETF for that market using the links below:

I review the Best Australian ETFs and recommend ETFs for Australian & International Shares, Bonds, Property and more

Best Australian ETF for Australian Shares

VAS – Vanguard Australian Shares ETF

Why do I recommend VAS as the Best ETF for Australian Shares?

  • VAS has the lowest management fee of comparable ETFs at 0.10% pa
    • That means it only costs you $1.00 per year for every $1,000 you invest
  • It is the best ETF in Australia to get exposure to the ASX 300 Index
  • Because VAS invests in Australian companies it pays you franked dividends
  • VAS offers a Dividend Reinvestment Program
    • Instead of receiving a cash dividend Vanguard will automatically buy you more shares in VAS using your dividend payout. This means you pay no brokerage fees!
  • The Fund Manager is Vanguard, one of the most trusted financial groups in the world

What index does VAS track?

VAS invests in the ASX 300 Index which tracks the largest 300 companies on the Australian Stock Exchange. The ASX 300 includes all of the top 200 companies in the ASX 200 and then another 100 smaller companies.

What shares does VAS invest in?

The top 10 share holdings of VAS as of 16 February 2022 are:

  1. Commonwealth Bank – ASX: CBA
  2. CSL Limited – ASX: CSL
  3. BHP Group – ASX: BHP
  4. National Australia Bank – ASX: NAB
  5. Westpac Bank – ASX: WBC
  6. Australia and New Zealand Banking Group – ASX: ANZ
  7. Macquarie Group – ASX: MQG
  8. Wesfarmers – ASX: WES
  9. Telstra – ASX: TLS
  10. Woolworths Group – ASX: WOW

Find out more by reading Vanguard’s VAS Fact Sheet

Best Australian ETF for Global Shares

VGS – Vanguard International Shares ETF

Take a look at my full review of the Best International ETFs on the ASX

Why do I recommend VGS as the Best ETF for International Shares?

  • VGS invests in 1,500+ different international shares from around the globe
    • Why buy thousands of individual international shares when you can buy a single ETF that does all the work for you!
  • VGS has a very low management fee of 0.18% pa
    • That’s a pretty cheap way to become an owner of 1,500+ different international shares!
  • The fund is domiciled in Australia, which means it is tax efficient for Australian investors
    • Other Vanguard ETF’s that invest in international shares, such as VEU and VTS, are based in the USA and are not truly Australian ETFs
    • Investing in ETFs like VEU and VTS is not recommended and can lead to complicated international tax obligations
      • The USA has death taxes which can be triggered if you own USA based shares!
    • Vanguard Australia introduced VAS and VGS as replacement options for VTS and VEU and I recommend sticking to these latest and greatest offerings
  • The MSCI World Ex-Australia index that VGS invests in excludes any companies that are listed in Australia
    • This makes VGS the perfect companion ETF to VAS. By investing in both VAS and VGS you are invested in all of the top companies from the developed world

VGS is actually one of the best ETFs to buy in Australia because of the low cost international diversification it provides in a single ETF.

What index does VGS track?

VGS invests in the MSCI World Ex-Australia index which tracks large and mid cap international companies. The index tracks over 1,500 different companies from 22 of the safest and well known international countries including:

  • USA
  • Japan
  • UK
  • France
  • Canada
  • Germany
  • Switerland
  • Hong Kong
  • Singapore

What shares does VGS invest in?

The top 10 share holdings of VGS as of 16 February 2022 are:

  1. Apple – NASDAQ: AAPL
  2. Microsoft – NASDAQ: MSFT
  3. Alphabet (Google’s parent company) – NASDAQ: GOOGL
  4. Amazon – NASDAQ: AMZN
  5. Tesla – NASDAQ: TSLA
  6. Meta (Previously Facebook) – NASDAQ: FB
  7. NVIDIA – NASDAQ: NVDA
  8. United Health Group – NYSE: UNH
  9. JPMorgan Chase – NYSE: JPM
  10. Johnson & Johnson – NYSE: JNJ

Find out more by reading Vanguard’s VGS Fact Sheet and take a look at my review of the Top International ETFs available to Aussies!

Best Australian ETF for Emerging Market Shares

VGE – Vanguard Emerging Markets Shares ETF

Why do I recommend VGE as the Best ETF for Emerging Market Shares?

  • VGE has the lowest management fee of comparable ETFs at 0.48% pa.
    • Sure this annual fee is higher than with ETFs such as VAS and VGS, but we are still only talking about $4.80 per year for every $1,000 you invest
    • Try buying shares in 5,300+ companies elsewhere for less than five bucks a year. I’ll wait.
  • You get exposure to 5,300+ companies from 24 emerging markets in a single ETF!
    • Choose this ETF if you want to invest in some of the more esoteric places around the world including the BRIC countries (Brazil, Russia, India, China) South Korea, Taiwan and South Africa
  • VGE is yet another ETF issued by our trusted friends at Vanguard
    • Are you beginning to understand why Vanguard dominates the ETF industry worldwide?

What index does VGE track?

VGE invests in the MSCI Emerging Markets Index. This index tracks over 1,200 companies from 24 countries that are considered to be emerging markets including:

  • China
  • South Korea
  • Taiwan
  • India
  • Brazil
  • South Africa
  • Russia
  • Mexico
  • Thailand
  • Malaysia
  • Indonesia

What shares does VGE invest in?

The top 10 share holdings of VGE as of 16 February 2022 are:

  1. Taiwan Semiconductor Manufacturing (Taiwan)
  2. Tencent Holdings (China)
  3. Alibaba Group (China)
  4. Meituan (Hong Kong)
  5. Reliance Industries (India)
  6. Infosys Limited (India)
  7. China Construction Bank (China)
  8. MediaTek (Taiwan)
  9. Housing Development Finance Corp (India)
  10. Vale SA (Brazil)

Find out more by reading Vanguard’s VGE Fact Sheet

Best Australian ETF for Australian Property

VAP – Vanguard Australian Property Securities ETF

Have you read our in depth reviews of all of the Best Australian REITs on the ASX?

Why do I recommend VAP as the Best ETF for Australian Property?

  • VAP has the lowest management fee of comparable ETFs at 0.23% pa
  • Because VAP only invests in Australian companies it pays you franked dividends
  • VAP also offers a dividend reinvestment program that allows Vanguard to buy you extra shares in the fund using at no extra cost using your dividend payouts
  • The fund manager is Vanguard. Don’t look so surprised.

If you already own VAS then you already own all of the companies that are included in VAP. VAS invests in the ASX 300 and the real estate investment trusts that VAP invests in are included in the ASX 300.

You should only consider VAP if you are specifically looking for additional exposure to Australian REITS beyond that which is included in VAS.

What index does VAP track?

VAP invests in the ASX 300 A-REIT Index. This index tracks all of the A-REITs (Australian Real Estate Investment Trusts) that are included in the ASX 300 Index.

What shares does VAP invest in?

The top 10 share holdings of VAP as of 16 February 2022 are:

  1. Goodman Group – ASX: GMG
  2. Scentre Group – ASX: SCG
  3. Dexus – ASX: DXS
  4. Mirvac Group – ASX: MGR
  5. GPT Group – ASX: GPT
  6. Stockland – ASX: SGP
  7. Charter Hall Group – ASX: CHC
  8. Vicinity Centres – ASX: VCX
  9. Shopping Centres Australasia Property Group – ASX: SCP
  10. Charter Hall Long Wale REIT – ASX: CLW

Find out more by reading Vanguard’s VAP Fact Sheet and take a peek at my review of the Top Australian REITs.

Best Australian ETF for International Property:

DJRE – SPDR Dow Jones Global Real Estate ETF

Why invest in DJRE?

  • Management fee is 0.50% pa.
  • Tracks the SPDR Dow Jones Global Select Real Estate Securities Index
  • Fund Manager: State Street Global Advisors

Alternatively:

  • There are no other ETFs available on the Australian share market that solely invest in International Property

Read my complete guide to the Best International REITs on the ASX.

Best Australian ETF for Commodities:

QCB – BetaShares Commodities Basket Currency Hedged ETF

Why invest in QCB?

  • Provides exposure to precious metals, livestock, energy, industrial metals and agriculture
  • No exposure to iron ore or coal
  • Management fee is 0.69% pa.
  • Hedged against movements in the AUD/USD exchange rate
  • Tracks the performance of an Index of Commodity Futures, the S&P GSCI Light Energy Index Excess Return (Hedged into AUD)
  • Fund Manager: Betashares

Alternatively:

  • There are no other ETFs available on the Australian share market that solely invest in a commodities basket

Best Australian ETF for Gold:

PMGOLD – Perth Mint Gold ETF

Why invest in PMGOLD?

  • Provides a fully paid call option to one hundredth of a troy ounce of physical gold
  • Lowest management fee of comparable ETFs at 0.15% pa.
  • Tracks the performance of physical Gold
  • Fund Manager: Perth Mint Australia

Alternatively: GOLD

  • Backed by physical gold held by HSBC Bank
  • Management fee of 0.40% pa.
  • Tracks the performance of physical Gold
  • Fund Manager: ETF Securities

Best Australian ETF for Australian Bonds (Fixed Income)

VAF – Vanguard Australian Fixed Interest ETF

Why do I recommend VAF as the Best ETF for Australian Bonds?

  • Low management fee of 0.15% pa.
  • Invests in 600+ Australian Bonds issued by the Federal Government, State Government and Australian Companies
  • Fund Manager: Vanguard

What index does VAF track?

VAF tracks the Bloomberg Ausbond Composite 0+ yr Index. This index includes investment grade fixed interest bonds issued in Australia by the Federal Government, State Governments, and high quality investment grade Corporations.

What Bonds does VAF invest in?

The top 10 bond holdings of VAF as of 16 February 2022 were issued by:

  1. Commonwealth of Australia
  2. Queensland Treasury
  3. NSW Treasury
  4. Victorian Treasury
  5. WA Treasury
  6. South Australian Government Financing Authority
  7. Kfw (A German Government-owned Bank)
  8. European Investment Bank
  9. International Bank for Reconstruction and Development
  10. International Finance Corp

Find out more by reading Vanguard’s Fact Sheet for VAF

Best Australian ETF for International Bonds (Fixed Income)

VBND – Vanguard Global Aggregate Bond Index (Hedged) ETF

Why do I recommend VBND as the Best ETF for Australian Bonds?

  • Provides exposure to high quality income producing bonds issued by governments around the world
  • Lowest management fee of comparable ETFs at 0.20% pa.
  • Hedged in AUD to protect against foreign exchange risk

VBND is also one of the best ETFs to buy in Australia full stop because it gives you a low cost portfolio of globally diversified bonds in a single purchase

What index does VBND track?

VBND tracks the Bloomberg Barclays Global Aggregate Float Adjusted Index hedged into Australian dollars. This index includes high-quality, income-generating securities issued by governments, government-owned entities, government-guaranteed entities, investment-grade corporate issues and securitised assets from around the world.

What Bonds does VBND invest in?

The top 10 bond holdings of VBND as of 16 February 2022 were issued by:

  1. United State Treasury
  2. Government of Japan
  3. Federal National Mortgage Association
  4. Republic of France
  5. Federal Republic of Germany
  6. Republic of Italy
  7. Government of United Kingdom
  8. Government National Mortgage Association
  9. Federal Home Loan Mortgage Corporation
  10. Republic of Korea

Find out more by reading Vanguard’s VBND Fact Sheet

That about sums up the Best Australian ETFs on the market for 2023.

Top 5 ETFs in Australia

One of the most frequently asked questions that I get asked is: What are the Top 5 ETFs in Australia?

With so many ETFs now trading on the Australian market it can be hard to narrow the list down to the best 5 ETFs. But if I had to choose:

  1. VGS – Vanguard International Shares ETF
  2. VAS – Vanguard Australian Shares ETF
  3. VGE – Vanguard Emerging Market Shares ETF
  4. VBND – Vanguard International Bond ETF
  5. VAF – Vanguard Australian Bond ETF

If you purchase these top 5 ETFs you will have the makings of a globally diversified ETF portfolio.

You will own ETFs that track not just the Australian Share and Bond Markets, but you will also own the best of the International Share and Bond Markets and shares from Emerging Market Countries too.

Now go ahead and take this information and learn how to create your own Australian ETF Portfolio

Is there an ETF you think has been hard done by and should be recognised as a Top Aussie ETF in this guide?

Then get in touch and let me know!