Diversified ETFs — also called all-in-one ETFs — hold a mix of shares and bonds from around the world in a single ASX-listed fund. For many Australian investors, a single diversified ETF provides sufficient portfolio diversification without the need to buy multiple funds and rebalance manually. This article explains how they work and compares the main options.
What Is a Diversified ETF?
A diversified ETF is a fund of funds. Instead of holding individual shares or bonds directly, it holds positions in other ETFs or index funds — each covering a different asset class or geographic region. The result is thousands of underlying securities (shares, bonds) combined in a single ASX trade.
Benefits:
- Global diversification in one trade
- Automatic rebalancing back to target asset allocation
- Low ongoing management required
- Low MER compared to actively managed diversified funds
Trade-offs:
- Slightly higher MER than holding individual ETFs (e.g., VAS + VGS separately)
- Less tax control — capital gains from internal rebalancing are passed through as taxable distributions
- Less flexibility to customise your allocation
The Main Diversified ETFs in Australia
Vanguard Diversified ETF Range
| ETF | Allocation | MER | Description |
|---|---|---|---|
| VDHG | 90% shares / 10% bonds | 0.27% | High growth — maximum share exposure with small bond buffer |
| VDGR | 70% shares / 30% bonds | 0.27% | Growth — moderate defensive allocation |
| VDBA | 50% shares / 50% bonds | 0.27% | Balanced — equal shares and bonds |
| VDCO | 30% shares / 70% bonds | 0.27% | Conservative — primarily bonds, limited growth exposure |
All four Vanguard diversified ETFs hold the same underlying funds — they differ only in the weighting between shares and bonds. All distribute annually and have an MER of 0.27%.
BetaShares Diversified ETF Range
| ETF | Allocation | MER | Description |
|---|---|---|---|
| DHHF | 100% shares | 0.19% | All growth — no bonds, maximum equity exposure |
| DZZF | ~70% shares / ~30% bonds | 0.19% | Growth — broadly mirrors VDGR in concept |
| DHHY | ~90% shares / ~10% bonds | 0.19% | High growth — comparable to VDHG concept |
BetaShares diversified ETFs use a different set of underlying ETFs (BGBL, HEMQ, A200, VBND) and have a lower MER (0.19%) than Vanguard’s range.
Diversified vs DIY Portfolio
Some investors prefer to build their own diversified portfolio using separate ETFs:
| Approach | Example | Annual MER (est.) |
|---|---|---|
| Single diversified ETF | DHHF | 0.19% |
| 2-ETF portfolio | VAS (37%) + VGS (63%) | ~0.11% |
| 3-ETF portfolio | VAS (37%) + VGS (53%) + VAF (10%) | ~0.12% |
The DIY approach is cheaper in MER terms and provides more tax control (you control when to rebalance and realise gains). The trade-off is that you must manage the portfolio yourself — which some investors find difficult to maintain through market volatility.
Geographic Diversification in Diversified ETFs
All diversified ETFs hold a mix of Australian and international shares:
- Australian shares: approximately 36–37% (reflecting common home country bias recommendations)
- Developed international shares: approximately 40–55%
- Emerging market shares: approximately 5–12%
- Bonds (for VDHG, VDGR etc.): a blend of Australian and international bonds
This mix gives Australian investors exposure to the US, Europe, Japan, and emerging markets — far beyond what any pure Australian share ETF provides.
Tax Considerations for Diversified ETFs
Diversified ETFs can generate unexpected capital gains distributions when they rebalance internally. This can result in taxable income even if you haven’t sold any units. High-income investors may prefer the tax control of a DIY portfolio. At lower income levels, the simplicity of a diversified ETF often outweighs the tax consideration.
See ETF Tax Australia for more detail.
Related Articles
- VDHG ETF Review
- DHHF ETF Review
- VDHG vs DHHF
- VDGR ETF Review
- Best ETF for Beginners Australia
- ETF Portfolio Australia
- ETFs hub
Frequently Asked Questions
Is a diversified ETF enough on its own? Many financial educators and commentators consider a single, broad diversified ETF (DHHF, VDHG) a complete long-term investment portfolio — particularly for investors who are still in the accumulation phase and have a long time horizon. Whether it is right for you depends on your personal circumstances, income, tax position, and financial goals. For personalised guidance, consult a licensed financial adviser.
Do all diversified ETFs rebalance automatically? Yes. Diversified ETFs automatically rebalance back to their target asset allocation — either through the fund managers’ periodic rebalancing or through the proportion of new investments flowing in. You do not need to manually buy and sell to maintain the target split.
Can I buy diversified ETFs through any Australian broker? Yes. VDHG, DHHF, VDGR, and other diversified ETFs are listed on the ASX and can be purchased through any standard Australian brokerage — CommSec, SelfWealth, Superhero, Pearler, Stake, or any other ASIC-regulated broker that provides ASX access.
This article provides general financial information only. ETF mentions are for educational context. Past performance is not a reliable indicator of future performance. For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.