An ETF (Exchange-Traded Fund) is a type of investment fund that holds a basket of assets — usually shares, bonds, or commodities — and trades on a stock exchange like a regular share. In Australia, ETFs are listed on the ASX and can be bought and sold through any standard broker account. They are one of the most popular investment vehicles in the world, with over $200 billion invested in ASX-listed ETFs as of 2026.
The One-Sentence Explanation
An ETF lets you buy a small slice of hundreds or thousands of different companies in a single trade.
When you buy one unit of VAS (Vanguard Australian Shares Index ETF), for example, you effectively own a tiny piece of all 300 companies in the ASX 300 — including CBA, BHP, CSL, Wesfarmers, and Woolworths — for a single brokerage fee of around $3–$10.
How an ETF Differs from a Regular Share
| Regular share | ETF | |
|---|---|---|
| What you own | Shares in one company | Units in a fund holding many assets |
| Diversification | One company’s risk | Spread across many assets |
| Management | N/A (you’re buying the company) | Fund manager (usually tracks an index) |
| Cost | Brokerage per trade | Brokerage + ongoing MER (management fee) |
| Price | Company’s market value | Net asset value of the underlying holdings |
How an ETF Differs from a Managed Fund
Like a managed fund, an ETF pools money from many investors to buy a diversified portfolio. The difference is that ETF units trade on the ASX during market hours — you can buy or sell any time the market is open, just like a share. Managed funds are priced once daily and redeemed through the fund manager, not on an exchange.
ETFs also typically have much lower fees than actively managed funds because most ETFs simply track an index rather than employing analysts to pick stocks.
What Does an ETF Hold?
The most common Australian ETFs hold:
- Australian shares — e.g., VAS tracks the ASX 300 (300 largest ASX companies)
- International shares — e.g., VGS tracks the MSCI World ex-Australia index (1,500+ global companies)
- Diversified mix — e.g., DHHF holds Australian shares, US shares, developed market shares, and emerging market shares in one fund
- Bonds — e.g., VAF holds Australian government and corporate bonds
- Commodities — e.g., GOLD holds physical gold
How ETFs Make Money for Investors
ETF investors generate returns in two ways:
- Capital growth — if the underlying assets rise in value, the ETF unit price rises
- Distributions — ETFs pass through income from the underlying assets (dividends from shares, interest from bonds) as periodic distributions
Who Issues Australian ETFs?
The major ETF providers in Australia are:
- Vanguard — VAS, VGS, DHHF, VDHG, VAF and others
- BetaShares — A200, NDQ, DHHF, HGBL and others
- iShares (BlackRock) — IOZ, IVV, IJP and others
- SPDR (State Street) — STW, WXOZ and others
- VanEck — MVW, MVA and others
How to Buy an ETF in Australia
- Open a broker account (CommSec, SelfWealth, Superhero, Pearler, etc.)
- Deposit funds
- Search for the ETF by its ASX ticker (e.g., VAS, DHHF, NDQ)
- Place a buy order (market or limit order) for the number of units you want
- Units settle 2 business days after purchase (T+2)
That’s it. No minimum holding period, no lock-up, no complex paperwork.
Related Articles
- How ETFs Work
- ETF MER Explained
- ETFs vs Managed Funds
- How to Invest in ETFs in Australia
- ETFs hub
- Investing hub
Frequently Asked Questions
Are ETFs safe investments? ETFs themselves are a structure — not an investment type. The risk depends on what the ETF holds. A broad Australian share ETF (VAS) is exposed to the ASX share market — it will fall when the market falls and rise when it rises. A bond ETF is lower risk but lower return. An ETF investing in a single commodity or narrow sector carries more risk than a broadly diversified fund. All investing carries risk of loss.
Can you lose money in an ETF? Yes. ETF unit prices can fall — and if the underlying assets fall significantly, so does your investment. A broad market ETF (VAS) fell approximately 35% in the COVID-19 crash of early 2020 before recovering. Long-term investors who held through the crash recovered their losses and went on to achieve new highs. Short-term investors who sold at the bottom crystallised a large loss.
Is an ETF better than a savings account? Over the long term, share market ETFs have historically delivered much higher returns than savings accounts — but with significant short-term volatility. Savings accounts provide guaranteed capital with known interest rates. For money you may need in under 3–5 years, a savings account is generally more appropriate. For long-term investing (10+ years), diversified ETFs have historically outperformed savings accounts significantly.
This article provides general financial information only. For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.