What Is An ETF?
Exchange-traded funds (ETFs) are investment vehicles similar to mutual funds that hold a portfolio of securities, such as stocks, bonds, currencies, commodities and other assets. ETFs differ from mutual funds in that they are often designed to match the performance of a specific index and are therefore usually passive, while mutual funds are typically actively managed in order to try to outperform a specific index.
ETFs also enable investors to buy and sell shares throughout the trading day, similar to regular stocks. On the other hand, mutual funds generally have restrictions on when and how often investors can trade their shares.
Top 9 Australian ETFs
There are many ETFs that track the performance of various Australian equity indexes. Here are nine of the largest and most popular.
1. iShares MSCI Australia ETF (EWA)
The fund seeks to track the performance of the MSCI Australia Index, which includes large- and mid-capitalisation companies that trade on the Australian Securities Exchange (ASX). Holdings in the ETF are weighted by market cap and are rebalanced quarterly.
2. Franklin FTSE Australia ETF (FLAU)
This fund tracks the performance of the FTSE Australia RIC Capped Index, which measures the performance of large- and mid-cap Australian stocks.
3. First Trust Australia AlphaDEX Fund (FAUS)
FAUS seeks to replicate the performance of the NASDAQ AlphaDEX® Australia Index, which seeks positive alpha, or risk-adjusted returns, relative to other indexes. The fund invests in stocks, depositary receipts, real estate investment trusts and preferred shares in the index.
4. iShares Currency Hedged MSCI Australia ETF (HAUD)
This fund tracks an index of large- and mid-cap Australian equities while trying to mitigate exposure to currency fluctuations between the Australian dollar and the U.S. dollar.
5. SPDR S&P/ASX 200 Fund (STW.AX)
The SPDR S&P/ASX 200 Fund tracks the performance of the S&P/ASX 200 Index, which is made up of the 200 largest and most liquid Australian equities.
6. iShares Core S&P/ASX 200 ETF (IOZ.AX)
Like others on this list, this fund also seeks to replicate the performance of the S&P/ASX 200 Index.
7. BetaShares Australia 200 ETF (A200.AX)
This fund tracks the performance of the Solactive Australia 200 Index, which provides exposure to 200 of the largest companies listed on the ASX.
8. Vanguard Australian Shares Index ETF (VAS.AX)
VAS seeks to track the performance of the S&P/ASX 300 Accumulation Index, which comprises about 300 Australian stocks that account for over 90% of the value of companies listed on the ASX.
9. VanEck Vectors Australian Equal Weight ETF (MVW.AX)
This fund aims to track the performance of the MVIS Australia Equal Weight Index. The index is made up of companies incorporated outside Australia but which are listed on the ASX and which generate at least 50% of their revenues in Australia.
Exchange-traded funds (ETFs) are passively managed investment vehicles designed to track the performance of a securities index. ETFs enable investors to trade shares throughout the day much like regular stocks without the restrictions of mutual funds. There are many ETFs that track the performance of various Australian equity indexes.
Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation…