Also read: The best performing ETFs of 2023
But while fees play a key role in the long-term success of many ETFs, it's also important to consider other factors, such as short-term and long-term performance figures and how these compare to others in the market.
This guide compares both the cheapest and best-performing ETFs to give you a broader picture of the market.
Below are the 20 cheapest ETFs on the ASX by management fees, or "management expense ratio" (MER). This is the annual fee charged by fund managers as a percentage of the assets held in the fund.
The returns shown are net, meaning fees have been removed prior to the performance figures.
|Fund name||Code||Type||Fee (% p.a.)||1-yr return||3-yr return||5-yr return|
|Vanguard US Total Market Shares Index ETF||VTS||ETF||0.03%||7.91%||12.38%||12.54%|
|iShares S&P 500 ETF||IVV||ETF||0.04%||9.46%||13.49%||13.07%|
|Betashares Australia 200 ETF||A200||ETF||0.04%||4.05%||10.82%||8.83%|
|SPDR S&P/ASX 200 ESG Fund||E200||ETF||0.05%||5.03%||10.57%||n/a|
|iShares Core S&P/ASX 200 ETF||IOZ||ETF||0.05%||4.12%||10.37%||8.58%|
|SPDR S&P/ASX 200||STW||ETF||0.05%||4.31%||10.54%||8.56%|
|iShares S&P Midcap ETF||IJH||ETF||0.07%||-1.51%||12.40%||8.87%|
|Vanguard Australian Shares Index ETF||VAS||ETF||0.07%||3.85%||10.09%||8.52%|
|iShares S&P Small-Cap ETF||IJR||ETF||0.07%||-7.89%||11.87%||5.94%|
|iShares Core Cash ETF||BILL||ETF||0.07%||3.72%||1.49%||1.33%|
|Betashares Global Shares ETF||BGBL||ETF||0.08%||n/a||n/a||n/a|
|Vanguard All-World ex US Shares Index ETF||VEU||ETF||0.08%||13.10%||6.93%||6.36%|
|iShares Core MSCI Australia ESG Leaders ETF||IESG||ETF||0.09%||3.22%||n/a||n/a|
|SPDR S&P 500 ETF Trust||SPY||ETF||0.09%||9.63%||13.73%||13.36%|
|iShares Core MSCI World ex Australia ESG Leaders ETF||IWLD||ETF||0.10%||13.63%||13.60%||11.67%|
|iShares S&P 500 AUD Hedged ETF||IHVV||ETF||0.10%||5.89%||7.43%||8.04%|
|Vanguard Australian Fixed Interest Index ETF||VAF||ETF||0.10%||-1.56%||-4.79%||-0.31%|
|iShares Core Composite Bond ETF||IAF||ETF||0.10%||-1.35%||-4.77%||-0.32%|
|SPDR S&P/ASX Australian Government Bond Fund||GOVT||ETF||0.10%||-2.81%||-6.23%||-1.00%|
|Betashares Global Shares Currency Hedged ETF||HGBL||ETF||0.11%||n/a||n/a||n/a|
|Source: ASX | Period ending: 31 Oct 2023|
How do the cheapest ETFs compare to the market?
At the time of writing, the cheapest ETF in Australia is the Vanguard US Total Market Shares Index (VTS). It returned 12.54% over the 12 months to Oct 2023. This is a positive result considering that during the same period the S&P 500 index and Nasdaq rose less than 1%.
When you compare the returns of the cheapest ETFs over the last 1-5 years with the average ETF returns below, it's also clear most of the lowest costing ETFs outperformed their more expensive peers.
A few averages worth noting (to 31 October 2023):
- Average ETF return over 1 year: 4.56% p.a.
- Average ETF return over 3 years: 4.50% p.a.
- Average ETF return over 5 years: 5.39%
- Average ETF management fee (MER): 0.54%
Choose an ETF broker to start investing
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.
How do the cheapest compare to the best?
While cheaper fees tends to correlate with above average performance over many years, the same does not appear to be true for the top performing funds.
If you take a look at the best performing ETFs on the Australian Securities Exchange (ASX) in 2023, you'll notice their fees aren't necessarily the cheapest. In fact, some of the highest returning funds have management fees that are well above the average of 0.54%.
|Fund name||ASX code||Type||Fee (% p.a)||1 year total return|
|Global X FANG+ ETF||FANG||ETF||0.35||63.01%|
|Global X Semiconductor ETF||SEMI||ETF||0.57||41.17%|
|Global X Ultra Long Nasdaq 100 Hedge Fund||LNAS||MF||1.00||37.21%|
|Betashares Metaverse ETF||MTAV||ETF||0.69||30.65%|
|Betashares Global Uranium ETF||URNM||ETF||0.69||30.50%|
|Betashares Asia Technology Tigers ETF||ASIA||ETF||0.67||29.16%|
|Loftus Peak Global Disruption Fund (Managed Fund)||LPGD||MF||1.20||26.80%|
|Betashares NASDAQ 100 ETF||NDQ||ETF||0.48||25.51%|
|Montaka Global Equities Fund (Managed Fund)||MOGL||MF||1.32||25.48%|
|VanEck Video Gaming and Esports ETF||ESPO||ETF||0.55||25.39%|
|Montaka Global Extension Fund (Quoted Managed Hedge Fund)||MKAX||MF||1.25||24.65%|
|Hyperion Global Growth Companies Fund (Managed Fund)||HYGG||MF||0.70||23.47%|
|Perth Mint Gold||PMGOLD||SP||0.15||22.10%|
|Global X Physical Gold||GOLD||SP||0.40||22.06%|
|Betashares Online Retail and E-Commerce ETF||IBUY||ETF||0.67||21.97%|
|Global X EURO STOXX 50 ETF||ESTX||ETF||0.35||21.95%|
|Betashares NASDAQ 100 Yield Maximiser Fund (Managed Fund)||QMAX||MF||0.68||21.81%|
|Betashares NASDAQ 100 ETF - Currency Hedged||HNDQ||ETF||0.51||21.64%|
|iShares China Large-Cap ETF||IZZ||ETF||0.77||21.64%|
|Global X Physical Silver||ETPMAG||SP||0.49||21.32%|
|Source: ASX | Period ending: 31 October 2023 | SP = Structured Product, MF = Managed Fund / Active ETF, MER = Management Expense Ratio (aka fees).|
Why are some funds cheaper than others?
Exchange traded funds typically have low management fees (MER) compared to regular managed funds because most of them are index funds. Index funds passively track a stock market index, such as the S&P/ASX200 index, so they need little legwork from the fund managers and can charge cheaper fees (MER) for the service.
Because index funds mirror the returns of the stock market, they don't usually beat it, but they do perform consistently and tend to be lower risk than other kinds of funds.
On the other hand, many of the best performing ETFs are more strategic (and may be riskier) than a standard index fund. And because of this, they often charge a higher management fee for the service.
What fees do you pay when you invest in ETFs?
These are the 3 main fees you'll need to consider when investing in an ETF:
- Management Expense Ratio (MER): This is the annual management fee charged by the ETF provider. It's typically charged before performance figures are released and is usually between 0.1–1% of assets.
- Brokerage fee: This is the fee charged by the broker or online trading platform every time you invest in a stock or ETF. This is typically around $10 to $30 per trade.
- Performance fees: Some actively managed ETFs charge a performance fee. This is typically charged as a percentage of your funds that outperform a certain benchmark.
So, do fees matter?
Fees absolutely matter, especially over many years. While ETFs are relatively new to the market, long-term studies of super fund performance show that high fees are strongly correlated with long-term performance.
Among the cheapest ETFs on the ASX, just 3 underperformed the average over 3 and 5 years. It's also worth noting that the cheapest ETFs listed above are a mix of every category – including active, passive, global, Australian, high and low-risk.
What the data above does also show is that fees are not the only consideration worth thinking about – and for some investors, not the most important.
More ETF news
More guides on Finder
How to buy OpenAI stock in Australia
Looking to jump on the AI bandwagon? Here's how you can invest in ChatGPT and its parent company OpenAI from Australia.
Best performing stocks on the ASX in 2023 (Updated weekly)
Looking for the best performing stocks in Australia? We update this list weekly.
Cryptocurrency ETFs explained: A simple guide for investors (2023)
If you’re looking for ways to gain exposure to Bitcoin and other digital currencies, cryptocurrency ETFs could be worth exploring. Find out what crypto ETFs are and how they work in this introductory guide.
How to buy Gol Linhas Aereas Inteligentes SA ADR (GOL) shares in Australia
Steps to owning and managing Gol Linhas Aéreas Inteligentes SA shares from Australia.
How to buy Microsoft (MSFT) shares in Australia
Steps to owning and managing Microsoft shares from in Australia.
A beginner’s guide to Lego investing
Looking for alternative investments? With a ROI of up to 3,593% lego may be worth considering. Read on to find out which lego sets are worth the investment.
The cheapest stock brokers in Australia (Dec 2023)
Find cheap stock brokerage in Australia when buying and selling shares on the ASX and other international exchanges.
What is the money market?
Learn about the money market and everyday consumer money market products.
Is investing in crowdfunding a safe investment?
Equity crowdfunding offers a unique opportunity for investors and for Australian startups, but Australia’s regulatory framework surrounding crowdfunding still lags behind the rest of the world.
The best trading platforms in Australia for 2023
Follow these tips to find the best share trading platform for you.
Ask an Expert