Our top pick for
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
If you already understand what index funds are and want to start investing, you can do so through a fund manager, a full-service broker or an online share trading platform. One of the easiest and cheapest ways to access index funds is via exchange traded funds (ETFs) traded on the Australian Securities Exchange (ASX). It is worth noting that you can buy more than just an Australian index tracking fund on the ASX. You can also find funds that track most of the world.
The following table shows some of the share trading platforms you can use to access index funds.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage is the cost to purchase $1,000 or less of equities without any qualifications or special eligibility. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
An index fund is a portfolio of stocks and sometimes other assets such as gold or cash. The idea of an investment fund is that instead of buying shares in 1 company or 1 asset, you can invest in a bundle of them.
With regular (non-index) investment funds, fund managers maximise profits by buying and selling assets based on market predictions. This difficult feat is known as "active" management. On the other hand, an index fund mimics a financial index, requiring little intervention from its fund managers.
The index fund approach can be used by all kinds of investment funds, including exchange traded funds (ETFs), managed funds and even super funds.
In Australia, you'll often hear people refer to index funds as ETFs or vice versa. This is somewhat misleading because not all ETFs are index funds (although most in Australia are) and not all index funds are ETFs.
A market index tracks the performance of certain stocks or groups.
Most countries will have their own individual stock market index that allows investors to get a snapshot of how the market in a country's exchange is performing.
Take Australia for example. Australia's most well-known index, the ASX 200, consists of the largest 200 companies on our stock exchange. The Wall Street alternative is the S&P 500 index, which includes the top 500 listed companies in the US. An index can also be based on industries. The Nasdaq 100 is an example of this, as it tracks the 100 largest tech companies listed on the exchange.
You'll notice these indices are often cited in the media because it is an easy way to quote how a market as a whole is performing. They rise and fall depending on a range of economic indicators and company news. While not directly correlated, a healthy economy certainly has an impact on the share market. After all, the more confident investors feel about the future of a country, the more likely they are to buy companies that are exposed to its economic conditions. If trade tensions increase between countries, stock market indices usually fall as investors become nervous.
Index funds hold a selection of stocks that make up an index. For example, Vanguard's Australian Shares Index Fund tracks the ASX 300 index, a collection of Australia's largest 300 companies.
If a company leaves an index, the fund manager sells its shares and replaces them with new stocks. For this reason, index funds are considered a comparatively safe alternative to directly buying shares in a company. Because these kinds of funds require minimal management, it's known as "passive" investing.
It's important to note that while index funds are sometimes called "mutual funds" overseas, within Australia, the term "index fund" more often refers to exchange traded funds (ETFs).
Confused about the terminology? You're not alone. These terms are changing all the time and vary across different borders.
Despite the popularity of traditional managed (sometimes called mutual) index funds in the US and other countries, few such options are available in Australia. Instead, many Australian investors use ETFs to track indices as they work in much the same way but are easier to access and have a lower minimum cost requirement.
The biggest difference between an ETF and an index fund is that an ETF can be traded like a stock, whereas an index fund runs a little differently. An index fund is bought and sold only for the price set at the end of the trading day.
However, this difference should matter little to long-term investors as intraday trading shouldn't be a big deal. After all, whether you buy an index at 12pm or 4pm, it will have a marginal difference on your returns in a decade.
Other noticeable differences include the following:
Index funds are proven to outperform many other kinds of investments.
In 2008, one of the world's most successful investors, Warren Buffet, made a $1 million bet that a bundle of actively managed funds would be worse off than the S&P 500 over 10 years. He argued that if a fund mimicked a major index, it would deliver better returns than a fund actively managed by professionals. Buffett's ultimately successful wager showed that net of fees an S&P 500 index would outperform a hand-picked portfolio.
The point is that although major indices fluctuate from year to year, they usually rise over a long time. For example, the ASX 200 index fell by more than 15% during the 2008 global financial crisis. But even if you had invested in the index fund just before that, you'd still be in a better financial position today than if you'd not invested at all.
This is due to diversification.
One of the key benefits of index funds is they allow for instant diversification as you'll own a basket of stocks in just one transaction. As such, you will take on less risk than owning one share while benefiting should the market as a whole increase.
Another key benefit of index funds is they allow you to invest overseas. Instead of having to work out how markets work and keep up with foreign news, you could simply buy an index fund that tracks overseas markets.
Of course, no investment is ever 100% "safe" and you should always seek professional advice before making any investment decision.
There are more than 100 index funds to choose from in Australia and most of these aren't labelled "index funds", so it can be tricky to source a full list. Below are some of the most well-known index funds available in Australia.
You can also check out the best performing ETFs of 2022.
|SPDR S&P 500 ETF Trust||S&P 500||ETF|
|iShares Global 100 ETF||S&P Global 100||ETF|
|SPDR S&P/ASX 200 Fund||S&P/ASX 200||ETF|
|Vanguard Australian Shares Index ETF||S&P/ASX 300||ETF|
|Vanguard Index Australian Fund||S&P/ASX 300||Unlisted|
|iShares North America Index Fund||MSCI North America||Unlisted|
Most major fund managers offer access to a limited pool of index funds, though ETFs are the more readily accessible option within Australia.
You can purchase traditional index funds directly through their associated fund providers, such as Vanguard Investments or BlackRock. You can purchase ETFs with any regular stockbroking account.
Whether you want to invest in an ETF or an unlisted index fund, these are the steps you need to follow:
Ask yourself what you want to achieve through this investment. Consider your time frame and how much risk you're willing to take on. Will you need to withdraw the funds in a year or can they sit for 10 years?
Compare funds online to find a product that matches your goals. Consider the risks, the fund's performance, the brokerage fees and other transaction costs.
Key things to take into account when deciding on an index fund include the following:
Once you've found the right product, you'll need to work out the best way to access it.
You can access index funds through their fund providers, such as BlackRock or Vanguard Investments.
Some online brokers, such as CMC Markets, have access to managed funds through a settlement service, such as the ASX's new mFund, but there are no index funds accessible via the mFund service at the time of writing.
ETFs are accessible on most online trading platforms and can be purchased just like any other stock. You'll need to sign up for an online share trading platform. To do this, you'll need to do the following:
Make sure to check out our extensive guide to exchange traded funds.
Steps to owning and managing Nexgen Energy shares.
Steps to owning and managing Keypath Education shares.
If you want to directly fund climate solutions a green bond is a great place to start. Here is how they work.
What's the best way to invest money in Australia? Find out about robo advisors, index funds, cryptocurrency and more in this guide.
Steps to owning and managing EBR Systems shares.
Steps to owning and managing 5E Advanced Materials shares.
Steps to owning and managing Leo lithium shares.
Steps to owning and managing Besra Gold shares.
Steps to owning and managing The Lottery Corporation shares.
Steps to owning and managing Endeavour Group shares.
finder.com.au is one of Australia's leading comparison websites. We compare from a wide set of banks, insurers and product issuers. We value our editorial independence and follow editorial guidelines.
finder.com.au has access to track details from the product issuers listed on our sites. Although we provide information on the products offered by a wide range of issuers, we don't cover every available product or service.
Please note that the information published on our site should not be construed as personal advice and does not consider your personal needs and circumstances. While our site will provide you with factual information and general advice to help you make better decisions, it isn't a substitute for professional advice. You should consider whether the products or services featured on our site are appropriate for your needs. If you're unsure about anything, seek professional advice before you apply for any product or commit to any plan.
Products marked as 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product. You can learn more about how we make money here.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labelling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan, we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider's terms and conditions as well as their application and lending criteria.