The best performing ETFs of 2019
The best performing exchange traded funds delivered returns of up to 68% for FY 2018-19.
Looking to invest in the best exchange traded funds (ETFs) on the Australian market? That’s a tough call to make because ETFs can be used for very different investment strategies – there's no one size fits all.
It’s important to consider both low fees and high returns when comparing funds, but you should also think about how risky the product is, your investment goals and how long you can afford to have the money locked away for.
Bearing these factors in mind, below are the 10 highest returning ETFs on the Australian Securities Exchange (ASX), including all standard ETFs, synthetic ETFs and actively managed ETFs – of every asset class over 1, 3 and 5 years according to the latest ASX data. Although high returns don't necessarily mean they're best for you, it's a great place to start your research.
Importantly, the returns shown are net, meaning the management fees have already been deducted to offer a clearer view of performance.
|ASX Code||Type||Fund Name||MER (% p.a)||1-Year Total Return||3-Year Total Return||5-Year Total Return|
|ETPMPD||Commodity (SP)||ETFS Physical Palladium||0.49||68.38%||39.73%||19.47%|
|MVA||Australian Property||VanEck Vectors Australian Property ETF||0.35||27.26%||11.30%||15.01%|
|ETPMPM||Commodity (SP)||ETFS Precious Metals Basket||0.44||24.07%||7.57%||6.63%|
|GDX||Global Equity - Sectors||VanEck Vectors Gold Miners ETF||0.53||23.74%||0.65%||n/a|
|GLIN||Equity - Infrastructure (MF)||AMP Capital Global Infrastructure Securities Fund (Unhedged) (Managed Fund)||0.85||21.99%||10.80%||n/a|
|VAP||Australian Property||Vanguard Australian Property Securities Index ETF||0.23||19.44%||8.48%||13.65%|
|PMGOLD||Commodity (SP)||Perth Mint Gold||0.15||19.35%||4.48%||7.78%|
|SLF||Australian Property||SPDR S&P/ASX 200 Listed Property Fund||0.40||18.93%||7.86%||13.19%|
|GOLD||Commodity (SP)||ETFS Physical Gold||0.40||18.71%||3.99%||7.18%|
|RINC||Australian Property (MF)||BetaShares Legg Mason Real Income Fund (Managed Fund)||0.85||17.96%||n/a||n/a|
Source: ASX | Period ending: Friday, 28 June 2019 | SP = Structured Product, MF = Managed Fund / Active ETF, MER = Management Expense Ratio (aka fees)
|ASX Code||Type||Fund Name||MER (% p.a)||3-Year Total Return||5-Year Total Return||1-Year Total Return|
|ETPMPD||Commodity (SP)||ETFS Physical Palladium||0.49||39.73%||19.47%||68.38%|
|GGUS||Global Equity - Strategy (MF)||BetaShares Geared US Equity Fund Currency Hedged (Hedge Fund)||0.80||25.36%||n/a||10.91%|
|UBU||Global Equity||UBS IQ MSCI USA Ethical ETF||0.20||17.18%||n/a||14.38%|
|VTS||Global Equity||Vanguard US Total Market Shares Index ETF||0.04||16.58%||16.80%||13.89%|
|QUAL||Global Equity - Strategy||VanEck Vectors MSCI World Ex-Australia Quality ETF||0.40||16.38%||n/a||16.42%|
|IAA||Asian Equity||iShares S&P Asia 50 ETF||0.50||15.81%||13.45%||4.70%|
|UBW||Global Equity||UBS IQ MSCI World ex Australia Ethical ETF||0.35||14.64%||n/a||11.44%|
|VGS||Global Equity||Vanguard MSCI Index International Shares ETF||0.18||14.22%||n/a||11.52%|
|WXOZ||Global Equity||SPDR S&P World ex Australian Fund||0.30||14.05%||12.63%||10.83%|
|WEMG||Emerging Markets Equity||SPDR S&P Emerging Markets Fund||0.65||13.62%||9.07%||11.62%|
Top 10 highest performing 5-year ETFs
|ASX Code||Type||Fund Name||MER (% p.a)||5-Year Total Return||3-Year Total Return||1-Year Total Return|
|ETPMPD||Commodity||ETFS Physical Palladium||0.49||19.47%||39.73%||68.38%|
|VTS||Global Equity||Vanguard US Total Market Shares Index ETF||0.04||16.80%||16.58%||13.89%|
|MVA||Australian Property||VanEck Vectors Australian Property ETF||0.35||15.01%||11.30%||27.26%|
|IXJ||Global Equity - Sectors||iShares S&P Global Healthcare ETF||0.47||13.86%||11.05%||17.57%|
|VAP||Australian Property||Vanguard Australian Property Securities Index ETF||0.23||13.65%||8.48%||19.44%|
|IAA||Asian Equity||iShares S&P Asia 50 ETF||0.50||13.45%||15.81%||4.70%|
|SLF||Australian Property||SPDR S&P/ASX 200 Listed Property Fund||0.40||13.19%||7.86%||18.93%|
|WXOZ||Global Equity||SPDR S&P World ex Australian Fund||0.30||12.63%||14.05%||10.83%|
|IXI||Global Equity - Sectors||iShares S&P Global Consumer Staples ETF||0.47||12.03%||6.74%||15.19%|
|IZZ||Asian Equity||iShares FTSE China Large-Cap ETF||0.74||11.55%||12.67%||5.84%|
An exchange trade fund is a basket of securities that has been listed on the Australian Securities Exchange by ETF issuers and fund managers. While standard ETFs typically track an index, others are actively managed or use derivative products to influence the fund’s performance. Put simply, an ETF is a fund of securities that can be traded on a stock exchange.
ETFs have built a reputation for being low risk and for delivering decent returns over a long period of time. That’s mostly true for index funds, but listed funds today come in many shapes and sizes, and some of them carry as much risk as any stock on the ASX. To make matters more confusing, the terms are frequently muddled between fund managers and investors.
There are so many types of listed funds today that ASIC has broadly labelled them exchange traded products (ETPs) as a way to avoid novice investors from confusing a risky derivative-type listed fund with a traditional ETF index fund. ASIC and the ASX have split them into ETFs (index funds), exchange traded managed funds (ETMFs) and synthetic funds or structured funds.
On the outside, these can appear to be very similar. Structured or managed funds that are listed are still often referred to as ETFs by fund managers and investors; however, they are quite different in nature because they use derivative products to imitate the returns of underlying assets, which may introduce additional risk for investors.
What is a derivative?Derivatives are products that derive their value from underlying assets like commodities or shares. Instead of purchasing a physical asset, it is a contract with an agreed upon return based on the price of the movements of the underlying asset.
What are structured or synthetic ETFs?
ETFs access investment assets in two ways: physically or synthetically. Issuers of a physical (or standard) ETF have purchased the underlying asset on the index it aims to replicate. When you invest in an ETF, it doesn’t mean you own the assets yourself; instead, you own shares in the ETF that holds the assets. However, structured or synthetic ETFs try to replicate the performance of its underlying assets through the use of derivatives. This is because it’s not always practical to hold physical assets. For example, gold or commodity ETFs are often synthetic. This means that when you invest in one, you’re not actually buying a lump of gold; rather, you’re investing in a contract that promises returns based on the commodity’s price movements.
Warning: Because structured products may use complex investment strategies, they could be much riskier than a standard index ETF.
What are active ETFs?
Active ETFs or ETMFs are actively managed listed funds. Fund managers aim to outperform the market by manoeuvring securities and sometimes derivative products within the fund. As such, they may carry higher risk than passive index funds and usually charge higher fees for the service.
What are commodity ETFs?
Commodity ETFs, or exchange traded commodities (ETCs), track the performance of an underlying physical commodity, such as gold, natural resources and agricultural products. Instead of investing in the actual commodity, the ETF will typically track the price movements of the commodity or its index. Because of this, commodity ETFs are typically synthetic or structured products.
- Time frame. Think about how long you can invest your money for and when you may need to access it. Some ETFs rise quickly over the short term but pose the risk of falling over several years. Others rise slowly over the long term but may dip over the short-term.
- Have a strategy. What do you want to get from this ETF. Can you afford to take on a riskier short-term investment or would you prefer to be more sure of your returns over a longer period? If you'd prefer to avoid risk, you might want to consider index funds.
- Understand the product. It’s always important to thoroughly research the listed fund you wish to invest in, whether that’s an index ETF, an active ETF or a structured product. Download the funds’ PDF and read through the details.
- Check the returns. Look at the returns (including all fees) over different periods of time. How has it performed over a one-year period? How has it performed over several years?
- Understand the fees. Fees strongly influence return on investment. Make sure the returns outshine the ETF’s management fees and pick a broker with fees that match your trading habits.
- Fully understand the product. Make sure you understand the nature of the product and the risks involved before you invest in an ETF. Some very complex products may appear to be simple on the outside. If you don't understand how the investment is managed or how the fund manager aims to achieve returns, talk to a licensed financial adviser or don't invest in the product.
As is the case with super funds and savings accounts, there is a direct correlation between high fees and an ETF’s overall performance. When fees are higher, returns tend to be lower and vice versa. There are two main costs involved when investing in listed funds: the brokerage fees and the management fees.
- Brokerage fees. As with shares, you’re charged a transaction fee by your broker every time you invest money into an ETF. For example, CommSec charges $10 for every transaction of $1,000 or less, while CMC Markets charges $11 or 0.1%, whichever is higher. This fee will come down to which trading platform or brokerage you choose to use.
- Management fee. This is often displayed as the management expense ratio (MER), which is the percentage of your return charged as fees by the ETF’s fund managers. Normally, the more work a fund manager has to do to keep the ETF profitable, the higher the fee – though this won’t always be the case. This is why many active ETFs charge higher fees than index ETFs, which passively track an index.
To find a platform that offers the lowest fees, you’ll first need to decide how much you want to invest in the fund and how many lump sums you’ll be investing over a year. If it’s just one lump sum, a platform that doesn’t charge an inactivity fee will be key. If you plan on frequently adding small amounts, the brokerage fee itself will be more important.
Brokerage fees range from around $10 to $30 per transaction and ETF fees range from about 0.05% to 0.8%.
- You could lose money. The value of ETFs and other types of listed funds rise and fall like any listed stock, which means there are similar risks involved.
- Single-asset ETFs. Some ETFs bundle a diverse range of securities that protect the investor from market falls; others hone in on one asset class. For example, a commodity ETF that invests in a particular metal will do well when that metal’s price goes up, but it will also fall quickly if prices don’t have the protection of other asset classes.
- Currency risks. If you invest in a global ETF, changes in the value of the Australian dollar will have a direct impact on the value of your investment.
- International taxes. If you buy units in an ETF listed overseas, you may need to pay foreign taxes. Make sure you’re aware of all tax implications of an ETF before you commit any funds.
- Synthetic ETFs. These have all the same risks as physical ETFs, but they also expose you to other potential risks such as counterparty risks. There's also the possibility that the price of futures will differ from the price of an underlying asset.
Before deciding whether ETFs are the best investment solution for you, make sure you’re fully aware of how they work and have an in-depth understanding of all the risks involved. Read the product disclosure statement closely, ask questions of the ETF issuer if you’re unsure about anything and consider seeking help from a qualified financial adviser.
You can read more in our comprehensive ETF guide.
Once you’ve considered the risks of investing in ETFs and worked out your financial goals, you can buy and sell units in an ETF like any share on the stock market through a fund manager or an online trading platform.
To invest in ETFs through an online trading platform, you’ll need to do the following:
- Search for a trading platform that suits your investment needs
- Sign up by providing personal details, proof of residency and proof of ID
- Log in to your trading account
- Move money into your trading account through a bank transaction or BPAY
- Search for the ETF on your platform and place an order
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
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