ETFs are a great way to build your wealth over the long term without needing to worry too much about individual shares.
The overall share market has made an average of 10% a year over the decades. Some ETFs could produce an even stronger return than that due to the shares they’re invested in.
Here are my top Australian share ETFs, in order:
BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC)
It invests in: Australia’s leading technology shares.
Some of the names it’s invested in: Xero (ASX: XRO), Afterpay (ASX: APT), Appen (ASX: APX) and Technology One (ASX: TNE).
Annual management fee: 0.48%.
Why I like it: Most of the businesses that are changing and improving our lives the most these days are technology shares. They’re the one with high profit margins and attractive economies of scale. These tech shares are able to expand quicker as well. Most of them have global aspirations. It’s hard to pick one, so why not just invest in all of them?
Vanguard MSCI Australian Small Companies Index ETF (ASX: VSO)
It invests in: Smaller shares on the ASX, though not that small.
Some of the names it’s invested in: Northern Star Resources (ASX: NST), Evolution Mining (ASX: EVN), Atlas Arteria (ASX: ALX), Afterpay and Ansell (ASX: ANN).
Annual management fee: 0.30%.
Why I like it: I think that shares in the ASX 20 have done most of their growing. The best way to deliver stronger long term returns is to find those shares that have more growth potential and can compound your wealth.
BetaShares Australia 200 ETF (ASX: A200)
It invests in: The ASX 200.
Some of the names it’s invested in: CSL (ASX: CSL), CBA (ASX: CBA), BHP (ASX: BHP), Westpac (ASX: WBC) and ANZ (ASX: ANZ).
Annual management fee: 0.07%.
Why I like it: It’s the cheapest way to invest in the broad Australian share market, which has been one of the strongest performers over the past century. Growth shares are starting to take up larger positions within the index, such as CSL.
Vanguard Australian Property Securities Index ETF (ASX: VAP)
It invests in: Australian property shares.
Some of the names it’s invested in: Goodman (ASX: GMG), Dexus (ASX: DXS) and Scentre (ASX: SCG).
Annual management fee: 0.23%
Why I like it: The property ETF has dropped around 34% since the COVID-19 falls started. Some of the fall is justified, retail and office property may not be as good in the future. But they’re still worth a lot, particularly with how low interest rates are now. Over time industrial and eCommerce properties will make up even more of this ETF.
iShares S&P/ASX Dividend Opportunities ETF (ASX: IHD)
It invests in: Solid blue chip dividend shares.
Some of the names it’s invested in: Wesfarmers (ASX: WES), Rio Tinto (ASX: RIO), BHP, AGL (ASX: AGL), Fortescue (ASX: FMG), Macquarie (ASX: MQG) and APA (ASX: APA).
Annual management fee: 0.30%
Why I like it: Income is hard to come by at the moment, particularly with interest rates so low and banks cutting dividends. This ETF’s biggest positions should be solid dividend holdings even during this period. Resource prices are holding up well, Wesfarmers’ Bunnings is performing solidly and APA has recently maintained its distribution guidance.
Disclosure: Jaz does not own shares of any of the shares mentioned at the time of writing.