What you can invest in via an ETF

Stock-based ETFs                                                                                                      

By far the most popular ETFs are conventional (~ aka ‘physically backed’) stock-based ETFs which mirror a share market index. A useful example is the S&P/ASX 200 which measures the stock performance of the top 200 companies on the Australian Securities Exchange (ASX) by market capitalisation. One share in a stock-based ETF will buy you a corresponding amount of each underlying company it’s tracking.

Sector or industry-specific ETFs

Instead of mirroring an entire index, other variations of stock-based ETFs could include a collection of stocks that share a pre-determined set of unique characteristics. A common link that defines stocks within an ETF is a sector/industry theme.

You may choose an ETF that invests exclusively in a sector you think could outperform into the future. These include tech stocks, healthcare stocks, growth stocks, property and infrastructure or listed commercial property stocks (see below) to name just a few.

Bonds ETFs

Allow you to invest in different types of bonds or fixed-income securities – with varying maturity dates – which as a retail investor would otherwise be difficult to access. Bond ETFs can provide a steady stream of income – through interest/coupon payments - and often at lower levels of risk than growth assets, like shares or property.

International ETFs

If you’re looking to tap into global growth sectors underrepresented on the ASX, an easy-to-access solution is through international ETFs. Being listed on the ASX means you can access foreign markets without needing an international share trading platform. When investing internationally it’s important to recognise any currency risk. The value of the foreign currencies will fluctuate (against the Aussie dollar) along with the underlying investment.

Commodity ETFs

Offer exposure to physical commodities like gold, silver or oil, which due to cost and complexity, would otherwise be impractical to acquire. They provide ‘pure’ access to a commodity, without the negative influences associated with having similar exposure via a mining company.

Some commodity ETFs may hold a combination of investments in a physical commodity, plus shares in mining companies. Commodity ETFs are more likely to be what are called ‘synthetic’ ETFs. Given that they use derivative contracts to emulate the price of the underlying commodity, they’re generally regarded as higher risk.

Listed property ETFs

Aim to give an investor exposure to commercial real estate assets. They do this by fully replicating an index of listed Australian (or global) real estate Investment trusts (REITs), like the S&P/ASX 300 A-REIT Index, or the MSCI World REITs Index.

Foreign currency ETFs

Aim to track the change in price of foreign currency relative to the Australia dollar, before expenses and fees. For example, if the US dollar goes up 5 percent against the Australian dollar (i.e. the A$ falls in value), the ETF is designed to go up by a corresponding amount (before fees and expenses). 

ETFs to match your risk profile

InvestSMART offers a suite of ETF portfolios that carefully blend a basket of stocks, using the four main asset classes – equities, fixed income, property, and cash – to match your appetite for risk: Conservative, balanced or growth.