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Australian ETFs have cracked $100 billion for the first time, as low interest rates push investors onto the stock market

Business Insider Australia logo Business Insider Australia 6/2/2021 Jack Derwin
Australians are piling into ETFs. Australians are piling into ETFs.
  • Over the last 12 months, Australians have piled into exchange-traded funds (ETFs) as they begin trading in record numbers.
  • The increasingly popular investment product broke $100 billion for the first time, up from less than $57 billion last year.
  • While some of that growth can be put down to market movements, the majority has been chalked up to new investment as Australians look for somewhere to park their cash.
  • Visit Business Insider Australia's homepage for more stories.

It may have been the year that Wall Street Bets, GameStop and cryptocurrency stole the headlines, but while some speculated, there were plenty of Australians simply buying the market, or at least swathes of it.

After 12 months of frantic investing, exchange-traded funds, or ETFs, cracked the $100 billion mark for the first time in Australia.

ETFs are essentially a range of different stocks and assets bundled up into a simple investment product. By buying one, investors can essentially buy up entire indices, such as the ASX or the Dow Jones, or gain broad exposure to commodities, or entire sectors and regions in a single transaction. The ASX could even have one dedicated to crypto soon.

Depending on which type investors pick, they can be a quick and less risky way to invest money widely. The fact that they soared past $100 billion during the pandemic is telling, according to Chris Brycki, founder of investment platform Stockspot.

"ETFs have been available in Australia for about 20 years, but 2020 was a bumper year. Interest rates are rock-bottom, property isn’t viable, and shares are risky," he said, noting ETFs provide "an alternative".

Their boom over the last year has been unmistakable. New analysis out on Wednesday shows that 12 months ago, the market was worth less than $57 billion, registering a 79% increase since.

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While the bull market has helped, a Stockspot spokesperson told Business Insider Australia that only 30% of that increase could be attributed to market movements. The vast majority of the growth, or some $30 billion, has been new investment flowing into ETFs.

For many, it may well have been their first time on ASX, with hundreds of thousands of new Australian investors created during the pandemic.

Drilling down, it's clear not every Australian has had the same experience. The best performing Australian ETF last year was ACDC, which contains battery technology and lithium stocks, essentially banking on a renewable future and transformation of the energy sector.

Containing market darlings like Tesla and local lithium miners like Galaxy Resources, any investment in the ETF 12 months ago would have doubled. Contrast that with Betashares BEAR ETF, which inversely tracks the value of the ASX. It declined 30% since the beginning of the year, as the market rebounded.

Australians should take those results with a grain of salt though, with past performance being no indication of future success or failure.

"This is because ‘best’ and ‘worst’ always changes. In fact often the worst performer in one year is the best performer in another," Brycki said."On the flipside the most popular ETFs – this year VAS, that invests in Australian shares – often don’t have the ‘wow’ factor of 95% returns."

"But the most popular ETFs tend to invest in a broader range of companies and industries. ETFs like this have slow and steady returns, while usually avoiding those huge crashes that many Australians are wary of."

More like the tortoise and less like the hare, they are the kind of ETFs that might instead win out in the long-term -- quite possibly the measure that matters the most when it comes to investing.

The antidote to meme stocks and shitcoins, in other words.

Disclaimer: This article contains general information only and is not intended to be used as financial advice.


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