Aussie ETF investors hit 2 million: What’s luring people?

Aussie investors are eating up ETFs (exchange-traded funds) with more than 2 million currently invested in ETFs for the first time according to fund manager Betashares. And it isn’t likely to stop there, with the fund manager finding that an additional 310,000 can be expected to enter into the market over the coming years.

But an increase in investors isn’t the only thing. According to the report, ETF investors are expecting to make an average portfolio growth of 6% next year after an average 2% gain from this current year.

So what’s all this talk of ETFs mean for the average investor?

What are ETFs?

If you’re new to investing, you might not know what ETFs are. Exchange-Traded Funds are a type of investment fund that holds assets like stocks, bonds, or commodities. Commonly, share based ETFs will follow a particular theme (Technology, mining, consumer defensive, etc.) or may follow an index (like the S&P500 for US or S&P/ASX 200 for Australian shares).   

As “exchange traded” suggests, ETFs are traded on stock exchanges, much like individual stocks, which means they can be bought and sold throughout the trading day at market price. The flexibility of trading and inherent diversification may be one of the reasons so many Aussie investors have decided to park their cash in them.

How technology changes investing

Technological advancements have also played a significant role. Online trading platforms have made ETFs more accessible than ever, allowing investors to manage their portfolios with ease. The rise of robo-advisors, which often use ETFs to create diversified portfolios, has further simplified the investment process for individuals.

There’s no telling how far technology will influence share trading, as some investors have already taken to AI advisors, although the technology is still rudimentary at best. However, it's important to note that the internet was also brushed off and is now the majority of how most retail investors trade. 

Where are ETFs heading?

Looking forward, the ETF market in Australia shows no signs of slowing down. With the continuous introduction of innovative ETF products that cater to evolving investor needs, such as sustainable investing ETFs, the market is expected to expand further. 

Betashares predicts that the ETF industry will continue to grow, both in terms of the number of investors and the total assets under management.

“On the back of continued growth in the number of ETF investors, high levels of accessibility and an ever-increasing universe of ETF solutions, we expect net flows from investors to exceed $20 billion next year,” Betashares chief executive Alex Vynokur said. They also found that industry funds under management were “on track to exceed $180 billion by the end of 2024, up from around $150 billion today”. 

If you’re looking to get started with ETFs, one of the easiest ways to do that is to open up an account with an online broker. You can check out some share trading platforms on our main hub page or compare some of the platforms below…