Investments

First published November 2024

Updated 21 September 2026

Executive Summary

Exchange Traded Funds (ETFs) give Australian investors a simple way to access global markets, sectors and investment themes without needing to buy shares directly on overseas exchanges. ETFs can provide diversification, transparency and relatively low-cost exposure to areas such as artificial intelligence, robotics, cybersecurity, international equities, bonds and commodities. For investors seeking broader portfolio diversification, ETFs may complement individual share investments while helping reduce concentration risk.

By Damon Frith, Wealth Editor, NAB Private Wealth 

Are you considering investing in some of the world’s top cyber security, defence, or robotics and artificial intelligence companies? ETFs may be the simple solution for your investment strategy.

Dealing with a foreign stock exchange, gaining access to company research, navigating currency conversions, and pondering tax implications can be daunting if investing directly into companies listed offshore.

Yet it is possible to gain exposure to these and other industries through an ASX listed ETF.  For instance, the Betashare Robotics and Artificial Intelligence (AI) ETF aims to track the performance (before fees and expenses) of leading companies expected to benefit from the adoption and exposure to robotics and AI by buying shares in a range of companies from several different countries and sectors.

That's just one example, and the options available have grown rapidly over the past decade. In fact, there is an ever-growing array of ETFs offering exposure to all manner of asset classes, including Australian and international shares, bonds, property securities and commodities. There are also ETFs which provide specific exposure to currencies and high-dividend shares.

ETFs vs Managed Funds: What Are The Key Differences?

Exchange Traded Funds have much in common with traditional managed funds. Both are open-ended investments that have traditionally invested in a variety of shares or a particular asset class to replicate the performance of a sector or an index.

Where they differ is that ETFs are listed on a stock exchange, making the price discovery process simpler with a live price available throughout the trading day. In contrast, managed funds typically reset their price once a day, some even less frequently.

Advantages for Australian Investors:

• Diversification: ETFs offer a simple way to access a broad range of investments, helping investors build diversified portfolios aligned to their long-term objectives.
• Cost effective: ETFs typically have an inbuilt management fee that may be lower than that of a managed fund due to less intensive management activities.
• Liquidity: As ETFs are listed on the ASX, units in ETFs can be bought and sold during the day, and the transaction is relatively quick and simple.
• Transparency: You can use the managers website or disclosure documents to easily access the funds fees and content of the underlying portfolio.
• Access to global opportunities: ETFs can provide efficient exposure to overseas markets, helping investors diversify beyond Australia and participate in sectors, industries and long-term trends emerging around the world.

ETF Trading and Strategy

Managed funds and ETFs each have distinct advantages. While ETFs can offer cost-effective diversification and market access, managed funds may provide the benefit of active management, specialised expertise and greater flexibility in responding to market conditions. Many investors choose to combine both approaches within a diversified portfolio.

Investors choosing an ETF path can further diversify by using a combination of ETFs and individual stock selection. An investor may select an ETF that gives them exposure to a broad spectrum of the market supplement their portfolio with particular shares they have identified as potential outperformers.

Growing Adoption Among Retail and Institutional Investors

ETFs first came to the Australian market around 25 years ago. Their popularity, however, has increased significantly over the past decade.

The main reason ETFs are coming to greater prominence is twofold:

• ETFs provide exposure to domestic and international thematics, sectors and industries that may ordinarily be difficult to access.
• Successful stock picking can be difficult, making the availability of relatively low cost professional management and expertise to construct a targeted portfolio of securities an appealing option for investors.

ETFs are not just for inexperienced investors, and they are being taken up by professional and institutional investors as the variety on offer provides many with the right strategic asset allocation, or the right tactical asset allocation, to justify an exposure.

Costs and Management Fees

There are a range of things to consider before investing in an ETF. After all, it is a financial instrument and that means you still need to do your homework first.

For instance, you will need to assess the relative liquidity of the ETF and that includes its underlying assets. If those assets are by their nature harder to sell, the ETF may be inherently less liquid.

You should also consider potential risks if you expand your diversification strategy and buy a product on an overseas market. This includes understanding how your investment will be taxed if the ETF is in another country. If the fund tracks overseas assets, you need to think about any currency risk as well, (although some funds may reduce this risk through a hedge).

Of course, it’s also worth remembering that there are fees associated with an ETF. While you may receive a distribution - the interest or dividends from the underlying bonds or shares for example – you will also have to pay fees associated with the management of the fund, which will impact your return.

Check List of ETF Considerations

Investment objectives: Consider whether the ETF aligns with your financial goals, whether you are seeking income, long-term growth, capital preservation or a combination of outcomes.

Time horizon:  Your investment timeframe can influence the types of ETFs that may be appropriate, with growth-focused investments generally better suited to longer-term investors.

Portfolio diversification: Consider how an ETF complements your existing holdings and whether it helps broaden exposure across companies, sectors, asset classes or geographic regions.

International exposure: Global ETFs can provide access to overseas markets and industries that may be underrepresented in Australia, helping investors broaden their opportunity set.

Currency considerations: Investments in overseas assets can be affected by movements in exchange rates, which may either enhance or detract from returns.

Tax implications: Different ETFs can have varying tax outcomes, so investors should understand the implications of distributions, capital gains and foreign investments before investing.

Costs and fees: While ETFs are often viewed as a cost-effective investment option, management fees and trading costs can vary significantly between products.

Liquidity: Investors should assess how easily ETF units and the underlying assets can be bought or sold, particularly during periods of market volatility.

Risk profile: Every ETF carries risk, and investors should ensure the fund's investment strategy, asset class and level of volatility are consistent with their risk tolerance.

 

Frequently Asked Questions About ETFs

What is an ETF?

An Exchange Traded Fund (ETF) is an investment fund that trades on a stock exchange and typically provides exposure to a basket of investments such as shares, bonds, property securities or commodities.

How do ETFs provide global diversification?

ETFs can invest across multiple companies, countries, sectors and asset classes, helping investors gain broader exposure than purchasing a small number of individual shares.

Are ETFs cheaper than managed funds?

ETFs typically have lower management fees than actively managed funds, although costs vary between products and investors should always compare fees before investing.

Can ETFs be bought and sold during the day?

Yes. Because ETFs trade on the ASX, investors can generally buy and sell units throughout market hours.

Do ETFs carry risk?

Yes. Risks can include market risk, liquidity risk, currency fluctuations, tax considerations and risks associated with the ETF's underlying assets.

Can ETFs be used alongside individual shares?

Many investors use ETFs to gain broad market exposure while also holding individual shares that align with their investment views or objectives.

 

To discover more call 1300 683 106 or email us on investordesk@nab.com.au

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Important Information

The information contained in this article is gathered from multiple sources believed to be reliable as of the end of September 2026 and is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, we recommend that you consider whether it is appropriate for your circumstances and that you seek independent legal, financial and taxation advice before acting on any of this information. ©2026 NAB Private Wealth is a division of National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.

All information in this article is intended to be accessed by the following persons ‘Wholesale Clients’ as defined by the Corporations Act. This article should not be construed as a recommendation to acquire or dispose of any investments.

Investments