Which Australian shares ASX ETFs are delivering the best returns for investors?

We reveal the top 5 performing ASX ETFs over the past three financial years.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX ETFs or exchange-traded funds (ETFs) are an increasingly popular investment method for Australian shares investors, providing instant diversification in a single trade with loads of options to choose from.

Leading ETF provider BetaShares estimates $4.8 billion of net inflows into ETFs in January to May alone this year. Fixed-income ETFs have received the most inflows at $2.5 billion, with Australian shares ASX ETFs attracting $1.6 billion of net inflows, and cash ETFs bringing in $688 million of net inflows.

BetaShares says ETF investing has recorded a compound annual growth rate (CAGR) of 43% since they were first invented and launched in 2001.

New data from the ASX quantifies the returns of ASX ETFs over the past three financial years.

In this article, we take a look at the top five performers for total investor returns.

The top 5 ASX ETFs for total returns

For the purposes of this article, we're going to focus on the ASX ETFs that invest in Australian shares only, based on a certain strategy.

We're excluding the index-based and sector-based ETFs that do not have a manager executing a defined strategy.

This way, we get a peek at which ETF providers are performing best, and also which investing strategies are delivering the top results right now.

According to the data, here are the top five ASX ETFs:

The BetaShares Geared Australian Equity (Hedge Fund) (ASX: GEAR) ETF returned an average of 24.95% per annum. This includes reinvested dividends which have historically averaged a yield of 4.89%.

Vanguard Australian Shares High Yield ETF (ASX: VHY) returned an average of 17.13% per annum. This includes reinvested dividends which have historically averaged 5.04%.

The SPDR MSCI Australia Select High Dividend Yield (ASX: SYI) ETF returned an average of 14.62% per annum. This includes reinvested dividends which have historically averaged 5.76%.

Russell Investments High Dividend Australian Shares ETF (ASX: RDV) returned an average of 12.41% per annum. This includes reinvested dividends which have historically averaged 5.36%.

Russell Investments Australian Responsible Investment ETF (ASX: RARI) returned an average of 11.02% per annum. This includes reinvested dividends which have historically averaged 3.94%.

More about the No 1 ETF

ASX ETF BetaShares Geared Australian Equity Fund (Hedge Fund) gives investors a cost-effective way to access geared exposure to the returns of the S&P/ASX 200 Index (ASX: XJO).

So, it's like an index fund for the ASX 200 but with a special strategy.

That strategy is to use leverage — or borrowed funds — to magnify returns.

The GEAR ETF currently has a leverage of 2.3x. That means it seeks a return of 2.3x the ASX 200 on a daily basis. But leverage goes both ways. It also magnifies losses in the same multitude.

The old saying is that leverage can provide 'an elevator to the ceiling — and the basement'.

Here is a chart documenting the performance of this Australian shares ASX ETF against the ASX 200 over the past three years.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Vanguard Australian Shares High Yield ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ETFs

A piggy bank on the cloud in the blue sky symbolising a record high share price.
Record Highs

Here's why the Vanguard Australian Shares Index ETF (VAS) just hit an all-time ASX high

If you own this ETF, you've had a great day.

Read more »

ETF on different coloured wooden blocks.
ETFs

Top 10 most traded ASX ETFs in June

The most traded ASX ETF was the ever-popular Vanguard Australian Shares Index ETF.

Read more »

Australian dollar notes in businessman pocket suit, symbolising ex dividend day.
ETFs

Own the Vanguard Australian Shares Index ETF (VAS)? Here's how much you'll get paid today

Today's VAS paycheque might disappoint some investors.

Read more »

Cubes placed on a Notebook with the letters "ETF" which stands for "Exchange traded funds".
ETFs

Why I'd still call the FANG+ ETF a buy

The US tech giants have been great performers.

Read more »

The letters ETF with a man pointing at it.
ETFs

Buy and hold these ASX ETFs until 2030

Looking for long term options? Check out these picks.

Read more »

Contented looking man leans back in his chair at his desk and smiles.
ETFs

Should Aussies choose Vanguard Australian Shares Index ETF (VAS) or a term deposit for passive income?

Both investment options come with positives and negatives.

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
ETFs

Where to invest $5,000 into ASX ETFs in July

Could these funds be a good place to invest your money?

Read more »

A woman sits at her desk thinking. She is surrounded by projections of world maps on various screens with data appearing below them.
ETFs

These top ASX global shares ETFs delivered stunning returns of 50% to 70% last year

We reveal the 6 best-performing ASX ETFs providing Aussie investors with international market exposure.

Read more »