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.
