10 ASX ETFs for investors to watch

What are ETFs?

Exchange Traded Funds (ETFs) are an increasingly popular way for investors to gain exposure to a wide variety of investments at a relatively low cost.

ETFs generally hold a particular type of shares, bonds, commodities, currencies, cryptocurrencies or futures contracts and usually reflect the price movement of their holdings. This enables investors to get exposure to particular industries (such as a financial services ETF), an index (such as the ASX200 ETF), international markets (such as a Korean shares ETF), bonds (through a bond ETF), etc.

There are approximately 258 ETFs trading on the ASX through financial services providers such as BetaShares, BlackRock, ETFS Management (AUS) Limited, State Street Global Advisors, Australia Services Limited, VanEck Investments Limited and Vanguard Investments Australia Ltd.

Given their sector specificity, ETFs provide stock investors with a convenient means to wager on the outcomes of broader macroeconomic or geo-political developments, as opposed to honing down on particular stocks.

What are the best ETF funds to watch?

2024 could provide investors with a diverse range of macroeconomic plays, as geopolitical turmoil in the Middle East and Eastern Europe creates both uncertainty and opportunities for markets. Analysts are anticipating an end to hawkish monetary policies in many economies, following long-standing runs of rate hikes that have helped to at least quell inflation.

The following ten ETFs could be very interesting options for investors as of the month of December 2024.

1. Vanguard Australian Shares Index ETF (ASX: VAS)*

2. iShares Core S&P/ASX 200 ETF (ASX: IOZ)

3. SPDR S&P/ASX 200 ETF (ASX: STW)

4. Vanguard Australian Shares High Yield ETF (ASX: VHY)

5. Betashares FTSE RAFI Australia 200 ETF (ASX: QOZ)

6. iShares S&P 500 ETF (ASX: IVV)*

7. Vanguard MSCI Intl ETF (ASX: VGS)*

8. BetaShares S&P 500 Yield Maximiser (ASX: UMAX)

9. BetaShares U.S. Equities Strong Bear Hedge Fund (ASX: BBUS)

10. iShares Core Composite Bond ETF (ASX: IAF)

Vanguard Australian Shares Index ETF (ASX: VAS)

The Vanguard Australian Shares Index is a highly regarded ETF that offers diversified exposure to the largest companies on the Australian Securities Exchange (ASX), including key players like Commonwealth Bank, BHP, and CSL. By tracking the S&P/ASX 300 Index, this ETF provides a comprehensive snapshot of the Australian equity market.

VAS is particularly attractive to those looking to harness the growth potential of Australia’s top companies across sectors such as financials, materials, and healthcare. With a focus on blue-chip Australian stocks, it provides a solid foundation for long-term capital growth and income, particularly through dividends, a notable feature of the Australian market. The Vanguard Australian Shares Index ETF is an excellent choice for those seeking to establish a core holding in Australian equities, offering broad market exposure and the advantages of diversification.

iShares Core S&P/ASX 200 ETF (ASX: IOZ)

The iShares Core S&P/ASX 200 ETF is popular among investors seeking broad exposure to the local stock market. This ETF aims to track the performance of the S&P/ASX 200 Index, which includes the top 200 companies listed on the Australian Securities Exchange. With its low-cost structure and diversified portfolio, IOZ provides a convenient way for investors to access a wide range of sectors, from financials and materials to healthcare and technology.

Investors might be particularly interested in IOZ for its stability and growth potential. The ETF's focus on large-cap stocks ensures that it includes some of Australia's most established and financially robust companies. Additionally, its high liquidity and strong track record make it a reliable core holding for both new and seasoned investors looking to build a solid foundation in their investment portfolios.

SPDR S&P/ASX 200 ETF (ASX: STW)

The SPDR S&P/ASX 200 ETF is a cornerstone for investors looking to tap into the Australian equity market. This ETF seeks to replicate the performance of the S&P/ASX 200 Index, which represents the top 200 companies listed on the Australian Securities Exchange. By investing in STW, investors gain exposure to a diverse range of sectors, including financials, materials, and consumer staples.

What makes STW particularly appealing is its combination of liquidity and a long-standing track record. As one of Australia's oldest and most established ETFs, it offers a reliable and efficient way to achieve broad market exposure. Investors might be drawn to STW for its potential to deliver steady growth and its role as a foundational building block in a well-diversified investment portfolio.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

The Vanguard Australian Shares High Yield ETF is designed for investors seeking both income and growth from their investments. This ETF aims to track the performance of the FTSE Australia High Dividend Yield Index, which includes companies with higher forecasted dividend yields relative to other Australian stocks. By focusing on high-dividend-paying companies, VHY provides investors with the potential for regular income distributions.

Investors might find VHY particularly attractive due to its emphasis on dividend yield, making it a suitable choice for those looking to generate a steady income stream. Additionally, the ETF's diversified portfolio across various sectors helps mitigate risk while offering exposure to some of Australia's most reliable dividend-paying companies. VHY is an excellent option for income-focused investors aiming to enhance their portfolio's yield without sacrificing growth potential.

Betashares FTSE RAFI Australia 200 ETF (ASX: QOZ)

The Betashares FTSE RAFI Australia 200 ETF offers a unique investment approach in Australian equities. Unlike traditional market-cap-weighted ETFs, QOZ uses a fundamentally weighted strategy to select the top 200 companies listed on the ASX. This means companies are chosen based on their economic size, considering factors like book value, cash flow, sales, and dividends rather than just their market capitalisation.

Investors might be drawn to QOZ for its potential to outperform traditional indices by focusing on undervalued stocks and avoiding overvalued ones. This strategy aims to deliver superior long-term performance while providing diversified exposure to the Australian market. Additionally, QOZ's cost-effective structure makes it an attractive option for those looking to enhance their portfolio without incurring high fees.

iShares S&P 500 ETF (ASX: IVV)

The iShares S&P 500 ETF offers broad exposure to 500 of the largest companies listed on US stock exchanges, including industry leaders like Apple, Microsoft, Amazon, and Johnson & Johnson. Designed to track the S&P 500 Index, this ETF is widely regarded as a reliable indicator of the overall health of the US economy.

IVV is a compelling option for those seeking to invest in a diversified portfolio that captures the growth potential of the largest US companies across various sectors, such as technology, healthcare, and consumer goods. With its focus on well-established, blue-chip companies, this ETF is well-suited for those aiming for long-term capital growth and stability. The iShares S&P 500 ETF is a strategic choice for benefiting from broader trends in the US economy while effectively managing risk through diversification.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

The Vanguard MSCI Index International Shares ETF delivers diversified exposure to over 1,500 of the world’s largest companies across developed markets, including global giants like Apple, Microsoft, Nestlé, and Toyota. By tracking the MSCI World ex-Australia Index, this ETF provides a broad representation of international equities outside Australia.

VGS is an appealing option for those looking to diversify their portfolios on a global scale, capturing the growth potential of leading companies across various sectors and regions, including North America, Europe, and Asia. It is particularly well-suited for those seeking long-term capital growth while managing risk through exposure to a wide range of industries and countries. The Vanguard MSCI Index International Shares ETF is a strategic choice for those wanting to complement their Australian investments with international exposure, offering a balanced approach to global investing.

BetaShares S&P 500 Yield Maximiser (ASX: UMAX)

The BetaShares S&P 500 Yield Maximiser is designed for investors seeking enhanced income from their U.S. equity investments. This ETF provides exposure to a diversified portfolio of the 500 largest U.S. companies, similar to the S&P 500 Index. What sets UMAX apart is its use of a covered call strategy, which aims to generate additional income by selling call options on the underlying stocks.

Investors might find UMAX particularly appealing due to its potential for higher income compared to traditional equity investments. The covered call strategy not only enhances dividend income but also helps to reduce the volatility of returns, making it an attractive option for those looking to balance income generation with risk management. UMAX is ideal for income-focused investors who want to benefit from the growth of large-cap U.S. companies while enjoying a steady income stream.

Vanguard Global Aggregate Bd Hdg ETF (ASX: VBND)

The Vanguard Global Aggregate Bd Hdg ETF is an excellent choice for investors seeking diversified exposure to the global bond market. This ETF aims to track the performance of the Bloomberg Global Aggregate Float-Adjusted and Scalable Hedged Index, providing access to a broad range of high-quality, income-generating securities issued by governments, government-owned entities, and investment-grade corporate issuers worldwide.

Investors might be particularly interested in VBND for its stability and income potential. The ETF's hedging strategy helps mitigate currency risk, making it a more stable option for Australian investors. With its low-cost structure and diversified portfolio, VBND is an attractive option for those looking to add a reliable fixed-income component to their investment portfolio.

iShares Core Composite Bond ETF (ASX: IAF)

The iShares Core Composite Bond ETF offers investors a low-cost, diversified exposure to Australian investment-grade fixed-income securities. This ETF aims to track the performance of the Bloomberg AusBond Composite 0+ Yr Index, which includes a broad range of bonds issued by the Australian Treasury, semi-government entities, and corporate issuers.

Investors might be particularly interested in IAF's potential to provide capital stability and consistent income. With its focus on high-quality bonds, IAF serves as a solid foundation for conservative portfolios, offering a defensive buffer against market volatility. Its low fee structure and reliable performance make it an attractive option for those seeking to preserve capital while earning a steady income stream.

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