ETF inflows surge as Aussies favour low-cost investing

Australia's exchange traded funds (ETF) market notched another record year in 2025, as investors look for ways to diversify amid volatility.

Investors tipped a net $51.9 billion into the sector over the year, up 60% on the year before, according to data from Rainmaker Information.

That took the total value of the ETF market to $279.6 billion, underscoring how central these products have become in many Australian portfolios.

David Gallagher, executive director of research at Rainmaker Information, the publisher of Money, says the data highlights a disciplined approach among investors.

"The strong preference for simple, diversified and cost-effective products shows how firmly long-term thinking has taken hold in the Australian market," says Gallagher.

Australians invest in index ETFs

The biggest driver was low-cost index-based ETFs, which aim to track a market benchmark such as the S&P/ASX 200, attracting $41.8 billion.

The major broad-market products together accounted for 19% of gross inflows, reflecting ongoing reliance on diversified building-block solutions.

These include:

• Vanguard Australian Shares Index ETF (VAS),
• Vanguard MSCI Index International Shares ETF (VGS),
• Betashares Australia 200 ETP (A200),
• Vanguard Australian Shares High Yield ETF (VHY)
• and Vanguard Global Aggregate Bond Index (Hedged) ETF (VBND)

"These products track an index. They're index funds that trade on an exchange, so you buy and sell them like a share, but their goal is to match the performance of the underlying benchmark," says Gallagher.

With volatility in the market, Ron Hodge, CEO of InvestSmart, says one of the most effective ways to deal with the noise is to build a portfolio that runs largely on autopilot.

"A simple, diversified ETF portfolio combined with a disciplined process can reduce the temptation to react to every headline," Hodge says.

Other popular investing strategies among Aussie investors

While products that track existing indexes are by far and away the most popular, there are other strategies Australians are using to invest their money.

"Smart beta" products - rules-based funds that tilt toward factors like value, quality or dividends rather than simply mirroring an index - was the second-most popular strategy, drawing $5.3 billion over the year.

"Smart Beta is using well-known investment strategies that beat the benchmark," says Gallagher. "They're more expensive because they are trying to add value above the market."

Actively managed ETFs, where a manager selects investments rather than following a set index, also took in $4.8 billion - up a mammoth 460% year-on-year.

"These products are trying to beat the market, but you are doing that by not owning every stock in the index," says Gallagher. "Instead, the manager chooses from the basket what fits with their strategy, so this will also carry higher fees."

Within the category of actively managed ETFs, Rainmaker Information data shows most of that demand clustered in a small number of strategies.

"These include strategies that pick well-valued stocks as opposed to growth stocks, momentum stocks (going long in past period winners and short in past period losers), and low volatility strategies rather than high-risk high-reward."

Lower-fee products attract new investors

A consistent theme across the market was cost sensitivity.

Lower-fee products again attracted most of the new investment, according to Rainmaker Information, indicating that value-conscious portfolio construction continues to shape investor behaviour.

Fixed income ETFs, which includes government and corporate bonds, continued to strengthen their role within portfolios in 2025.

"Following the rate-driven cash rotation seen in 2023, inflows into bond ETFs broadened across the category, indicating that demand is shifting from tactical allocation to a more structural, long-term position," Rainmaker Information published in its analysis.

No matter the strategy, the trend towards investors engaging in ETFs seems to be one likely to continue.

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