Insights

Investors are now buying more index ETFs than ASX shares

Why are index ETFs so popular?
The post Investors are now buying more index ETFs than ASX shares appeared first on The Motley Fool Australia. –

Unless you’ve been living under an ASX rock over the past decade or so, you have probably noticed the rising popularity of ‘passive investing through index exchange-traded funds (ETFs). ETFs have been around for a few decades. That’s in contrast to other, older investment vehicles such as Listed Investment Companies (LICs) and managed funds.

Index funds use computer algorithms to blindly mirror indexes like the S&P/ASX 200 Index (ASX: XJO). Because they just track these indexes, these funds don’t have to hire fund managers or investment analysts. As such, they usually have far lower costs and fees than their ‘active’ counterparts.

Active where? Passive funds continue to grow

This advantage, coupled with the fact that many active fund managers struggle to outperform indexes anyway, have boosted the popularity of index ETFs dramatically over the past decade or two. But this popularity has now grown so much that index funds look like they are set to overtake actively managed funds for the first time.

According to a report in the Australian Financial Review (AFR) today, which cites data from EPFR Global, there is now US$8.4 trillion invested in index ETFs and index managed funds globally. That is close to one in every two dollars in global share portfolios (including individual share ownership). In Australia, the figure is now at 54%, up from 45% at the start of last year. Over in the United States, passive funds now account for 57% of listed equity funds.

That follows an injection of US$17 billion into these passive funds just last week. At the same time, US$15.4 billion reportedly flowed out of actively managed funds.

The report quotes Bernd Meyer, chief strategist at the private German bank Berenberg on this trend:

The trend towards passive investing continues unabated… For many investors, entering the capital market no longer means selecting attractive securities themselves or hiring an active portfolio manager to perform the selection… It means putting money into a passive index fund.

The ASX’s largest index ETF is the Vanguard Australian Shares Index ETF (ASX: VAS), which tracks the S&P/ASX 300 (ASX: XKO). This index ETF now has a market capitalisation of $8.13 billion, up from $5.83 billion in September last year.

The post Investors are now buying more index ETFs than ASX shares appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

More reading

The Fortescue (ASX:FMG) share price is gaining today
After a thumping year, L1 Capital to expand fund offerings

ASX 200 up 1%: Tech shares rise, Bank of Queensland’s provision update

Why ASX energy shares could outperform this morning

2 top ASX 200 shares that might be buys today

Motley Fool contributor Sebastian Bowen 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!