Key takeaways:

• Investors favoured index and broad-exposure ETFs, notably the Vanguard Australian Shares Index ETF

• The list of the most traded ETFs was dominated by Betashares and Vanguard products

• Trading activity highlighted strong enthusiasm for exposure to international shares, albeit via ASX-listed ETFs

• The greatest conviction was centred on ASX-related ETFs, while tech ETFs recorded weaker levels of conviction

• Some of the best-performing ETFs in 2023 didn’t feature among the most traded names on the Selfwealth platform, including CRYP, FANG, URNM, SEMI, DAPP, and BKCH

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Long viewed as a popular investment choice for investors eyeing exposure to a diverse basket of stocks, ETFs enjoyed strong support this year amid a macro environment that saw strong gains for US indices, and as a number of emerging investment themes grew in popularity. 

In 2023, more than one in four trades across the Selfwealth community were ETFs. That number increased towards 30% when looking specifically at ‘buy’ trades, with ETFs often aligning with investors’ long-term buy-and-hold strategies.

On that note, these were the most popular ETFs traded throughout the year.

Top 20 ETFs by Volume

1. Vanguard Australian Shares Index ETF (ASX: VAS) - 83.3% Buy-to-Sell Ratio - Share Price Performance: 6.1%

2. Vanguard Diversified High Growth Index ETF (ASX: VDHG) - 77.1% Buy-to-Sell Ratio - Share Price Performance: 11.4%

3. Vanguard MSCI Index International Shares ETF (ASX: VGS) - 80.1% Buy-to-Sell Ratio - Share Price Performance: 20.7%

4. iShares S&P 500 ETF (ASX: IVV) - 82.5% Buy-to-Sell Ratio - Share Price Performance: 24.3%

5. Betashares Nasdaq 100 ETF (ASX: NDQ) - 68.6% Buy-to-Sell Ratio - Share Price Performance: 50.8%

6. Betashares Australia 200 ETF (ASX: A200) - 82.3% Buy-to-Sell Ratio - Share Price Performance: 6.1%

7. Vanguard U.S. Total Market Shares Index ETF (ASX: VTS) - 71.8% Buy-to-Sell Ratio - Share Price Performance: 24.5%

8. Betashares Diversified All Growth ETF (ASX: DHHF) - 82.8% Buy-to-Sell Ratio - Share Price Performance: 13.1%

9. Betashares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ) - 52.8% Buy-to-Sell Ratio - Share Price Performance: -16.7%

10. Betashares Geared Australian Equity Fund (ASX: GEAR) - 59.2% Buy-to-Sell Ratio - Share Price Performance: 11.1%

* Measured between close of trade December 30, 2022, and close of trade December 19, 2023

Investor Behaviour Insights

Investors Favoured Broad Exposure 

The vast majority of ETFs actively traded by Selfwealth members in 2023 were funds offering index or broad exposure.

In first place, Vanguard Australian Shares Index ETF (ASX: VAS) was the most traded ETF (by volume) across the community, and approximately five out of every six trades in the fund, which seeks to track the S&P/ASX 300, were ‘buys’. 

VAS also recorded more than twice as many ‘buys’ as the next most actively traded ETF, the Vanguard Diversified High Growth Index ETF (ASX: VDHG).

After that, the gap continued to spread out between the next most popular trades, being the Vanguard MSCI Index International Shares ETF (ASX: VGS), iShares S&P 500 ETF (ASX: IVV), and Betashares Nasdaq 100 ETF (ASX: NDQ). As it were, in 2023 VAS recorded nearly as many trades as these three funds combined.

Nonetheless, the results also indicated that there was only a modest level of appetite for thematic exposure among the most traded ETFs. Within the top 20, just four funds provided access to specific investing themes. 

These included the Betashares Global Cybersecurity ETF (ASX: HACK), in 14th, Betashares Global Sustainability Leaders ETF (ASX: ETHI), ranking 16th, Betashares Asia Technology Tigers ETF (ASX: ASIA), placing 17th, and arguably, the Vanguard Australian Property Securities Index ETF (ASX: VAP), in 20th. Trades across these four ETFs were comparable to approximately one-third of those in VAS.

Betashares and Vanguard Won in the Popularity Stakes

Across the community, Betashares and Vanguard held a dominant foothold over investor interest in the ETF market. Much of this can be explained by their extensive portfolios of ETF products, as well as their status as low-cost fund providers.

By volume, Betashares was represented on ten occasions within the top 20, and seven times when looking at the top trades by money flow.

On the other hand, there were seven Vanguard funds among the top 20 most actively traded ETFs this year, and in terms of value, five made the final cut.

Elsewhere, iShares, Global X, and ProShares were some of the other ETF providers with individual products that enjoyed high popularity within the community when measured by volume. The same trio, as well as Direxion and SPDR, also made the top 20 ETFs traded by value, indicating that some investors were more prepared to spread money into niche products.

Strong Enthusiasm for International Shares

As was the case with the top 20 stocks traded throughout the year, most investors opted to trade exchange-traded funds listed on the ASX.

However, the majority of the leading ETFs traded on the Selfwealth platform offered some form of exposure to international equities. 

Often, this exposure was centred on US markets, and in the form of a wholly-concentrated focus, although there were some instances where popular ETF trades offered exposure to both local and international markets via the one instrument.

In a year where overseas markets delivered large returns, the results suggest that investors were very enthusiastic about gaining exposure to international stocks through ETFs. 

What’s more, with the exception of strong money flow in niche products tracking the semiconductor sector, investors favoured the local variants of said funds ahead of US-listed ETFs due to familiarity, low-cost access, and a likely indifference towards currency fluctuations.

Long-term Buying Conviction

High conviction levels across the community suggests Selfwealth members see ETFs as key instruments to back their long-term investment goals and forecasts. 

The highest buy-to-sell ratios were mostly concentrated among ETFs targeting the local share market. Both VAS and A200 had buy-to-sell ratios tracking above 80% for volume, and around two-thirds when tracking money flow.

With that said, IVV and VGS also recorded strong conviction levels on account of their status as benchmarks for the US and global share markets respectively.

A particular point of interest was that conviction in tech-related ETFs typically lagged that of funds with more diverse exposure, despite the tech sector being the strongest performing corner of the market in 2023.

One overseas-focused tech ETF that displayed weak buy-to-sell sentiment was the Betashares Asia Technology Tigers ETF (ASX: ASIA). In fact, ASIA was the only top 20 name with a buy-to-sell ratio under 50% for overall trade volumes. That meant sellers were the driving force for overall trading activity, with weak conviction likely owing to concerns about the Chinese government’s regulatory intervention.

Similarly, by volume, trading conviction in NDQ was about 15 percentage points lower than that of IVV, which tracks the more diverse index in the S&P 500. In the case of money flow, NDQ was one of the few names that saw a clear majority of money flowing out of the fund, rather than into it.

Top 20 by Value

1. Betashares Geared Australian Equity Fund (ASX: GEAR) - 50.6% Buy-to-Sell Ratio - Share Price Performance: 11.1%

2. Betashares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ) - 49.1% Buy-to-Sell Ratio - Share Price Performance: -16.7%

3. Vanguard Australian Shares Index ETF (ASX: VAS) - 65.2% Buy-to-Sell Ratio - Share Price Performance: 6.1%

4. ProShares UltraPro Short QQQ ETF (NASDAQ: SQQQ) - 50.1% Buy-to-Sell Ratio - Share Price Performance: -74.6%

5. Global X Ultra Long Nasdaq 100 Hedge Fund (ASX: LNAS) - 49.9% Buy-to-Sell Ratio - Share Price Performance: 115.9%

6. Betashares Australian High Interest Cash ETF (ASX: AAA) - 55.9% Buy-to-Sell Ratio - Share Price Performance: 0.0%

7. Global X Ultra Short Nasdaq 100 Hedge Fund (ASX: SNAS) - 51.1% Buy-to-Sell Ratio - Share Price Performance: -63.5%

8. ProShares UltraPro QQQ (NASDAQ: TQQQ) - 49.9% Buy-to-Sell Ratio - Share Price Performance: 194.9%

9. Vanguard MSCI Index International Shares ETF (ASX: VGS) - 61.0% Buy-to-Sell Ratio - Share Price Performance: 20.7%

10. Betashares U.S Equities Strong Bear Fund (ASX: BBUS) - 50.6% Buy-to-Sell Ratio - Share Price Performance: -35.3%

* Measured between close of trade December 30, 2022, and close of trade December 19, 2023

Top Performing Funds Outside the Top 20

There were also a number of ETFs that, despite yielding significant returns in 2023, didn’t rank among the most popular trades, either by volume, or by money flow.

On the ASX, this included the Betashares Crypto Innovators ETF (ASX: CRYP), Global X Fang+ ETF (ASX: FANG), Betashares Global Uranium ETF (ASX: URNM), and Global X Semiconductor ETF (ASX: SEMI).

Circling back to one of our earlier observations, these funds are all thematic in nature, and all benefitted from unfolding trends throughout the course of the year.

CRYP, which returned 196.5%, was the standout as cryptocurrency prices returned to their highest levels in 20 months. In the case of FANG, up 98.2%, the ETF was propped up by strong returns from mega-tech names, which recovered after a shaky 2022. 

SEMI returned 67.5% on the back of Nvidia’s meteoric rise in 2023, the flagbearer for the semiconductor sector, which experienced a paradigm shift amid significant interest in generative artificial intelligence (AI).

Last but not least, with uranium prices surging to their highest level in 15 years, URNM delivered a return of 62.5%.

These themes were also central in delivering large returns for many of the high-performing US-listed ETFs that flew under the radar within the Selfwealth community, including the VanEck Digital Transformation ETF (NASDAQ: DAPP), up 252.4%, and the Global X Blockchain ETF (NASDAQ: BKCH), which gained 239.4% in 2023.