How Australian investors are building their dream portfolios on the stock exchange

There’s never been a better time to be an investor. More access, more choice, more flexibility. Of course, this is all at a time of market volatility, but look on the bright side - at least there are more options than ever to help you manage the uncertainty of today’s markets.

More choice can come with its own challenges – like where do you start your research, or what products are right for your portfolio? That’s where Livewire’s Listed Series, in partnership with the ASX, comes in. You’ll find tips on finding the right listed products for your portfolio, and you’ll hear insights from some of the top fund managers with products in this space.

Before we launch in, we’ll take a quick step through the extraordinary changes in the marketplace and what trends investors can take advantage of through listed products.

What are listed products?

When we talk about listed products, we are talking about Exchange Traded Funds (ETFs) and listed investment vehicles, like Listed Investment Companies (LICs) and Listed Investment Trusts (LITs).

What’s the difference, I hear you ask? You can find out in more detail in this explainer from Livewire’s own Vishal Teckchandani, but a short explanation follows.

• ETFs are a basket of investments that you can trade on a stock exchange like the ASX, using a trading platform. When you invest in an ETF, you receive units in a pooled managed fund – that means your money is combined with other investors to buy a collection of assets, like shares in a company, or bonds. The units reflect your portion of the overall fund. ETFs are open-ended funds, which means they can expand for more investors to buy units by simply buying more of their underlying assets. Any income generated by an ETF might be offered to investors as a Distribution. ETFs started out as passive investments, but as time has gone on, you’ll find more sophisticated versions that are actively managed or use smart-beta.
  
  
• LICs and LITs similarly own a basket of investments and can be traded on an exchange, but where they differ to ETFs is that they are close-ended. That means there is only ever a fixed amount of shares available on the market, and they can trade at a discount or premium to NAV (above or below the value of the assets in the LIC or LIT). Any income generated by the LIC will be offered to investors in the form of a Dividend, or a Distribution for a LIT. These investments are actively managed by a fund manager.

The evolution of listed products

Chances are, you hold a listed product in your own portfolio, or via your superannuation.

According to Rory Cunningham, Senior Manager, Business Development, Investment Products for the ASX, more than one in four Australian investors hold listed products. These investments are particularly popular with younger investors, self-managed super funds (SMSFs), and high-net-worth investors and financial advisers. Their popularity is growing too, given the ease and convenience they offer.

“The vast majority of investors use listed products for long-term portfolio construction, particularly for retirement savings and wealth building. While some investors may use ETFs for short-term market exposure, they are primarily a buy-and-hold investment vehicle,” says Cunningham.

LICs and LITs have been around for a long time – in fact, over 100 years. The Australian Foundation Investment Company (ASX: AFI) was the first listing in 1928. Technically the oldest investment company is Whitefield (ASX: WHF) which was incorporated in 1923 but not listed until 1971.

ETFs are a more recent evolution for the Australian market. The first ETFs appeared in US markets at the start of the 1990s, but Australia didn’t join in until 2001 with an ETF to track the S&P/ASX 200, the SPDR S&P/ASX 200 Fund (ASX: STW).

“When the first ETF was listed on the ASX in 2001, ETFs were a niche product primarily intended to be used by institutional investors. Today, they have become mainstream, embraced by both retail and institutional investors,” says Cunningham.

In fact, ETFs have only been really embraced by Australians in the past seven years.

At the end of 2017, the size of the market was $35.96bn. At the end of February 2025? $247.77bn.

If the changing fortunes of ETFs surprises you, it’s worth remembering a lot changes in a short time.

For example, the S&P/ASX 200 index only hit its 25th anniversary this year and Cunningham notes that since then, there’s been significant growth in self-directed investing, increased education, and technology advancements to support investors.

That same index is also now viewed as the key indicator of Australian share market health; not bad for an index that started at 3,133.30 to match the All-Ordinaries Index. Today, it stands at 7,962.3 (as at 11 March 2025).

Trends to watch in the listed product space

In recent times, Cunningham has seen a shift in the types of listed products issued to the Australian market. Smart-beta or strategy-focused ETFs have become more common while higher interest rates saw a plethora of fixed income ETFs hit the market.

“High-yield and quality-focused ETFs were among the top for inflows in 2024,” Cunningham says, adding that there has been record inflows to fixed income investments, be it broad-based, subordinated debt and high-interest cash strategies.

It’s not to say that older forms of listed products aren’t still popular.

“Broad equity market index-tracking ETFs continue to attract significant inflows, forming the core of many portfolios,” says Cunningham.

Livewire readers’ own top-tipped ETFs are testament to this, featuring broad-based Australian and US equity market indices, alongside high-yield and quality strategies.

Cunningham is also seeing an increase in IPOs in the LIC and LIT sector, along with follow-on capital raisings from existing strategies, particularly in private credit strategies.

There’s plenty to watch going forward, with Cunningham highlighting a few trends to watch:

• More actively managed ETFs
• Growth in fixed income ETFs, with phasing out of bank hybrids accelerating product development
• More international and sector-specific ETFs
• Crypto ETFs

“Regulatory advancements have enabled the listing of ETFs investing in certain cryptocurrencies,” Cunningham says.

He expects to see more income-focused options and greater access to private markets, real assets and alternatives, through listed products in coming years.

Building a portfolio of listed products

Listed products have made it easier than ever to build a complete diversified portfolio, so it's hardly a surprise that Cunningham is seeing growing popularity.

“ETFs offer a simple, cost-effective and transparent way to build a diversified portfolio, providing access to a wide range of asset classes, markets and investment strategies within a regulated and liquid environment,” he says.

“Beyond ETFs, investors can also utilise LICs, LITs, REITs, Australian Government Bonds, and Warrants to construct a well-balanced portfolio. Understanding the differences between these products and how they complement each other is crucial for achieving long-term financial goals.”

Ready to invest?

In the Listed Series for 2025, we’ll take you through the basics of listed products, introduce you to a range of expert fund managers, share a list of funds to kickstart your research, and help you understand the different ways different strategies can work in your portfolio.

Today, you’ll find:

• An explainer on ETFs and LICs from Livewire’s Vishal Teckchandani

Keep checking in daily for more, and let us know in the comments your top questions about investing in listed products.