What Are the Best ASX ETFs for First-Time Investors? Here Are Our Top 5!

In this article, we’re looking at the Best ASX ETFs for First-Time Investors. But first, let’s look at what ETFs are and why they’re so lucrative.

 

Why ETFs Offer the Best Start for First-Time Investors

Using exchange-traded funds (ETFs) is one of the most efficient ways to begin investing. With a single purchase, you gain access to a diverse portfolio of listed assets across many companies—far more than most investors could build individually. ETFs generally charge lower fees than actively managed funds and update holdings daily, offering unmatched transparency. On top of that, they trade throughout the day on the ASX, giving you full control over when you invest.

Australia’s ETF sector has been booming. Over 2024, total assets under management jumped by 38 %, from A$172.9 billion to A$239.1 billion, buoyed by record inflows of A$33.5 billion. Vanguard, BetaShares, iShares and VanEck captured 96 % of this surge. By mid-2025, the sector is forecast to pass A$300 billion. For newbies, these trends underline a powerful message: fewer fees, wide diversification and ever-growing investor trust.

 

Our 5 best ASX ETFs for first-time investors!

Vanguard Australian Shares Index ETF (VAS): Australia’s Core Holding

The Vanguard Australian Shares Index ETF (VAS) tracks the S&P/ASX 300 Index, covering more than 300 of Australia’s large- and mid-cap listed companies and property trusts. At the end of June 2025, VAS held around A$20 billion in assets, making it the largest ETF on the ASX—the first ever to cross that milestone.

Its management fee is just 0.07 % per annum, equating to 70 cents a year per A$1,000 invested. As of 24 June 2025, the net asset value per unit was A$106.26. Over the five years to May 2025, VAS delivered an impressive annualised return of 12.09 %, driven by both capital growth and dividends (about 4.6 %).

VAS’s appeal lies in its stability, broad sector coverage and ability to deliver yields. With around a 3.3 % income yield and a high level of franking credits, it caters to income-seeking investors too. As a core holding, it offers a simple, low-cost way to mirror the Australian market’s performance.

 

BetaShares Australia 200 ETF (A200): Cost-Efficient, Large-Cap Focus

The BetaShares Australia 200 ETF (A200) tracks the Solactive Australia 200 Index, comprising the largest 200 ASX-listed companies by market capitalisation and liquidity. As of 24 June 2025, it managed about A$7.6 billion and delivered a trailing 12-month distribution yield of 3.31 %.

Investors favour A200 for its extremely low management expense ratio of 0.04 %, currently the lowest among ASX-listed Australian-share ETFs. As at 31 May 2025, its one-year return was approximately 13.29 %, with its five-year annualised return at 12.31 %—slightly beating the benchmark index.

Although readers may prefer dividend reinvestment over cash payouts, A200’s strong quarterly distributions with meaningful franking credits (around 70–85 %) make it appealing to long-term growth- or income-focused investors. Its focus on large-cap stocks translates to slightly less diversified exposure than VAS but comes with even lower fees—ideal for cost-conscious beginners.

 

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

The iShares Core S&P/ASX 200 ETF (IOZ) gives investors access to the same top 200 ASX-listed companies, but through BlackRock’s iShares platform. IOZ tracks the S&P/ASX 200 Accumulation Index, which reinvests dividends, appealing to those who prefer a single total-return figure.

Although IOZ’s MER of 0.05 % is marginally higher than A200’s, BlackRock’s version offers strong brand trust and widespread use. Investors appreciate its smooth trading volumes and slightly different index composition. While A200 is the cheapest option, IOZ provides a proven, low-cost experience with reliable cost-efficiency.

 

Vanguard MSCI International Shares ETF (VGS): Global Diversification

Australian shares make up a large percentage of retail portfolios—generally around 60–70 %. That exposes investors to country-specific risks and sector concentration, particularly in financials and materials. The Vanguard MSCI International Shares ETF (VGS) offers a counterbalance.

VGS tracks the MSCI World ex-Australia Index, spanning thousands of companies across developed economies including the United States, Europe, Japan and Canada. By the end of 2024, it held nearly A$10 billion, supported by inflows of roughly A$2 billion in 2024 alone. These flows reflect investors seeking overseas growth.

With a management fee of 0.18 %, VGS is cost-effective for international exposure. Most returns come from US equities, especially tech stocks. As global markets advance, VGS has delivered strong growth. Its regional diversification and currency exposure also provide an important hedge for Aussie-centred portfolios.

 

Vanguard Australian Shares High Yield ETF (VHY): Income-Focused Option

The Vanguard Australian Shares High Yield ETF (VHY) targets companies listed on the ASX that offer above-average dividends, replicating the FTSE ASFA High Dividend Yield Index. With a management fee of 0.25 % per annum and a portfolio turnover rate of approximately 21.5 %, it remains cost-effective, though less passive than other Vanguard strategies.

The fund holds around 68 high-yielding companies, primarily blue-chip banks, utilities and resource stocks. The focus on income targets investors seeking regular cash flow, underpinned by healthy franking credits. However, Morningstar warns of “dividend traps”; sustaining high-yield status may coincide with underlying earnings weakness. Despite the potential distribution risk, many investors in r/fiaustralia label VHY as “a simple and relatively cheap way of getting exposure to around 60 large-cap ASX blue-chip high-yielding companies”.

VHY fits well as an income-focused satellite holding, complementing growth ETFs while delivering regular distributions. Its structurally higher yield and franked income make it attractive to those building passive-income portfolios, though it should be balanced with broader market exposure.

 

How to Structure a Well-Balanced Portfolio

For new investors, I recommend a “core and satellite” strategy. At the core, choose one broad Australian ETF—A200 for ultra-cheap large-cap exposure or VAS for broader mid-cap inclusion. Then, add satellites: include VGS to gain international balance and VHY to boost yield.

A starting allocation might look like this: 40 % A200 or VAS, 40 % VGS, 20 % VHY. Adjust proportions based on your risk appetite. If you’re more cautious, shift weight towards VHY. If you’re aiming for growth, you could overweight VGS.

Set regular contributions, using dollar-cost averaging—say, monthly. Revisit your portfolio annually. Check allocations and rebalance to your target mix, maintaining alignment with your objectives. Remember, franking credits on Australian dividends may provide tax benefits, so discuss this with a financial planner.

 

Understanding the Risks

Investing always carries risk. ETFs mirror market performance, meaning value will fluctuate. Australian-share ETFs are often concentrated in financials, materials and resources, making exposure to global ETFs crucial for balance. International ETFs like VGS also carry currency risk; a rising AUD can erode returns.

Additionally, higher-yield ETFs (like VHY) may seem appealing but often focus on mature sectors such as energy and utilities, which may lag in bull markets. Keep your investment horizon long—at least five years—to ride out volatility.

 

Final Takeaway

For first-time investors in 2025, ASX-listed ETFs offer a sensible and affordable way to begin building a diversified portfolio. Consider starting with:

• VAS or A200 as your foundational position in Aussie shares
• IOZ, if you prefer a reputable alternative with accumulated dividends
• VGS to add offshore diversification and growth potential
• VHY to introduce a reliable income and yield

This blend delivers diversification across markets and sectors, low costs and a straightforward path towards long-term wealth. With carefully chosen ETFs, regular contributions and annual reviews, you can build a resilient and future-proof investment portfolio.

 

What are the Best ASX Stocks to invest in right now?

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FAQs

• What is the minimum amount I need to start investing in ASX ETFs?

  Most brokerage platforms in Australia allow you to start investing in ETFs with as little as A$500 per transaction, owing to the ASX’s minimum trade requirement. However, some micro-investing apps may let you begin with even smaller amounts through pooled investments.

• Are ETFs safer than individual shares?

  ETFs are generally considered less risky than individual stocks because they offer built-in diversification. Instead of relying on the performance of one company, you gain exposure to many companies across various sectors. However, they still carry market risks and can fluctuate in value.

• How often do ASX ETFs pay dividends?

  Most ASX-listed ETFs—such as VAS, A200 and VHY—pay quarterly dividends. The exact schedule and amount may vary depending on the ETF’s underlying holdings and market performance. International ETFs like VGS usually pay semi-annually.

• Are the dividends from ETFs franked?

  Yes. Many Australian ETFs offer franking credits on their dividend distributions, particularly those investing in Australian equities, such as VAS, A200 and VHY. These credits can reduce your income-tax liability if you’re an Australian resident for tax purposes.

• Do I have to pay tax on ETF investments?

  Yes. You may need to pay capital gains tax when you sell your ETF units for a profit. In addition, dividends and franking credits are assessable income. It’s best to keep detailed records and consider consulting a tax adviser, especially at the end of the financial year.