The 2026 Guide to All Things ETF

Whether you’re starting up your portfolio fresh, or looking to add new tilts to your existing investments, there are plenty of options in the ETF world today and more to come in 2026. There are more than 400 ETFs listed on Australian exchanges, and plenty to come in the pipeline, so how do you navigate your choices?

The ETF landscape is far from the simple passive index-trackers of years ago and in this guide, I’ll cover the different styles out there and the trends to watch. I’ll also discuss how you can evaluate whether a particular ETF is right for your portfolio.

Basic ETFs & Index Tracking

When people think of ETFs as being passive and simple instruments, this comes back to how they started. You might also hear such ETFs referred to as ‘vanilla index trackers’. These funds will aim to replicate the performance of a broad-based index, like the S&P/ASX200 or S&P 500.

They can do this in a couple of ways:

- Physical replication: where the ETF will purchase the underlying assets of the index. It might purchase the exact same assets (full replication) or a representative basket of only some of the assets that will generally provide much of the same performance (partial replication or sampling). An example of this would be Betashares Nasdaq 100 ETF (ASX: NDQ).

- Synthetic replication: This is where the ETF will use derivatives to replicate the performance of the index, for example, using futures. An example of this might be purchasing oil futures to replicate the performance of the crude oil index.

If you purchase a passive ETF, you are looking to replicate the performance of an index, and that’s not necessarily a bad thing. After all, Warren Buffett himself has stated that the average investor can do well by simply owning a fund tracking the S&P 500 and including US Treasury Bills. Considering that the S&P 500 has delivered 14.6% p.a. for the last 10 years, investors can still find solid growth options in passive indices.

Typically, ETFs are the most cost-effective option for investors as they are cheaper and simpler to operate. Investors should bear in mind though that index tracking means that just as an ETF rises with the market, it also falls.

This is not where it ends though.

Just as our world has become more tech-savvy and advanced, so too has the ETF world, meaning the 2026 investor has plenty of more sophisticated options to consider…

ETF Styles & Trends to Watch in 2026

1. Smart Beta Investing

Let’s say you are still happy with a mostly passive index, but you want to avoid some of the bigger highs and lows, or perhaps you only want to invest in high dividend stocks on the ASX. In this case, you might look at smart-beta investing. This is a style that has become increasingly popular on the ASX as technology has continued to advance to support it.

Smart-beta investing uses additional filters to target specific concerns. It’s not straight index tracking, but it is automated and uses algorithms. You could think of smart-beta as aiming to enhance your index returns.

Smart-beta indices might use an alternative weighting of a broad-based index or create a newer weighted index just focused on a filter like yield or quality.

Passive broad-based indices are typically market-weighted, which means that each underlying asset is allocated to on the basis of its size or market capitalisation. Smart-beta indices can still be market-weighted, but you’ll find the holdings will share a particular filter, such as dividend income.

Market capitalisation weightings means that larger companies can dominate returns, an alternative weighting might be used to smoothen returns or allow other smaller companies to have a greater influence in the performance.

One alternative weighting is equal-weighting where all companies are weighted exactly the same. For example, in the Nasdaq 100 index, Nvidia is the largest allocation and represents 9.9% of the index. If you were to use an equal-weighting index, the allocation to Nvidia would be 1%.
Another alternative weighting is where allocations are based on a specific metric, like earnings, dividends or revenue. For example, the Global X S&P/ASX 200 High Dividend ETF (ASX: ZYAU) filters companies from the S&P/ASX 200 based on quality and yield and then allocations are set based on the size of the yield.

Smart-beta investing can still be cost-effective though may be more expensive when compared to vanilla index ETFs due to the more sophisticated algorithms used.


2. Active ETFs

Active ETFs are a more recent development. There was a temporary pause from ASIC on listings in 2019 but since then there’s been an abundance of new active ETFs joining the market.

It’s a trend that is expected to continue with many active fund managers listing active ETFs to broaden their client base to retail investors who might otherwise not have had been able to access their wholesale unlisted formats.

Active ETFs aim to outperform market indices through a range of strategies, such as fundamental research, quantitative data or even a combination of both. They don’t track indices, though they’ll benchmark their performance against them. They may also use indices as part of the investment universe they select assets or stocks from.

There are strict regulations for how these types of ETFs are labelled. You’ll find the word “Active” and in some cases, “Managed Fund” used in the name of the ETF.

An example of an active ETF is the Claremont Global Fund Active ETF (ASX: CGUN) which invests in 15 high-quality global stocks identified by an investment team. Allocation sizes are determined by the investment team based on a range of metrics and the ETF aims to outperform the MSCI World ex-Australia Net Total Return Index (AUD).

A sub-component of active ETFs is complex ETFs.

These ETFs use sophisticated trading strategies like covered calls, leveraging or derivatives. They may not be suitable for all investors. This has been a fast-growing area of ETFs and there are now over 40 of these listed on the ASX.

An example of a complex ETF is the Global X S&P/ASX 200 Covered Call Complex ETF (ASX: AYLD) which uses covered calls to aim to generate higher yield above dividends and franking for investors.


3. Thematic Investing

Whether investors are keen to dive into AI investing or cybersecurity, thematic investing has been popular for many years now. It typically falls within smart-beta investing because of the filters used to identify companies within a specific theme, though some active managers will also offer funds focused on specific themes.

While these investments will track an index related to a theme, they can be more expensive compared to broad-based indices. They can also be more volatile.

Generally, experts suggest when using these to incorporate them as a smaller tilt rather than the bulk of a portfolio and be conscious of your existing exposures. Consider that if you hold the Nasdaq 100, you already have exposure to the Magnificent Seven so purchasing an AI focused thematic might see significant cross-over in your portfolio holdings.

When investing in a thematic ETF, consider the composition of the underlying index and the durability of the theme – you want megatrends where there will be long-term spend and regulatory support, like technology broadly or cybersecurity, rather than those that focus on meme stocks and gimmicks.

Some examples of thematic ETFs include Global X Battery Tech & Lithium ETF (ASX: ACDC) which invests across the energy transition and JPMorgan Climate Change Solutions Active ETF (Managed Fund) (ASX: T3MP) which invests in companies offering innovation into managing climate change.

Evaluating ETFs for Your Portfolio

With such a wide range of ETFs on offer, there are a few steps investors can start take to filter down their options.

1. What is your investment strategy and where are there gaps in your existing portfolio?

This will help you understand if you need certain asset classes for diversification, or a particular goal like income is lacking. From there, this will help you focus on specific types of ETFs. If you need a tilt towards income, you might consider index-tracking assets like fixed income or you might consider smart-beta ETFs with a focus on yield.

2. What is your budget for fees?

Active and complex ETFs can be more expensive to incorporate in your portfolio than passive ETFs. Investors on a tight budget or with a smaller portfolio may be better suited to passive options to avoid chipping into their returns, but of course this also depends on your goals.

3. Your personal preferences

Some investors have strong views on passive compared to active investing and this will influence which options they research and choose to invest in. Or, you might have a particular interest or view that you want to reflect in your portfolio and this might guide you towards certain thematic ETFs that cover this.

You can see a complete list of the ETFs listed on the ASX and CBOE on their websites, broken down into asset classes.

Some additional tips before investing to consider:

1) Look Under the Hood.

Visit the ETF issuer’s website to understand the investment strategy and what stocks are in the ETF to ensure it matches with what you are looking for.

2) Check Performance.

As with any other investment, look at the ETF’s performance over market cycles in the longer term. For passive and smart-beta investments, also look at the tracking error which indicates how closely the ETF performance matches the index. There will always be some slight variation due to delays in trades or fees, but the lower the tracking error, the better.

Other Trends to Watch in 2026

In 2025, investors flocked to international equities to take advantage of record highs in global markets. They also headed to fixed income assets, with high yields on offer in this space and to offer extra defensive qualities to portfolios in an uncertain market. Gold was another standout given the record prices on this front, with ETFs like Global X Physical Gold (ASX: GOLD) one of the popular options in this space.

Cryptocurrency has generated some interest off the back of regulation opening this space, though bitcoin prices experienced falls in late 2025. As a newer space with the first ASX funds listed in 2024, growth in funds under management should continue.

These themes are likely to continue to dominate in 2026, along with some emerging sectors.

VanEck Australia’s Russel Chessler highlighted global defence and nuclear energy as growing trends to watch and where he anticipates thematic investing to outperform in a recent InvestmentMarkets article.

This follows the increasing focus on domestic self-sufficiency in terms of defence spend and operations, along with the ongoing and rising demand for energy solutions, not just as part of the climate transition but also to support AI growth.

ETF Investing in 2026

When it comes to investing in ETFs across the year, the fundamentals of investing still apply. Take your time to understand what you are investing in and whether it’s right for you and your portfolio. Seek expert advice when you need specialised support.

Don’t be afraid to contact ETF issuers with questions about the products they offer when you need more detailed understanding.

Finally, the ETF market continues to grow at a rapid pace and there are more ETFs listing all the time. Continue to evaluate your portfolio to check the ETFs you own continue to meet your needs and objectives, and if you need to adjust, then spend the time researching your options.

Funds Mentioned

Disclaimer: This article is prepared by Sara Allen. It is for educational purposes only. While all reasonable care has been taken by the author in the preparation of this information, the author and InvestmentMarkets (Aust) Pty. Ltd. as publisher take no responsibility for any actions taken based on information contained herein or for any errors or omissions within it. Interested parties should seek independent professional advice prior to acting on any information presented. Please note past performance is not a reliable indicator of future performance.