Future Focus: The new Aussie portfolio
The State of the Australian Investor reveals how Aussies are building their portfolios.
Mentioned: Vanguard Australian Shares ETF (VAS), Vanguard MSCI Intl ETF (VGS), iShares S&P 500 ETF (IVV), BetaShares NASDAQ 100 ETF (NDQ)
I spent the last few months working through data on Australian investors in partnership with Sharesight. The result is the State of the Australian Investor report, which analyses the transaction data, portfolio performance, decisions and mood of Australian investors. Over the next few editions of Future Focus, I want to explore some of my favourite insights from the report. You can find the full report here.
At the start of my career I worked in Client Services at an asset manager. As a new investor I saw many client portfolios that ranged in balance, holdings and strategy. What I learned during this part of my career formed the foundation of my investing approach.
As the investment product industry evolved, so did my portfolio. Investment products will never perfectly fit all your requirements, but ETFs ticked the most boxes. They now form the core of my portfolio. I like the simplicity of gaining broad exposure to markets in a single trade. This allows me to focus on saving money and keeping my asset allocation aligned with my goals.
I recently worked on a study of Australian investors in partnership with portfolio tracking platform Sharesight. It explored their holdings, their transactions and how they feel about the current climate. I once again got to take a look at what investors were doing, and I’m not the only one relying on ETFs.
Morningstar’s 2026 State of the Australian Investor
Morningstar’s 2026 State of the Australian Investor explored the portfolios of 90,000 investors using Sharesight data. The four most widely held securities were all exchange-traded funds (ETFs).
Vanguard Australian Shares Index ETF VAS, Vanguard MSCI Index International Shares ETF VGS, iShares S&P 500 ETF IVV and BetaShares Nasdaq 100 ETF NDQ were the top four most held positions.
It isn’t that individual shares are no longer important to investors. ETFs are just becoming an increasingly used tool in portfolio construction. This trend shows up in more than the list of the most popular holdings.
ETFs made up a higher percentage of portfolios by market value, more investor portfolios contained ETFs and purchases of ETFs far outnumbered sales. These trends were more pronounced for new Sharesight users.
How investors are changing the way they use ETFs
Investors increased the percentage of their portfolios allocated to ETFs from 22.60% in FY2025 to 26.20% in FY2026. The proportion of portfolios that held at least one ETF increased from 62.7% to 64.2%.
ETFs are no longer an afterthought, or a small add-on. For the investors that use ETFs, they occupy a central position in their portfolio. Between FY2025 and FY2026, the share of investors holding only ETFs rose from 21.7% to 23.6%. The proportion of investors holding solely individual shares fell from 32.2% to 27.0%, while those holding both increased from 44.7% to 48.1%.
This is not an outright rejection of direct share investing. More investors are building portfolios with a mix of ETFs and individual shares – a hybrid approach. We often hear that more investors are investing ‘passively’. The data shows that this is not the perfect truth. It appears as though investors are still actively investing in direct securities, but are using passive products as a larger part of their portfolio.
Popular as a starting point
A survey of Morningstar readers offered another indication of the popularity of ETFs. When respondents were asked where they would invest $10,000 tomorrow, ETFs were the most popular answer, selected by 28% of respondents. Direct Australian shares followed at 26%, with international shares at 18%.
The portfolio data also showed a difference between newer portfolios and the overall population. ETFs represented 40% of portfolio value for the FY2026 new entrant group, compared with 26.2% across the overall portfolio population.
We can’t say with certainty that all new entrant portfolios are new investors, but it is more likely. It reasonable to assume that ETFs are being considered as a natural starting point for investors entering the market.
A core-satellite approach
The data points to more investors turning to a core-satellite approach.
The core is being filled with ETFs that provide broad-based exposure to markets. Satellite holdings are more likely to include individual shares to express conviction.
Transaction data supports the increasing popularity of core-satellite. ETF purchases outnumbered ETF sales by between 3.2 and 5.4 times across the quarters examined in the report. For individual shares, the buy-to-sell ratio was between 1.5 and 1.7 times. This suggests that investors were more inclined to accumulate ETFs and hold them, while individual shares were more likely to be bought and sold as investors revised their views.
My investing approach
I see a lot of familiar patterns in the Sharesight data. I follow the same trading patterns revealed in the report – I only ever add to my ETF holdings and haven’t made a sell trade yet. ETFs make up an increasingly large position in my portfolio. I’m putting my new savings into ETFs.
I do have some legacy equity holdings. I also have a large allocation to a single share – Morningstar MORN. This is a result of my remuneration package. I have not created a ‘Core-Satellite’ portfolio on purpose, but things have naturally evolved to share many of the attributes of core-satellite. I don’t think I’m alone in this.
As equity investing has become democratised and a combination of other factors – slow age growth, rising cost of living, out of reach property prices to name a few – investing has become a non-negotiable for any of us who want to achieve or maintain a comfortable life. ETFs offer me, and other investors, a way to access markets in a cost-effective manner. They allow diversification of smaller amounts of funds. They don’t require comparatively time intensive research or monitoring like direct equity holdings. They suit investors who invest more for utility than for enjoyment.
ETFs solve a lot of the investing challenges I face.
Final thoughts
The rise of ETFs in the Sharesight data reflects a shift in how engaged Australian investors access markets. More portfolios hold ETFs, ETFs account for a larger share of portfolio value, and investors are buying them more often than they sell them.
Direct shares and ETFs are increasingly being used together, with diversified funds forming the foundation and individual companies expressing a view for investors.
What else can you find in the report?
- The average performance of Australian investors included in the study
- Their portfolio composition
- Their confidence levels in retirement
- The most popular holdings, and the most traded holdings
- How investors reacted to market shocks
You can find the full report here.
Invest Your Way
For the past five years, Mark and I have released a weekly podcast and written on morningstar.com.au to arm you with the tools to invest successfully. We’ve always strived to provide independent, thoughtful analysis, backed by the work of hundreds of researchers and professionals at Morningstar.
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