A Simple Guide to ETFs for New Investors
Introduction
Exchange-Traded Funds - ETFs for short - are one of the simplest ways for young Australians to invest. But what exactly are they, and how do you find ones that match your values?
What Is an ETF?
An ETF is like a shopping basket filled with investments - shares, bonds, or both -that you can buy and sell on the stock market. Instead of buying one company’s shares, you get a slice of many at once.
Why ETFs Are Popular
Lower cost than buying individual shares
Instant diversification
Easy to access through most investing or trading platforms.
Available in ethical or sustainable themes
Types of ETFs
Index ETFs: Track well-known indices like the ASX200 or S&P 500. The ASX200 and S&P 500 is the top list of the biggest and most important companies in the Australia and the U.S. Index’s like the S&P 500 includes companies like Apple, Microsoft and Nvidia. Buying an Index ETF is like buying a little piece of all 500 companies at once, instead of picking just one.
Thematic ETFs: Focus on trends or industries such as clean energy, robotics, cybersecurity, or future mobility. Great if you want your investments to align with where you think the world is headed. Look into thematic ETFs such as AINF, CURE and BUGG that focus on specific trends and sectors giving you targeted exposure like artificial intelligence, healthcare innovation and cybersecurity.
Ethical ETFs: This is a set of ETFs that aim to include companies that meet certain social, environmental or governance standards and avoid those that don’t. But not all “ethical” means the same thing. Ethical ETFs are further broken down into ESG, SRI and Impact ETFs. Try researching ethical ETFs such as FAIR, DBBF and ETHI that meet governance standards.
Examples of Popular ETFs
How to Start Investing in ETFs
You don’t need a finance degree to get started.
Pick a platform – Choose an investing app or broker that offers the ETFs you want. You’ll need an investing app that’s easy to use, transparent with fees, and offers access to the themes you care about. Here is a guide on how to pick a suitable investment platform.
Decide your budget – Start with an amount you’re comfortable - even as little as $50 - so you can invest in ETFs without putting your everyday finances under pressure.
Set your timeframe – ETFs work best over years, not weeks, because of compound interest. When your investment makes money, that money can start making money too. Over time, this “earnings on earnings” effect can turn small gains into much bigger growth.
For example, if you invest $1,000 at an average of 8% per year, after one year you would have $1,080. After ten years, that grows to about $2,160, and after twenty years, it becomes around $4,660. The longer you leave your money invested, the more compounding can grow it—time is your biggest advantage.
4. Keep an eye on performance and fees – Occasionally check how your ETF is performing and make sure the fees haven’t changed. This helps ensure your investment is still working efficiently for you over time.
How to Evaluate an ETF
What’s inside it? Look at the holdings and see what companies are inside it.
What’s the fee? This is called the Management Expense Ratio (MER). Which is the yearly fee you pay to the company that manages your ETF or managed fund. This can eat into returns.
Does it match your values? See if it uses ESG (Environmental, Social, Governance), SRI (Socially Responsible Investing), or Impact screening.
Beware of Greenwashing
Not all ethical ETFs are truly impactful. Some “ethical” ETFs still include questionable companies - like fast fashion or fossil-fuel-reliant tech. Always look under the hood before investing. For deeper research, try tools like Morningstar’s ETF screener or Rask’s ETF research guide.
How Inaam Helps
Instead of sifting through endless ETFs yourself, Inaam curates a portfolio for you. You tell us your values and we will build you a mix of impact-first investments, including ETFs where they make sense.
Final Thought
ETFs can be a smart, accessible first step into investing. Just make sure your ETF is as ethical as it claims to be.
Note: This is general information, not financial advice. Always do your own research or speak to a licensed advisor before investing.