Livewire's top-tipped ETFs for 2023 returned 20.74% on average

If there’s an investment structure that has been the biggest winner of the past five years, it would be the Exchange-Traded Fund. Funds under management has, quite frankly, exploded. There are now 308 funds listed on the ASX (as of 31 October) and the market capitalisation is $145.83 billion, more than triple what it was back in 2018.

The market has changed enormously from the days of vanilla, broad-based index trackers. There’s an ETF for every sector and industry, an ETF for every theme – notably, thematic ETFs were particular beneficiaries of COVID-buying. Active managers have also flooded the space after ASIC lifted its suspension in late 2019.

The attraction to ETFs has been largely due to the ease and convenience of use and lower minimum investment – one click and it’s yours via your preferred trading platform. It’s a broad space with plenty of options to consider.

Livewire's top-tipped ETFs for 2023 were a diverse mix - though the bulk were equities focused. There were thematics, global equities, Australian shares and even a precious metal in the mix. While there were broad-based indices like the S&P 500 and Nasdaq 100, there were also a few smart-beta ETFs in the mix – that is, ETFs that incorporate additional filters or rules such as dividend yield to offer specific desired outcomes for investors or offer protection in certain market cycles by exclusionary stock filters.

The year may have started sluggish, but many ETFs you tipped were beneficiaries of the AI-fuelled tech boom and other major market themes. They also were top performers – with an average of 20.74% total return on offer. Take that inflation!

1. Betashares Nasdaq 100 ETF (ASX: NDQ)

The Betashares Nasdaq 100 ETF invests in 100 of the world’s largest non-financial companies across technology, consumer services and other growth-oriented businesses.

It should come as no surprise that the Betashares Nasdaq 100 ETF was the standout performer of 2023. The magnificent seven account for 49.2% of the Nasdaq 100 and averaged returns of 95.62% across the year. What was behind these exceptional returns? The dominance of artificial intelligence.

This ETF is also a top performer on a 5-year basis – You can read more in this wire by my colleague Glenn Freeman.

Source: Market Index, 6 December 2023

2. Betashares Global Cybersecurity ETF (ASX: HACK)

The Betashares Global Cybersecurity ETF tracks exposure to leading companies in the cybersecurity sector. The holdings in this ETF include some of the biggest names in the industry, some of which you may know and others you may not, such as Palo Alto Network (NASDAQ: PANW) and Fortinet (NASDAQ: FTNT).

Cybersecurity has been a major concern across the year – and one where investment continues to grow. Just think of the mass impact of hacking on both Optus and Medibank (ASX: MPL) last year. 

A Gartner survey noted an anticipated increase in cybersecurity technology investment in 2024 from 87% of chief information officers (CIOs) and technology executives in Australia and New Zealand – so, this trend isn't going away.

Source: Market Index, 6 December 2023

3. VanEck MSCI International Quality ETF (ASX: QUAL)

The VanEck MSCI International Quality ETF gives investors exposure to a diversified portfolio of quality international companies listed on exchanges in developed markets around the world (ex Australia).

At the end of 2022, growth was very much on the nose and investors were looking for quality and value. While growth made a resurgence this year, quality has continued to be a factor that investors seek in a challenging and often confusing market environment.

Source: Market Index, 6 December 2023

4. VanEck Morningstar Wide Moat ETF (ASX: MOAT)

VanEck Morningstar Wide Moat ETF gives investors exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar’s equity research team. It’s a high-conviction approach.

Just over 20% of the portfolio is focused in financials, with the next biggest sector weighting in healthcare and it features names like Gilead Sciences (NASDAQ: GILD), Nike (NYSE: NKE) and Wells Fargo (NASDAQ: WFC) in its holdings.

While US tech has been the story of the year, US financials have also been strong performers and the portfolio has benefited from this exposure.

Source: Market Index, 6 December 2023

5. iShares S&P 500 ETF (ASX: IVV)

The iShares S&P 500 ETF offers exposure to the largest 500 US companies by market capitalisation, seeking to replicate the S&P 500 index.

Much like the Nasdaq 100, the S&P 500 is heavily concentrated in the magnificent seven. These stocks represent 29% of the S&P 500 by market capitalisation and were a heavy driver of performance across 2023.

Source: Market Index, 6 December 2023

6. Vanguard MSCI Index International Shares ETF (ASX: VGS)

The Vanguard MSCI Index International Shares ETF provides exposure to many of the world’s largest companies listed in major developed countries as listed in the MSCI World ex-Australia Index.

Much like the S&P 500 and Nasdaq 100, it has substantial holdings in the Magnificent Seven – close to a fifth of the portfolio – and has benefitted from the outperformance of these stocks.

Source: Market Index, 6 December 2023

7. Global X Physical Gold ETF (ASX: GOLD)

The Global X Physical Gold ETF invests in physical gold bullion, with each unit of investment representing a 0.009249232 fine troy oz (as at September 2023).

This is both the oldest and first physical gold ETF in the world.

Gold traditionally performs well in uncertain, challenging market environments, due to its use as a hedge against inflation. This year has been no exception and prices have hit record highs.

As of 6 December 2023 at 5.11 pm, it was trading at US$2,027.27 per troy ounce (Source: ABC Bullion). Michael Goldberg from Collins St Value Fund recently wrote for Livewire on the case for gold.

Source: Market Index, 6 December 2023

8. Vanguard Australian Shares High Yield ETF (ASX: VHY)

The Vanguard Australian Shares High Yield ETF seeks to provide low-cost exposure to companies on the ASX that have higher forecast dividends relative to other ASX-listed companies by tracking the FTSE Australia High Dividend Yield Index.

The biggest holding is BHP Group (ASX: BHP) at 10.63% of the portfolio, followed by Commonwealth Bank Australia (ASX: CBA) (9.58%) and National Australia Bank (7.22%). Both BHP and Commonwealth Bank featured in your top-tipped large-cap stocks for 2023 and you can read more in this wire. While BHP dropped 37% in profits this year, it still has much going for it and hasn’t failed to deliver the big dividends. The future looks interesting too. For example, it purchased Oz Minerals this year, a major copper play for the business and actually accounts for just under 7% of world uranium production.

As for Commonwealth Bank, it beat dividend consensus this year and turned a generous profit but brokers are starting to turn on the banking stalwart with it now ranking as a strong sell on Market Index’s Broker Consensus tool.

Source: Market Index, 6 December 2023

9. Vanguard Australian Shares Index ETF (ASX: VAS)

Vanguard Australian Shares Index ETF seeks to provide exposure to the S&P/ASX300.

It’s been a bumpy ride – largely off the back of a volatile smaller cap space, but investors are still up on the year. They’ve also benefitted from a reasonable year of dividends, particularly in the largest companies like BHP and Commonwealth Bank.

Source: Market Index, 6 December 2023

10. Global X Battery Tech & Lithium ETF (ASX: ACDC)

Australia’s largest thematic ETF seeks to provide exposure to global companies developing electrochemical storage technology and mining companies producing battery-grade lithium.

Lithium has had a volatile year – in fact, prices have fallen over 80% across the year which will have hurt performance. That said, the exposures in the ETF are towards the higher quality lithium plays, such as market-darling Pilbara Minerals (ASX: PLS), Mineral Resources (ASX: MIN) and Core Lithium (ASX: CXO) and it is broadly diversified across battery and EV manufacturers, such as Tesla (NASDAQ: TSLA). 

The EV market and battery space is still growing and there is significant government investment dedicated towards the green transition to continue to support companies in this space.

Did you miss the other wires on your most-tipped picks?

• Only 3 of your top-tipped small caps for 2023 are in the black

• How your top-tipped ASX large-caps of 2023 fared

This article was originally published on Livewire Markets.