Summary: ETFs are becoming a popular investment choice for many New Zealanders, with the NZX's Smartshares a long-established provider. ETFs offer the same benefits as index funds whereby you can invest in a diverse range of companies, industries and regions, all with the convenience of one security. In a nutshell, ETFs offer a low-fee, no-hassle way to invest money all packaged together as something you can buy and sell on the sharemarket. ETFs are, in most cases, a long-term investment. 

ETFs are easy to buy and the choices significant, our guide outlines their pros, cons, how (and where) to buy them and must-know tips for investing. We cover:

• ETF Pros and Cons
• Investing in ETFs
• Popular New Zealand and USA-listed ETFs
• Other Considerations

Disclaimer: Our ETFs list, published below, is journalistic in nature and only highlights low-fee options. It does not endorse the ETFs, nor does it constitute financial advice. ETFs are largely growth-focused, investing in New Zealand and/or overseas. The ETFs listed are regarded as long-term investments that carry a varying degree of risk.

​Looking for other ways to invest? Check out our guide to index funds and our Passive Investing vs Active Investing guide.

ETFs are specialist investments and there are advantages and disadvantages for the ordinary New Zealand investor. To help you understand what's important, we outline the pros and cons below.

Buying an ETF is, for most people, a lot easier than picking individual shares. Yet it can be hard to know where to start. We believe it's a three-step process, which we outline in detail:

1. Decide where you want your investments based. In New Zealand, Smartshares are the most common option, with 35 to choose from. They are all denominated (i.e. traded and held) in New Zealand Dollars. However, platforms such as Hatch and Stake offer access to US-based ETFs, but the investment will be held in US Dollars. Sharesies offers ETFs in New Zealand, Australia and US markets (in their respective currency). Interactive Brokers offers US-based ETFs and many other ETFs listed on 30+ global exchanges, including the UK, Germany, Canada, Australia, Japan, Hong Kong and Singapore. All investments are held in their functional currency.
   
2. Pick an ETF that you want to invest in. ETFs available track well-known indexes like the NZX 50, ASX 200, S&P 500 or specific industries (with property, emerging markets and industrials being popular examples).
3. Understand the exchange risk if you invest outside of New Zealand. The NZD moves daily against other currencies, which will affect the value of your investment. For example, if the NZD becomes stronger against the USD, your USD ETF investment will become less valuable in NZD.

Know This: Smartshares, which offer exposure in many countries and industries, can be a popular introduction to ETF investing given all investments are in NZD. Investing platform InvestNow lets anyone buy and sell Smartshares without any brokerage fees. 

When you’re choosing where to buy an ETF, there are a few things to consider:

1. ETF selection: Do you plan to invest in one index, country, geographic region (i.e. Asia and Europe), company size (i.e. small-cap or multi-national), sector (industrials or ethical etc) or strategy (growth vs income/dividend-producing etc)?
2. Platforms: There are a lot of choices; Smartshares benefits from being NZD-based with 35 different ETFs to select from, as well as free buying and selling using InvestNow. If you're looking for US-based ETFs, and there are hundreds available; Interactive Brokers, Hatch, Sharesies and Stake offer access. If you prefer ETFs beyond the USA and New Zealand, Interactive Brokers offers hundreds of options. Australian ETFs are available on Sharesies.
   
3. Access and management: Do you want to have access to research information to help you decide which ETF is right for you? What platform you select depends on how involved you want to be as an investor, and how much research you want to do. Stake and Interactive Brokers both have in-depth charting and research tools.
4. Fees: ETFs have two fees  the expense ratio (which are the expenses incurred by the ETF to run its day-to-day operations) and the brokerage (i.e. trading) fees when you buy and sell ETF holdings. The expense ratio can range from a super-low 0.03% p.a. to 1% p.a. Brokerage fees are charged by the broker or platform you use to buy and sell the ETFs. This will be a percentage of your trade value, but platforms like Stake and InvestNow don't charge brokerage fees.
5. Foreign Exchange: If you invest in ETFs outside of Smartshares, you'll need to exchange New Zealand Dollars into a foreign currency, which will be USD if its Stake or Hatch. The fees for doing this differ (1.0% for Stake, 0.50% for Hatch, and if you're investing in ETFs using Sharesies, the currency fee is 0.40%) - our Hatch vs Stake guide has more details. Interactive Brokers charges 0.020% for transferring NZD into any currency and is the cheapest for this. Unlike Sharesies, Hatch or Stake, Interactive Brokers requires a lot more work and regulation when it comes to signing up.
6. Fees: ETFs have two fees:

• Expense ratio-  these are expenses incurred by the ETF to run its day-to-day operations. They can range from a super-low 0.03% p.a. to 1% p.a. 
• Brokerage (i.e. trading) fees - incurred in when you buy and sell ETF holdings. Brokerage fees are charged by the broker or platform you use to buy and sell the ETFs. This will be a percentage of your trade value, but platforms like Stake and InvestNow don't charge brokerage fees.

MoneyHub does not offer or publish financial advice, so the best approach would be for you to do your own research as to what ETF is most appropriate for your needs. Things to consider include:

1. Location: Do you have a preference for what country you invest in? There are plenty of New Zealand ETFs that follow the top 10, 50 or more companies. If you want to invest in the USA, Smartshares offers this too, while keeping everything in NZD.
2. Business sector or industry: The choice is endless, with ETFs that invest in technology, bonds, cash, emerging markets, property and many more. Before investing, consider whether the ETF is based on a widely followed index and/or it tracks popular underlying assets. If it does, it is likely that ETF offers better investment prospects than an ETF that has an obscure geographic focus and/or a niche investing strategy.
3. Performance: How has the ETF performed in the last 1, 3 and 5 year period? Are the foundations strong, and what does the market think about the ETF you're interested in? For non-New Zealand ETFs, ETF.com and the EFT Database are both useful resources to learn about ETF investing; ETF.com is our suggested starting point.
4. Level of Assets: To get economies of scale and ensure liquidity, an ETF should have a level of assets above NZ$15m. This means there's enough investor interest in the ETF to let you sell without having to wait a long time for a buyer.
5. Trading Activity: Before investing, make sure the ETF is frequently traded. This isn't so much of an issue with Smartshares or popular US-based ETFs, but others are less liquid. This is important because the more an ETF is traded, the closer the bid-ask spread which means you'll likely get the best price when you buy and sell.

If you invest in US-listed ETFs, the exchange rate will influence the true value of your investment. This is best explained with an example:

• You invest NZ$1,000 into a S&P500 ETF - the NZD/USD exchange rate is 0.63, meaning your NZD translates to US$630.
• After six months, your US$630 S&P ETF has increased 10% in value to US$703. You decide to sell, and want to convert the money back to NZD. 
• At the time you do this, the NZD/USD exchange rate is 0.68. This means your US$703 investment is worth NZ$1,033 (US$703/0.68).
• This means your profit is only NZ$33 because the NZD has risen close to 10% against the USD at the same time the ETF increased. 
• However, it must be noted that had the NZD become weaker against the USD if in the previous example, your NZD gains would compound. For example, had the NZD/USD rate dropped to 0.58, the US$703 ETF investment would now be worth NZ$1,212. This represents around a 20% gain despite the ETF's market price increasing only by 10%. 

Our view: Currency movements can significantly influence the value of any foreign holding. If you're unprepared to take this additional risk, some Smartshares ETFs are hedged and protect you against such movements. 

Please note, this list is journalistic in nature and highlights some well-regarded ETFs only - it does not endorse the providers, nor does it constitute financial advice. The ETFs below are listed under the investment platforms you can use to invest and are published as examples only.

Our selection of ETFs are largely growth-focused investing in New Zealand and/or overseas. All the ETFs listed below are seen as long-term investments that carry a varying degree of risk. Popular ETF options include:

ETFs are becoming an increasingly popular investment option for New Zealanders due to their low-cost, diversity and long-term returns. Investing in an ETF is also a lot easier (and less risky) than choosing a number of different shares. To make sure you invest in an appropriate ETF, we suggest making a few additional considerations:

1. Is the ETF performing? Before investing, make sure you understand how the ETF is performing. If it has dropped, has it done that consistently against its benchmark? Given the range of ETFs on offer, you might end up investing in an ETF you don't fully understand. A popular approach is to choose an ETF that follows a major index such as the NZX50 or S&P500.
2. Are you new to investing? If so, don't rush. This guide explains the basics to let you navigate and advance towards your financial goals.
3. Are ETFs one part of your investing strategy? Our ETFs vs Shares and ETFs vs Index Funds guides help explain what options might be available to you.
4. Financial Advisers don’t often recommend ETFs, although there are exceptions. Read more about Financial Advisers here.