Tracker funds—sometimes called index funds—are having a moment in Australia’s investment scene. With 2025’s focus on transparency, low fees, and digital-first investing, tracker funds have become a go-to for both first-timers and seasoned pros. If you’re seeking a smarter, simpler way to grow your wealth, now’s the time to take a closer look.
What Exactly Is a Tracker Fund?
At its core, a tracker fund is a type of managed fund or exchange-traded fund (ETF) designed to mirror the performance of a specific market index, such as the ASX 200 or the S&P Global 100. Instead of relying on a fund manager to pick stocks, tracker funds simply buy the same securities that make up the index, in the same proportions.
- Low Cost: No expensive research or active trading means lower management fees—often under 0.2% per year.
- Transparent: You know exactly what you own, and performance closely matches the index.
- Diversification: Exposure to hundreds of companies in a single fund reduces risk.
This passive approach has surged in popularity as Australians look for cost-effective, no-fuss ways to invest.
Why Tracker Funds Are Hot in 2025
Several trends and policy shifts are fuelling the growth of tracker funds in Australia this year:
- Fee Pressure: The Australian Securities and Investments Commission (ASIC) continues to crack down on excessive fund fees. As a result, investors are moving billions from active to passive strategies.
- Superannuation Shakeup: The 2025 MySuper reforms encourage super funds to improve transparency and reduce costs, making tracker funds a favoured option for default super products.
- Digital Platforms: Fintechs like Pearler and Stake make it easier than ever for Aussies to buy tracker ETFs with fractional investing and automated plans.
- Performance Evidence: Research from Morningstar and the ASX shows most actively managed funds underperform their index over 5+ years, further boosting the case for trackers.
Example: If you invested $10,000 in a broad ASX 200 tracker ETF five years ago, your investment would have grown in line with the market—without the drag of high fees, and with less risk than picking individual shares.
How to Use Tracker Funds in Your Portfolio
Tracker funds can play multiple roles in a modern Australian portfolio:
- Core Holding: Many investors use an Australian shares tracker fund as the foundation of their super or investment account.
- Global Diversification: International tracker funds (e.g., tracking the S&P 500 or MSCI World Index) provide exposure beyond the local market.
- Thematic Investing: Some tracker ETFs now follow themes like clean energy, technology, or emerging markets—offering targeted exposure without active management risk.
Real-World Example: In 2025, a typical young professional might split their $20,000 investment:
- 60% in an ASX 200 tracker ETF (e.g., VAS)
- 30% in a global tracker ETF (e.g., VGS or IVV)
- 10% in a thematic tracker (e.g., HGEN for hydrogen economy exposure)
This mix provides broad diversification, low costs, and exposure to long-term growth trends.
Risks and Considerations
While tracker funds are simple and cost-effective, they’re not risk-free:
- Market Risk: If the market falls, so does your investment. Tracker funds don’t protect against downturns.
- No Outperformance: By design, tracker funds won’t beat the market—they aim to match it, minus fees.
- Tracking Error: While rare, minor deviations from the index can occur due to fund costs or rebalancing delays.
Still, for most Australians, the benefits of diversification, simplicity, and low fees outweigh these drawbacks—especially with the ongoing regulatory focus on consumer outcomes in 2025.
Conclusion
Tracker funds have cemented their place in Australia’s investing mainstream, driven by 2025’s regulatory reforms, digital access, and the clear evidence that low-cost investing wins over time. Whether you’re building your first portfolio or rethinking your super strategy, adding tracker funds could be the smartest move you make this year.
