The inaugural InvestSMART ETF Scorecard report, which examines fund performance in the 12 months to August 2024, has revealed that six of the 10 most popular ETFs in Australia are focused on global equities.

Collectively, the 10 most popular ETFs gained $16.1 billion in assets under management, accounting for one-third (31 percent) of total inflows.

“ETFs are one of the most popular ways to invest for Australians, with total assets under management reaching $213 billion in August 2024. – an increase of about $61 billion from August 2023. The gains were driven by solid growth in global equity markets and strong investor cash flows,” the report said.

The VanEck MSCI International Quality ETF (ASX: QUAL) proved to be the most popular global equity ETF, recording net inflows of over $2 billion.

However, it remains the third most popular ETF overall, behind the Vanguard Australian Shares Index ETF (ASX: VAS ) with net inflows of over $2.5 billion and the Betashares Australia 200 ETF (ASX: A200 ) with net inflows of $2.44 billion. Both ETFs invest in the Australian market.

Although Australian ETFs topped the table as the most popular, international ETFs were the most popular ETF category in the 12 months to August 2024.

One likely reason is that investors see the benefits of investing internationally and want exposure to the booming U.S. tech sector, the report said.

According to the report, the list of the top 10 performing ETFs is largely dominated by global equity ETFs.

The Betashares Geared US Equity Fund Currency Hedged (ASX: GGUS) was the best performing ETF with a 46.6 per cent one-year return, followed by the Betashares Crypto Innovators ETF (ASX: CRYP) with a 43.3 per cent return.

At the other end of the scale was the Global X Ultra Short Nasdaq 100 Complex ETF (ASX: SNAS ) which returned -40.5 per cent and the Betashares US Equities Strong Bear Hedge Fund – Currency Hedged (ASX: BBUS ) which returned -37.7 percent cent

Also among the worst performers were commodity ETFs, with the report noting that while gold-themed ETFs performed "extremely well", other thematic ETFs such as Global X Physical Palladium (ASX: ETPMPD), recorded a decline of 25, 2 percent.

“Investing in thematic or active ETFs can be tempting because of the huge returns they can promise, but they tend to be more volatile than passive ETFs. Investors should limit exposure to these riskier options to a small percentage of their portfolios,” said Ron Hodge, CEO of InvestSMART Group.

Looking ahead, Hodge predicts that ETFs are likely to become a cornerstone of wealth-building strategies over the next decade, especially as "skyrocketing property prices" push home ownership out of the reach of younger generations.

"It is critical for investors to look beyond short-term gains and focus on long-term outcomes. For example, six of this year's 10 best-performing ETFs have three stars or less in our "star rating" system. This year's winner could easily be next year's loser.