How many ETFs should you own?

A few weeks ago, a new client sent me his portfolio to review. After 20 years as a financial adviser, first at UBS and now running my own firm, I’ve seen a lot of portfolios. This one stopped me. He owned 14 ETFs: VAS, A200, IOZ and VHY side by side, three global funds holding many of the same big US tech companies, two near-identical emerging markets ETFs and a handful of thematic funds with no clear purpose.

He thought he was diversified. In reality he had built a portfolio full of duplication, complexity and overlapping fees. Tap any button to jump to that part of the video.

Part 1: More ETFs don’t mean more diversification

Australia’s 10 largest ETFs hold around $105 billion between them, about 31% of the whole Australian ETF market. Take four popular Australian share funds: VAS, A200, IOZ and VHY. Add up their fact sheets and you get roughly 770 holdings. Sounds diversified, until you realise it’s counting the same companies several times.

CBA, BHP, NAB, Westpac, ANZ, Macquarie and Rio Tinto appear in all four. The big four banks alone make up roughly 22–30% of every one of them.

So an investor holding VAS, A200 and IOZ hasn’t built three Australian portfolios. They’ve bought the same banks and miners through three wrappers, with three fee schedules, more brokerage and more tax paperwork.

What real diversification looks like

Going from one to three complementary funds is an enormous jump in diversification. From three to five, the benefit starts to flatten. By the sixth, seventh or eighth broad-market fund, you’re mostly rearranging companies you already own while adding admin.

Part 2: The one-fund core vs building it yourself

Diversified all-in-one ETFs put an entire core portfolio in one ticker: Australian shares, developed and emerging markets and, depending on the fund, some bonds. They also rebalance automatically. The three main options are DHHF, VDHG and VDGR.

DHHF returned 57.3% over five years, the strongest of the diversified all-in-one ETFs on the ASX in this comparison, and led over 12 months because it held no bonds while shares outperformed. VDGR’s larger defensive allocation lowered its return, but that allocation is there to cushion you when shares fall. The right fund is the one whose ups and downs you can actually live with, not last year’s winner.

The DIY five-fund core beat DHHF by about 1.4 percentage points, helped by slightly lower blended fees, control over the mix and especially the NDQ tilt (which returned 28.4%). That tilt won’t win every year.

• One all-in-one ETF: one ticker, automatic rebalancing.
• A 3–5 fund core: more control and potentially lower fees, but more distributions, tax records and rebalancing decisions.

Either works. What doesn’t work is owning four versions of the same index. And after all that fine-tuning the gap was only 1.4 points, so for many investors DHHF’s simplicity is worth it.

Part 3: Where adding more ETFs can help

The diminishing-returns problem mainly affects the core, because broad-market ETFs keep fishing in the same ponds: the ASX 200, MSCI World and S&P 500. A genuine satellite ETF fishes in a different pond.

Someone holding VAS and VGS, or just DHHF, owns thousands of companies but has little meaningful exposure to things like hydrogen, pure-play semiconductors, energy transition metals or robotics. These themes can respond to very different forces from Australian banks and US mega-cap tech, so a satellite sleeve of 5–10 genuinely different positions can keep adding new exposure after the core is done.

The trade-off is real. Satellite ETFs are narrower, more volatile and more expensive, often around 0.45–0.7% a year. That’s why they’re normally held as smaller positions, often 2–5% each, inside a satellite sleeve of 10–30% of the portfolio. And check the label: a robotics ETF and an AI ETF can hold many of the same companies, as can clean energy and energy transition funds.

Read more about the approach in the base and trend method.

Part 4: The $36,000 difference

The 12 months to 30 May 2026 show how differently themes can perform. The 10 best-performing satellite ETFs produced extraordinary returns: IKO (South Korea) returned 206% and HGN (hydrogen) 187.3%. Equal-weighted, those 10 returned 124.4%.

What it does show is where the differences were. VAS, DHHF and the five-fund core were only a few points apart. Assume a 70/30 core and satellite split, with 3% in each of the 10 hindsight winners: on a $100,000 portfolio, the gap between VAS alone and the strongest hindsight portfolio was about $36,000 in one year. Choosing between the two cores moved the result by about 1.4 points; the satellite moved it by more than 30.

Even capturing a quarter of the hindsight result (about 31%) would have lifted a 70/30 portfolio to around 19.5%, still well ahead of DHHF’s 13.2%. But selecting even a quarter of the upside is much harder than a finished performance table makes it look. The biggest opportunity and the biggest selection risk both sit outside the core.

For context, our own long-term targets are far more modest: around 8% a year for the core and 10% or more for the satellite over full market cycles. Targets aren’t guarantees.

Part 5: Why the satellite is hard to get right

• Choice: there are 490+ ETFs on the ASX, with new funds launching and themes rotating constantly. Picking the 5–10 that deserve a place is a serious research job.
• Entry timing: it matters far more than for a broad core. A concentrated thematic ETF can give a completely different result depending on where in its cycle you buy.
• Knowing when to leave: themes run, peak and correct. Some form a new base and start another trend; others fade for years.

That’s why ETF Adviser uses a base and trend framework: filter the ETF universe, look for funds moving from consolidation into a confirmed uptrend, enter with a defined stop, and exit when the trend breaks. Without a repeatable process, investors tend to buy after a theme dominates the news and sell in the first scary correction. That’s performance chasing, not a satellite strategy.

Part 6: So how many ETFs should you own?

Six to 15 is not a target. Every fund must justify its place. Before adding an ETF, ask:

1. What does it give me that I don’t already own?
2. How much does it overlap with my existing holdings?
3. If it’s a satellite, what are my rules for getting in and getting out?

Two complementary ETFs can give more genuine diversification than 10 overlapping ones. Build the core first and keep it simple enough to hold through a tough market. Then, if you have the time, interest and risk tolerance, use a smaller satellite sleeve to reach the opportunities the core misses. That’s how you build a portfolio with intention instead of collecting ETFs.

Want a second opinion on yours? Get a free portfolio review. Building the core? Read VAS and VGS portfolio in 2026.

Watch the full video on YouTube →

General information only, not a recommendation to buy or sell any ETF. ETFs named are examples only. Returns quoted are past performance over the periods shown and are not a reliable indicator of future performance. The satellite figures are hypothetical and based on hindsight. Consider your objectives, financial situation and needs, and read the PDS, before investing.

Frequently asked questions

How many ETFs should I own in Australia?

There is no magic number. For the core of a portfolio, one diversified all-in-one ETF or three to five complementary broad-market ETFs is usually enough. Investors using a core and satellite approach might hold around 6 to 15 in total, but only if every ETF has a distinct job.

Is it bad to own VAS, A200 and IOZ together?

They overlap heavily: A200 has about 99% overlap with VAS and IOZ about 97%. Holding all three mostly buys the same companies through three wrappers, with extra fees, brokerage and tax paperwork, rather than adding diversification.

Is one ETF enough for a portfolio?

For a fully passive investor, a diversified all-in-one ETF such as DHHF, VDHG or VDGR can be enough for the core, as it holds Australian, international and emerging market shares (and bonds, depending on the fund) and rebalances automatically.

What is a satellite ETF?

A satellite ETF gives targeted exposure the core misses, such as a theme, sector or region. They are typically more volatile and expensive, so they are often held as smaller positions of around 2–5% each within a 10–30% satellite sleeve.