ETF investing strategy for wealth creation

As you move into the accumulation phase of your investing journey, there may be a number of financial obligations or goals to factor into your accumulation plan before retirement.

While you may be earning more, you may also have more expenses, whether it be for children or other family, property, business, or holidays. You may be contributing more to superannuation as well as investing outside of superannuation.

Regardless, an accumulator’s financial goal ultimately is wealth creation to prepare for eventual retirement.

Deploying the right investment strategy and taking a disciplined approach to investing is crucial during this stage.

Investing with ETFs is a strategy that can help you increase the value of your investments and net worth over time.

The accumulation phase

An accumulation plan is an investment strategy to help investors increase the value of their investment portfolio before regular employment income ends in retirement.

Many investors achieve this by investing in ETFs and over a long period, reinvesting investment distributions and capital gains, and taking advantage of compounding returns.

An effective way to stick to an accumulation plan is to practise dollar-cost averaging, enabling investors to invest fixed amounts of money on a regular basis over a long timeframe before retirement.

This is often ideal for investors who don’t have a large sum to invest upfront but are able to budget a set amount of money regularly for investment over the long-term.

Learn about dollar-cost averaging.

The core-satellite strategy

One popular approach to portfolio construction for the accumulation phase is the core-satellite strategy.

The core-satellite investing strategy is an approach that seeks to achieve capital appreciation, limited volatility, and cost control for your investment portfolio.

It’s a strategy that can be designed specifically to cater to your needs, and can be achieved through a selection of just a few ETFs.

The core, or foundation, of your portfolio typically consists of a number of investments that give you broad exposure to a range of asset classes.

The satellite component of your portfolio comprises investments you might make to try and generate extra returns.

This could include investments to take advantage of short-term opportunities, or more focused exposures than the broad exposures that make up the core of your portfolio.

Core-satellite diagram

Learn more about the core-satellite strategy.

Once you’ve set up your investment portfolio, it’s wise to consider when you may need to rebalance your portfolio as your circumstances change over time and as you move into retirement.

Learn more about portfolio rebalancing.

Distribution/ Dividend Reinvestment Plan (DRP)

For all investors, but particularly those in the accumulation phase with a long time horizon, a dividend reinvestment plan – known as a distribution reinvestment plan (DRP) in the ETF industry – could mean the difference between working until you’re 70 or retiring earlier in a strong financial position.

The aim of a DRP is to earn compounding returns for capital appreciation.

How does a DRP work?

A DRP is a plan offered by an ETF manager that allows you to automatically reinvest your cash distributions in additional units in the ETF.

An ETF pools the distributions paid on the securities in its portfolio and, subject to fees and costs, periodically pays these out to unitholders. The amount an investor gets in distributions depends on how many units of the ETF they own.

If the investor chooses to participate in a DRP, instead of receiving their distributions in cash, the distribution is applied to purchase additional units in the ETF.

Learn more about distribution/dividend reinvestment plans (DRPs).

View the most frequently asked questions about distributions.

View BetaShares funds distribution calendar.

Self-Managed Super Funds

Self-managed super funds (SMSFs) are a way of saving for your retirement during the accumulation phase.

An SMSF is an option for investors who want to invest their superannuation funds in a portfolio built specifically with their choice of assets such as shares, property, bonds or cash.

Many people turn to ETFs for their SMSF in order to give them tailored, flexible and cost-effective control over their superannuation.

Learn about using ETFs for self-managed super funds (SMSFs).

Learn about using ETFs for an SMSF growth investing strategy.

What’s an indirect cost ratio?

The Indirect Cost Ratio (ICR) is often quoted in a managed fund or ETF’s Product Disclosure Statement (PDS).

The ICR is an estimate of the costs of investing in an ETF or other fund.

For BetaShares funds, ETF management fees and costs are accrued daily and deducted on a monthly basis from the fund assets, and are reflected in the daily price of the ETF.

Learn how to understand ETF management fees and how ETF fees compare to managed fund fees.

Asset allocation for accumulation

In considering what to invest in for the long term, it all comes down to getting the right mix of assets. Most investors in the accumulation phase are looking for capital appreciation/growth, therefore generally weight their portfolio allocations in favour of shares/equities.

However, this varies from person to person and will usually be determined by your risk and return profile, your goals and personal circumstances.

For example, a high growth risk and return profile is typically suited to a portfolio made up of 90% growth assets vs a moderate growth risk and return profile which may be suited to a portfolio split of around 30% to defensive assets and 70% to growth assets.

Learn about different risk profiles.

Learn about different types of investments and asset classes.

Investing for income vs growth

During the accumulation phase, some investors think they have to choose between income and growth, perceiving that growing wealth and generating income are mutually exclusive. That is, a focus on growth means forgoing income, and a focus on generating income means sacrificing growth.

However, growth and income are portfolio attributes that can work together to benefit either growth-focused or income-focused investors, as shown in the table below.

Investment objective
  To generate income To generate gains
Income-oriented portfolio Pass portfolio income through to the investor as income Reinvest to increase portfolio value, enable compounding, and achieve growth
Growth-oriented portfolio Sell down part of portfolio to generate income Adds to gains for the investor

Learn more about investing for income or growth.

Investing strategy

During accumulation, when the focus typically is on accumulation of assets and capital appreciation, many investors choose growth investing.

Growth investing is a strategy that centres on choosing equities and similar investments that have significant growth potential. A number of global sectors or thematics with the potential for growth include technologyhealthcarerobotics and artificial intelligencecybersecurity and climate change innovation, all of which investors can gain exposure to by investing in ETFs.

Learn about thematic investing – an investing strategy for growth.

Understanding ETF management fees

While you can’t control the markets, you can control the costs of constructing and maintaining your portfolio.

Spending less on management fees and brokerage means more of your investment’s return can flow to you, allowing more money to be reinvested and increasing your earnings potential over time.

The cost differential between managed funds and ETFs is arguably one of the primary reasons for the growing popularity of ETFs. Managed funds typically charge significantly higher fees than ETFs offering similar exposure.

In addition, some managed funds charge investors ‘performance fees’ when their performance exceeds a specified benchmark. By comparison, most passive ETFs charge a simple management fee and no performance fees as they seek to track a benchmark.

Learn how to understand ETF management fees and how ETF fees compare to managed fund fees – the difference could be tens of thousands of dollars over the life of a 40-year investment.

Accumulation phase investing checklist

  1. Consider your investment goals alongside other potential financial obligations during this phase, such as providing for family, paying a mortgage and contributing to super
  2. Consider the core-satellite approach for your investment portfolio
  3. Consider asset allocation for accumulation and balancing your approach between growth and income towards entering retirement
  4. Consider participating in a DRP to compound your investment returns
  5. Understand and control the costs of constructing and maintaining your long-term investment portfolio
  6. Have a rebalancing plan for your long-term investment portfolio


The accumulation phase essentially begins when a person starts saving money for retirement and ends when they begin taking distributions or income from their investments.

For many people, the accumulation phase starts when they begin their working life and ends when they retire.

ETFs are a convenient, cost-effective way to help you increase the value of your investments over time for a comfortable retirement.

Continue learning about investing for different stages

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Written by

Holly Morgan

Content Manager