The biggest decision is how much growth (shares) versus defensive assets (bonds and cash) you hold, and it should change as your time frame shortens. Five all-in-one ETFs make this easy: DHHF (100% growth), VDHG (90%), VDGR (70%), VDBA (50%) and VDCO (30%). Over five years to 30 September 2026 they returned between 9.2% and 2.5% a year. More growth earned more, with bigger bumps along the way.
The ladder: five funds, one decision
An all-in-one (diversified) ETF holds Australian shares, global shares and, in most cases, bonds and cash in a single fund. It rebalances itself, so it keeps the same mix without you doing anything. The only real choice is which mix.
Growth vs defensive: the five rungs of the ladder
| DHHF | VDHG | VDGR | VDBA | VDCO | |
|---|---|---|---|---|---|
| Growth / defensive | 100 / 0 | 90 / 10 | 70 / 30 | 50 / 50 | 30 / 70 |
| Fee (MER) | 0.19% | 0.27% | 0.27% | 0.27% | 0.27% |
| Fund size | $1.7bn | $4.1bn | $1.6bn | $0.9bn | $0.3bn |
| 1-year return | +8.1% | +7.5% | +5.6% | +3.7% | +2.3% |
| 3-year return (a year) | +15.1% | +13.8% | +11.6% | +9.2% | +7.0% |
| 5-year return (a year) | +9.2% | +7.7% | +5.9% | +4.0% | +2.5% |
Total returns including distributions to 30 September 2026. Source: TMX Australia monthly funds report.
What each step down has cost
Every rung down the ladder gave up return over the last five years. That period included a sharp rise in interest rates, which hurt bond prices, so the defensive part of these funds had an unusually tough run. Bonds will not always lag this much, but shares have historically earned more than bonds over long periods.
What $10,000 grew to
The gap is large. Over five years, $10,000 in DHHF grew to about $15,500, while VDCO reached about $11,300. That is the price of a smoother ride. Whether it is worth paying depends on when you need the money.
Stage 1: building wealth (roughly 20s to 40s)
With decades ahead and money still going in, time is your biggest asset. A fall in the market mostly means you buy more units at lower prices. This is why many younger investors choose the top of the ladder.
- DHHF or VDHG suit investors who can ignore a 20 to 30% fall and keep investing through it.
- Build your own with two funds, such as A200 for Australian shares and BGBL for global shares. A 40/60 split costs about 0.06% a year, but you have to rebalance it yourself.
- Geared options such as GHHF borrow inside the fund to magnify returns. Losses are magnified too, so they suit only investors who fully understand gearing.
See VDHG vs DHHF and DHHF vs GHHF for the detail.
Stage 2: the peak years (roughly 45 to 55)
Balances are bigger, so the same percentage fall now costs real money. But retirement may still be 10 to 20 years away, and the money may need to last another 25 years after that. Many investors stay growth-focused here, perhaps moving from 100% growth to 90% or 70%.
A gentle way to shift is to direct new money to a more defensive fund, rather than selling what you already hold. That avoids triggering capital gains tax and brokerage.
5-year return a year, from all growth to mostly defensive
Stage 3: the run-up to retirement (roughly 55 to 67)
This is the riskiest window, and the reason is called sequence risk. A big fall just before or just after you stop work hurts most, because you have the largest balance and little time to recover, and you may have to sell to fund living costs.
This is when many investors move towards VDGR (70/30) or VDBA (50/50). The aim is not to stop growing. It is to make sure one bad year cannot derail the plan. Compare VDHG vs VDGR and VDGR vs VDBA.
Stage 4: retirement and drawing an income
Now money is going out instead of coming in. The danger is no longer volatility on its own. It is running out of money over a retirement that can last 25 to 30 years. A portfolio that is too conservative can fail slowly, because its returns may not keep up with inflation and withdrawals.
A common structure is a cash buffer of one to three years of spending, held in a cash ETF such as AAA or a bank account, sitting alongside a balanced or growth core fund. When markets fall, you draw from cash and leave the shares to recover. When markets recover, you refill the buffer.
What fees cost on $100,000 over 20 years
Our full guide to ETFs for Australian retirees covers the cash buffer, core and income satellites in detail.
Changing rungs without the tax bill
- Redirect contributions. Put new money into the next fund down, and let the old one keep compounding.
- Use distributions. Take distributions as cash and invest them where you want the mix to go.
- Inside super or an SMSF, tax on switching can be much lower, and in retirement phase earnings are generally tax free. That can make a clean switch simpler.
- Review once a year, not every time the market moves.
Browse every diversified ETF, or put any two side by side in compare ETFs.
Common questions
What is the best ETF for a 30 year old in Australia?
Many younger investors with decades ahead choose a high-growth all-in-one fund such as DHHF (100% growth) or VDHG (90% growth), or build a low-cost mix of Australian and global share ETFs. The right level depends on how you would react to a large fall.
Is VDGR or VDHG better?
VDHG has 90% in shares and returned 7.7% a year over five years to September 2026; VDGR has 70% and returned 5.9%. VDHG grew more but falls further in bad years. VDGR suits investors who want a smoother ride.
Should I move to a conservative ETF when I retire?
Not necessarily all the way. Retirement can last 30 years, so many retirees keep a meaningful growth allocation and manage short-term risk with a cash buffer instead of moving everything into bonds and cash.
Why did bonds do so badly over five years?
Interest rates rose sharply from 2022. When rates rise, existing bond prices fall, which pulled down the defensive part of the balanced and conservative funds. Higher rates now mean bonds pay more income than they did five years ago.
Joshua Stega is a financial adviser with 20 years' experience and the founder of ETF Adviser. He built ReviewETF to make every Australian ETF easy to find and compare.
General information only. It does not take into account your objectives, financial situation or needs. Consider the PDS and TMD before investing. Past performance is not a reliable indicator of future performance. Data as at 30 September 2026.