Key points (as at Q2 2026)
- More ETFs does not automatically mean more diversification; overlap is what matters.
- VAS and A200 share approximately 96% of holdings, so holding both adds little.
- VGS excludes Australian shares entirely, so it holds essentially none of the same companies as VAS, approximately 0% overlap.
- Check overlap, fee and what is genuinely added before buying any new ETF. General information only.
Last updated: Q2 2026. Overlap and fee figures are computed live from ETFLens data as at Q2 2026 and reviewed quarterly.
It is one of the most common questions new ETF investors ask: how many ETFs should I invest in, one or five? The number barely matters. What the funds hold is everything. Three ETFs tracking the same market are not diversified. One good fund can be. The concept that ties it together is overlap, and you can measure it directly with the ETFLens Overlap Checker before you add anything.
This article is general information only and not personal financial advice. ETFLens does not hold an Australian Financial Services Licence (AFSL), and it does not recommend any number of funds or any specific fund.
The case for one ETF
A single all-in-one diversified ETF gives broad global exposure in one trade. Funds like VDHG (charging 0.27% p.a.) and DHHF (charging 0.19% p.a.) hold thousands of companies across Australian and international markets, and they rebalance automatically. The appeal is simplicity: one holding, one trade, nothing to rebalance yourself. The trade-off is that you accept the provider's fixed asset mix. For some investors, one fund is the whole portfolio; whether that suits you depends on your circumstances.
The case for two ETFs
A common two-fund approach pairs one Australian share ETF with one international share ETF, for example VAS plus VGS, or A200 plus BGBL. The key step is to check the overlap first. VGS excludes Australian shares entirely, so it holds essentially none of the same companies as VAS, approximately 0% overlap; together they cover the Australian and global markets with no duplication. Contrast that with VAS and A200, which share approximately 96% of their holdings because both track the large end of the Australian market. Holding both of those adds little diversification. See the VAS vs A200 comparison for the detail, and our two-ETF portfolio guide for the broader idea.
The case for three or more ETFs
Adding a third or fourth ETF can add genuine diversification, but only if the new fund holds something the others do not. A bond ETF, an emerging markets fund or a small-cap fund each brings exposure that a developed-market share fund lacks, so the overlap with your existing holdings is low. The cost of going further is real, though: more funds means more brokerage, more positions to track and more tax events when you rebalance. Each new ETF should earn its place.
When more ETFs hurts you
The clearest mistake is stacking funds that hold the same thing. Owning VAS and A200 together (approximately 96% overlap) means paying two management fees on nearly identical exposure. Owning two global large-cap funds, such as VGS and IVV, has the same problem, since both are concentrated in the same large US companies. The overlap checker frames this in dollar terms: on a $10,000 holding, it shows how much of your money is duplicated rather than diversified. Paying twice for one exposure is the opposite of what most investors think extra funds are doing. You can model the fee side on the Fee Analyser, and read the concept in full in ETF overlap explained.
A simple framework before adding an ETF
This is a factual checklist, not a prescription. Before adding any new ETF, three questions are worth asking:
- What does it hold that I do not already own? Run the new fund against your existing holdings in the overlap checker. If the overlap is high, the fund is mostly repeating what you have.
- What is the fee? A new fund adds a new MER. Check whether the added exposure is worth the added cost on the Fee Analyser.
- Does it genuinely add to my diversification? If it holds different companies, different countries or a different asset class, it can. If not, it may just add cost and complexity.
There is no right number of ETFs for everyone. The useful test is not how many you hold, but how much they overlap and what each one adds. Whether any particular mix suits you depends on your objectives and circumstances, which ETFLens cannot assess.
The hidden costs of holding more funds
Fees are the obvious cost of an extra ETF, but they are not the only one. Each fund you add is another position to track, another set of distributions to record at tax time, and another holding to rebalance when your target weights drift. Every rebalance that involves selling can trigger a capital gains tax event, so a more complex portfolio can quietly create more admin and more tax friction. None of this means more funds is wrong; it means the diversification a new fund adds should be worth the extra complexity. The overlap check answers the first half of that question, and the fee and tax impact answer the second. A two or three fund portfolio with low overlap can be simpler to run, and cheaper, than a long list of funds that mostly hold the same companies.
This article is general information only and not personal financial advice. ETFLens does not hold an Australian Financial Services Licence (AFSL). Consider your own objectives, financial situation and needs, or speak with a licensed financial adviser before making investment decisions. Past performance is not a reliable indicator of future returns.