Cash just isn't creating the returns that it used to. Earlier in this decade we could find risk-free returns of above 5% from cash. But now I think that investing the cash for the long-term is probably the best thing to do as long you keep a bit of cash on the side for emergencies.
Exchange-traded funds (ETFs) are a great way to invest lots of assets at once. It's a good way to get diversification.
So, here are two ETF ideas:
Vanguard Australian Government Bond Index ETF (ASX: VGB)
With cash returns being so low, it could (belatedly) be time to think about bonds. Business bonds may be a bit risky, so sticking to government bonds could be a safer option.
The only thing this ETF invests in is federal government bonds (which is the biggest allocation) and state & territory government bonds. It has a running yield of 3.13% and with some economists predicting even lower interest rates it could see bond values go higher. It's lower interest rates that have caused the ETF to deliver returns of 11.3% over the past year.
The ETF has an annual management fee of 0.2%.
Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE)
Asia is a region displaying very attractive growth attributes with businesses and citizens alike seeing a rise in wealth and prosperity.
Lots of industries are seeing growth including eCommerce, cloud computing, other tech, advanced manufacturing, travel, airports, insurance and so on. That's why some of the largest positions in this ETF are: Alibaba, Tencent, Samsung, Taiwan Semiconductor Manufacturing, AIA and Ping An Insurance.
Over a third of this ETF is allocated to Chinese businesses with another quarter invested across Hong Kong and Taiwan shares. Other countries include South Korea, India, Singapore, Thailand, Malaysia, Indonesia and the Philippines.
Statistically, I think this ETF looks very attractive. Its earnings growth rate is almost 12% and it has a ROE ratio of nearly 16%, yet the price/earnings ratio is only 13.6x.
Foolish takeaway
The Vanguard Asia ETF is definitely exposed to more volatility, but I think it has a very attractive growth outlook as long as China sticks to its somewhat capitalist effort of having an accessible market for foreign investors.
The short-term outlook for the Vanguard government bond ETF is interesting, but over the long-term it probably won't offer good returns if interest rates stay low, meaning little interest returns, or if interest rates go up which would cause bond prices to go down.
