I don't normally buy ETFs, but I would buy these 2

I don't normally invest in exchange traded funds (ETFs), but I would definitely buy these 2 ETFs for my investment portfolio.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I don't normally buy exchange traded funds (ETFs) for my portfolio, but there are a few that I definitely would.

If you're wanting to be passive with your Australian investing, or you don't have much ASX exposure, then Vanguard Australian Shares Index ETF (ASX: VAS) and BetaShares Australia 200 ETF (ASX: A200) wouldn't be bad options.

But I'm not a fan of the ASX index. It's dominated by resource shares such as BHP Group Ltd (ASX: BHP) and banks like Westpac Banking Corp (ASX: WBC). These are very big, mature businesses that will find it hard to grow revenue meaningfully over the long-term.

However, there are some ETFs that I think provide very compelling growth that I'd happily buy:

Exchange Traded Fund (ETF)

BetaShares NASDAQ 100 ETF (ASX: NDQ)

When you think about what makes some of the best investments, you could list a few key attributes. Capital light, high profit margins, effective management, strong balance sheets, powerful economic moats and a long growth runway.

This description would describe many of the biggest businesses on the NASDAQ. Microsoft, Apple, Alphabet, Facebook, Amazon and so on. These businesses have almost unassailable business positions in their respective arenas. The only main competition is each other.

Cloud computing has a huge future. Digital media is the way forward. Technology is more important than ever in this coronavirus era. And so on. 

There are a few quality smaller technology shares on the ASX, but there's nothing like the large cap quality seen within this ETF. The fact that it comes with an annual management fee that's less than half the typical 1% annual fund management fee is also very attractive.

Since inception in May 2015, it has generated an average return per annum (after fees) of 19.75%.

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

The US isn't the only place where there are large, powerful technology businesses. Asia is another hub of strong tech shares to consider.

There is a huge amount of Asian consumers that use technology in all areas of their life. The world's wealth is slowly shifting in favour of the Asian middle class, which is really benefiting the tech businesses that operate there.

Within the ETF are powerhouses like Alibaba, Tencent, Taiwan Semiconductor Manufacturing and Samsung. There are plenty of other big names like JD.com, Infosys, Baidu and Xiaomi.

The trade war and the coronavirus pandemic have not been helpful for Asian share valuations over the past couple of years. Even so, this investment has still managed average returns per annum (after fees) of 13.6% since inception in September 2018. That type of return could continue with how profitable these businesses are. 

Foolish takeaway

I think Aussie investors would be well served to be indirectly invested in some of the world's best technology shares through these two ETFs. I'd probably prefer owning the NASDAQ because the underlying earnings are more global. But the Asian one could be a very good performer, you just have to think about the potential China risks.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Index investing

a man leans back in his chair with his arms supporting his head as he smiles a satisfied smile while sitting at his desk with his laptop computer open in front of him.
Index investing

I'd invest $20 a week the Warren Buffett way as I aim to build wealth

Warren Buffett says successful investing can be easy, even for a beginner.

Read more »

Two men in suits face off against each other in a boing ring.
Index investing

There's an ETF price war on the ASX right now. Here's what you need to know

Index fund investing on the ASX just got whole lot cheaper.

Read more »

A young female investor with brown curly hair and wearing a yellow top and glasses sits at her desk using her calculator to work out how much her ASX dividend shares will pay this year
Index investing

I'd drip-feed $400 a month into ASX shares to try for a million

Shares will make you rich, all you need is time...

Read more »

A smiling woman with a satisfied look on her face lies on a rug in her home with her laptop open and a large cup on the floor nearby, gazing at the screen. researching new ETFs
ETFs

Vanguard Australian Shares Index ETF: Short-term pain for long-term gains

Is there ever a bad time to buy an index fund?

Read more »

Elderly couple look sideways at each other in mild disagreement
ETFs

Why did the Vanguard Australian Shares Index ETF lag the ASX 200 in January?

The Vanguard Australian Shares ETF choked in January. Or did it?

Read more »

A man in a brown bear costume holds the head of it in one hand while raising his other arm in excited victory-style pose.
Index investing

Bears beware! ASX 200 recoups all of 2022's losses plus more in January

If you'd listened to the bears in 2022, you'd be crying today.

Read more »

a woman sits at her desk looking puzzled and disappointed with her hand to her chin while an open laptop computer sits on one side of her and her hand is around the base of a globe of the world on the other side of her.
ETFs

The Vanguard MSCI Index International Shares ETF lagged the market in January. Here's why?

Why did this international shares ETF lag the ASX 200 so dramatically?

Read more »

A woman holds up hands to compare two things with question marks above her hands.
ETFs

Does the Vanguard Australian Shares ETF's unique structure deliver better returns than the ASX 200?

Here's what makes Vanguard's Australian shares ETF different...

Read more »