The two exchange-traded funds (ETFs) in this article are delivering solid returns.
What are exchange traded funds?
As linked above, ETFs are investment vehicles that allow the investor to buy a whole group of businesses at once. With some of them you can buy a decent number of shares with one investment – 50 to 100 holdings. Other investments give exposure to thousands of businesses at once.
Some ETFs are focused are providing dividend income to investors like Vanguard Australian Shares High Yield ETF (ASX: VHY) and BetaShares S&P 500 Yield Maximiser (ASX: UMAX).
The following ETFs have been generating ASX-beating returns:
Betashares Global Cybersecurity ETF (ASX: HACK)
This ETF is provided by BetaShares, one of the largest ETF providers in Australia.
BetaShares explains that the fund's portfolio includes global cybersecurity giants, as well as emerging players, from a range of global locations. With cybercrime on the rise, the demand for cybersecurity services is expected to grow strongly for the foreseeable future.
Mr Fouse, a partner and lead strategist with Pinkston, wrote this year for Forbes about cybercrime: "Not long after the outbreak first took hold, dozens of hospitals, medical labs and health care organizations in the U.S. and abroad were the victims of ransomware attacks. At around the same time, the FBI's Internet Crime Complaint Center began receiving 3,000 to 4,000 daily cybersecurity complaints — a more than threefold increase from the 1,000 daily complaints it was receiving prior to the pandemic.
And today, with more Americans working from home, cybersecurity risks are at an all-time high. A slew of recent phishing attacks appeared to specifically target remote workers, preying upon the COVID-19 moment to steal, hack and install malware.
In a report released on March 11, the U.S. Cyberspace Solarium Commission (CSC) revealed the full extent of America's cybersecurity vulnerabilities. According to the CSC, the costs of cybercrime are only increasing, and a concerted cyberattack on America's infrastructure could be devastating."
Looking at the Betashares Global Cybersecurity ETF's biggest holdings its largest positions are: Crowdstrike, Zscaler, Okta, Cloudflare, Cisco Systems, Accenture, F5 Networks, Palo Alto, Leidos and Science Applications International. It currently has around 40 holdings in total.
Most of these holdings are based in the US, but there is also exposure to other countries including the UK, France, Israel, Japan and South Korea.
It has an annual management fee of 0.67% per annum. At the end of November 2020, Betashares Global Cybersecurity ETF had produced net returns of 19.2% since inception in August 2016, 21.5% per annum over the past three years and 18.3% over the past year.
VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)
VanEck says that this ETF gives investors exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar's equity research team.
It has a total of almost 50 holdings. Its biggest holdings are: Applied Materials, Corteva, Charles Schwab, Microchip Technology, Boeing, Compass Minerals International, Aspen Technology, Yum! Brands, Cheniere Energy and American Express.
As mentioned, all of this ETF's businesses are based in the US. The ETF has diversification to various sectors. In terms of allocations of more than 10%, it has a 22.2% weighting to IT, an 18.2% exposure to health care, a 17.1% holding of financials shares, 11.3% is industrial shares and 10.1% is allocated to consumer staples.
This ETF has an annual management fee cost of 0.49% per annum. Over the past five years, the VanEck Vectors Morningstar Wide Moat ETF had delivered an average return per annum of 16%. That even outperformed the S&P 500's return of 13.6% per annum over the past five years.
