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

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:

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.

More reading

• Where to invest $10,000 into ASX shares immediately
• How bankable are the big four ASX bank shares in 2020?
• 3 best stocks for ASX 200 investors in retirement to buy now
• Why ASX iron ore miners may outperform this morning
• ASX 200 Weekly Wrap: Surging bank shares push ASX toward 6,000

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.

The post I don’t normally buy ETFs, but I would buy these 2 appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2AwGxmn