If you’re building an income portfolio but don’t feel like you have sufficient funds to maintain a truly diverse portfolio, then exchange traded funds (ETFs) could be the answer.

There are a number of ETFs that have been set up to give investors exposure to a collection of dividend shares. All through a single investment.

Two that could be worth considering are listed below:

BetaShares S&P 500 Yield Maximiser (ASX: UMAX)

The first ETF for income investors to consider is the BetaShares S&P 500 Yield Maximiser.

This ETF has been designed to generate attractive quarterly income and reduce the volatility of portfolio returns. To achieve this, BetaShares has implemented an equity income investment strategy over a portfolio of shares comprising the S&P 500 Index.

This index is of course home to 500 of the largest companies listed on Wall Street. Among the companies you’ll be investing in include Apple, Exxon Mobil, Johnson & Johnson, Microsoft, and United Health.

At the last count, its units were providing investors with a 6.4% distribution yield.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

Another ETF that could be a good option for income investors is the Vanguard Australian Shares High Yield ETF.

This ETF provides investors with exposure to companies that have higher than average forecast dividends. Importantly, this is done with diversification in mind. Vanguard restricts the proportion invested in any one industry to 40% of the total ETF and 10% for any one company. This ensures that you’re holding a diverse collection of dividend shares.

Among the companies included in the fund are Commonwealth Bank of Australia (ASX: CBA) and the big four banks, as well as mining giants such as BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO).

The Vanguard Australian Shares High Yield ETF currently trades with an estimated forward dividend yield of 5.8%.

The post 2 ETFs for ASX income investors to buy for dividends appeared first on The Motley Fool Australia.

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More reading

• Top ASX dividend shares to buy in September 2022
• Here are 2 ASX dividend shares with attractive yields
• Could these ASX ETFs soon play a bigger role in Aussie super funds?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended BetaShares S&P500 Yield Maximiser. The Motley Fool Australia has recommended Vanguard Australian Shares High Yield Etf. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It’s fair to say that investing in the small side of the share market carries more risk than other areas.

However, if your risk tolerance allows for it, having a bit of exposure to this side of the market could be a good thing for a balanced portfolio due to the potential returns on offer.

After all, if you can find a future mid or large cap whilst it is still a small cap, the returns could be incredible.

With that in mind, listed below are two small cap ASX shares that have been tipped as buys. They are as follows:

Hipages Group Holdings Ltd (ASX: HPG)

The first ASX small cap share to look at is Hipages. It is a leading online platform and software as a service (SaaS) provider that connects consumers with trusted tradies.

The Hipages platform helps tradies grow their business by providing job leads from homeowners and organisations looking for qualified professionals.

Goldman Sachs is a very big fan of Hipages and believes “HPG presents a compelling long term growth opportunity as it scales to become the leading trade services marketplace in Australia.”

The broker currently has a buy rating and $2.20 price target on its shares.

Silk Laser Australia Limited (ASX: SLA)

Another small cap ASX share that has been tipped as a buy is Silk Laser.

It is one of Australia’s largest specialist clinic networks. Silk offers a range of nonsurgical aesthetic products and services including laser hair removal, cosmetic injectables, skin treatments, body contouring, and skincare products.

Demand for Silk’s services has been strong in recent years and continued in FY 2022. This and recent acquisitions helped the company deliver a 91% increase in sales to $162.7 million.

Pleasingly, management remains positive on the future and “expects to continue its growth trajectory in FY23.”

This went down well with the team at Wilsons. In response to its results, the broker has put an overweight rating and $3.62 price target on the company’s shares.

The post 2 growing small cap ASX shares analysts rate as buys appeared first on The Motley Fool Australia.

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More reading

• Goldman Sachs names 3 mid cap ASX shares to buy
• Goldman Sachs names 2 exciting small cap ASX shares to buy
• SILK Laser share price surges as FY22 earnings beat guidance
• Goldman Sachs names 2 ASX shares to buy right now
• Hipages share price sinks as ‘perfect storm’ hits profit

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Hipages Group Holdings Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended SILK Laser Australia Limited. The Motley Fool Australia has positions in and has recommended Hipages Group Holdings Ltd. The Motley Fool Australia has recommended SILK Laser Australia Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Warren Buffett is one of the world’s richest people and has been a leading investor for decades. I think there are some interesting All Ordinaries (ASX: XAO), or All Ords, ASX shares that would fit right into the Berkshire Hathaway portfolio.

Berkshire Hathaway owns plenty of banks in its portfolio, but there are plenty of other businesses that it invests in, including furniture.

Included in the Berkshire Hathaway portfolio are: Jordan’s Furniture, Nebraska Furniture Mart and Star Furniture. With that in mind, I think that Nick Scali Limited (ASX: NCK) shares would fit into Warren Buffett’s investment strategy for a number of reasons.

Management team

Warren Buffett likes to find businesses that have good management teams. The current managing director of the business is Anthony Scali, who joined the business in 1982. He has almost 40 years’ experience in furniture retailing. He owns just over 11 million Nick Scali shares. That’s a hefty holding considering the Nick Scali share price is around $10 at the moment.

I think it’s a very good sign that the business is still managed by the same family. It naturally makes Anthony Scali very motivated to continue managing the business in a long-term, sustainable way. Ordinary shareholders are very aligned with management.

Growth potential

Nick Scali is looking to grow in a number of different ways.

Warren Buffett likes to find businesses that could have a long growth runway so that they have plenty of compounding potential.

The All Ords ASX share is looking to grow its Nick Scali store network in Australia to at least 85 stores. It’s expanding geographically into New Zealand. It recently bought the Plush furniture business, which also has a store rollout plan. Nick Scali also wants to grow its online sales across the business.

Dividends

Warren Buffett isn’t exactly known for being a dividend investor. But, Nick Scali’s dividend payments are a good boost for overall returns from this business.

In FY22, the All Ords ASX share paid a final dividend of 35 cents per share (up 40%) and total dividend of 70 cents per share (up 6.7%).

The full-year dividend translates into a grossed-up dividend yield of 9.75% at the current Nick Scali share price.

Outlook

Uncertainty may be increasing amid an increase in inflation. Nick Scali itself said that “given the current global economic environment, the business will face challenges in respect of potential rising freight costs and inflationary pressure on operating costs over the next 12 to 24 months”.

But, despite that, it had an elevated order book at the end of June. It also gets a boost from the revenue of the acquired Plush business. It’s expecting the FY23 first-half revenue to be “materially above” the previous year.

July trading was “positive”, with total written sales orders for the group of $43.2 million, up 64.1%.

Foolish takeaway

With the Nick Scali share price valued at just 11x FY22’s earnings, I think it could be worth jumping on considering it has dropped by around 33% in 2022. I think this decline more than makes up for the possible economic decline that could happen in the next 12 months.

The post Why I think Warren Buffett should buy this ASX All Ords share appeared first on The Motley Fool Australia.

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More reading

• Why is the Nickel Industries share price dipping on Wednesday?
• Here’s why the ASX 200 could be set up for an almighty rally before the end of this horrible year for stocks
• ‘Better chance of making good money when markets are down’: fundie
• Top brokers name 3 ASX shares to buy today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Motley Fool’s Tim Hanson in the US conceptualised what he dubbed the ‘humility curve’. 

It depicts the typical journey of an investor. Usually, investors start out with shares they understand. 

They’ll then crank the complexity of an investment up a few notches (or 10), throwing money into riskier prospects in the hope of higher returns.

With years of experience, investors blossom from naive to humble, realising that complexity doesn’t necessarily have a positive correlation with making money.

Tim Hanson illustrated his own humility curve, which you can see below.

My own investing journey has followed a similar curve, though I’m not nearly as far along.

But going right back to where it all began, I kept it very simple.

My first ASX investment

If I could pinpoint the impetus of my investing journey, I’d say it was the Commonwealth Bank of Australia (ASX: CBA) that really set the wheels in motion.

See, I was signed up to CBA’s ‘Youthsaver’ bank account. Which, as the name suggests, was only available to youths. 

As I neared my 18th birthday, the bank sent me a booklet in the mail. They explained that as I was (officially) becoming an adult, I would have to transition to a new account. So, the booklet detailed different options on offer, along with the various features and ‘perks’.

As I read through the options, I distinctly remember the proposed interest rates catching my eye. From memory, they were around 1%; far too low for my untrained eye.

So here, my journey into personal finance, and eventually investing, began.

My research led me to high-interest savings accounts. And it introduced me to the wonderful world of ASX exchange-traded funds (ETFs). 

At the time, there was one ASX ETF, in particular, that I kept seeing everywhere. And I thought it suited my investment objectives to a tee. 

That ASX ETF was… the Vanguard Diversified High Growth Index ETF (ASX: VDHG).

What’s so good about the VDHG ETF?

Vanguard’s range of diversified ETFs was the first of its kind on the ASX.

They’re basically an ETF of ETFs. Or more simply, an ETF that’s made up of other ETFs. 

They’re designed to make life easy for investors. 

In one investment, you get access to a ready-made, diversified portfolio of sorts. 

At the time, I was considering buying a few ETFs across Aussie shares, global shares, and bonds. With VDHG, I could get all of that in one fell swoop. And I’d have Vanguard to take care of the rebalancing for me. 

At 0.27%, I think the management fees are fairly reasonable as well, sitting somewhere in between a plain index-tracking ETF and a more targeted thematic ETF.

The VDHG ETF, specifically, primarily invests in wholesale versions of the Vanguard Australian Shares Index ETF (ASX: VAS) and the Vanguard MSCI Index International Shares ETF (ASX: VGS). 

It also has smaller weightings than other Vanguard funds across small companies, emerging markets, and bonds.

As the ‘high growth’ version, VDHG targets a 90% allocation to growth assets (e.g. shares) and a 10% allocation to income assets (e.g. bonds).

As Vanguard aptly describes, VDHG is “designed for investors with a high tolerance for risk who are seeking long-term capital growth”. Being able to ride out inevitable market volatility over (hopefully) many decades, I thought this was the ETF for me.

But for investors with shorter investment horizons and/or lower tolerances for risk, Vanguard has three other diversified ETFs: VDGR (growth), VDBA (balanced) and VDCO (conservative). These ETFs have different target allocations across growth and income assets.

But nowadays, Vanguard isn’t alone in offering diversified ETFs. BetaShares has also thrown its hat in the ring. And the one I’m especially interested in is the BetaShares Ethical Diversified High Growth ETF (ASX: DZZF). It offers a similar target allocation to VDHG but with an ethical tilt.

Where does the VDHG ETF sit in my portfolio?

To this day, the VDHG ETF forms a large part of the core of my portfolio. I know it’s running along in the background, dividend reinvestment plan (DRP) and all, at worst achieving market returns. 

And with my core taken care of, I’m comfortable taking higher-risk positions elsewhere, investing in individual ASX shares. 

This is often known as the ‘core and satellite’ approach to portfolio construction. It combines the best of both worlds of passive and active investing. 

As I continue along my humility curve, I’ve learned that it often pays to keep things simple. The VDHG ETF helps me to do just that.

The post This ASX ETF was my first investment, and I’ll be holding it for the long term appeared first on The Motley Fool Australia.

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More reading

• How much is too little to start investing in ASX shares?
• Is the Vanguard Australian Shares Index ETF (VAS) dividend growing?
• Could right now be the perfect time to buy the Vanguard Index International Shares ETF?
• Here are 2 high quality ETFs for ASX investors to buy right now
• Why making your first purchase of ASX shares can be scary

Motley Fool contributor Cathryn Goh has positions in Vanguard Diversified High Growth Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Vanguard MSCI Index International Shares ETF. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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