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How I’d build a simple ASX portfolio with just 3 ETFs

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A man in his office leans back in his chair with his hands behind his head looking out his window at the city.

Building an ASX portfolio does not have to be difficult.

In fact, I think many investors could do very well by keeping things simple, spreading their money across a small number of exchange-traded funds (ETFs), and letting time do the heavy lifting.

If I were starting today and wanted a simple long-term portfolio, I would consider using three ASX ETFs.

Start with a broad Australian base

The first ETF I would consider is the Vanguard Australian Shares Index ETF (ASX: VAS).

This ETF provides investors with exposure to a broad basket of Australian shares, including the largest companies on the ASX.

That means a single investment can provide exposure to banks, miners, retailers, healthcare companies, infrastructure shares, and industrial businesses.

For me, the appeal is simplicity.

Instead of trying to pick the next winning bank or mining stock, investors can own a broad slice of the Australian market. That can reduce the risk of relying too heavily on one company.

The VAS ETF can also provide dividend income, which is one of the features many investors like about the Australian share market.

I would not expect it to be the fastest-growing part of the portfolio every year. But I think it can work well as a steady foundation.

Add global diversification

The second ETF I would consider is the Vanguard MSCI Index International Shares ETF (ASX: VGS).

This is where I think the portfolio becomes much stronger.

Australia is a good market, but it is also quite concentrated. Banks and resources make up a large part of the local index, which means investors can miss out on other sectors if they only buy Australian shares.

The VGS ETF helps solve that problem.

It provides exposure to major global companies across developed markets, including large technology, healthcare, consumer, industrial, and financial businesses.

I think that is important because many of the world’s best companies are listed outside Australia.

A portfolio that only owns ASX shares may be missing out on global leaders in software, semiconductors, luxury goods, pharmaceuticals, payments, and cloud computing.

That is why I would want the VGS ETF in the mix.

Add a growth tilt

The third ETF I would consider is the Betashares Nasdaq 100 ETF (ASX: NDQ).

This ETF is more concentrated and higher risk than the VAS or VGS ETFs, but I think it can play a useful role for investors who want extra growth exposure.

It gives investors access to many of the largest companies listed on the Nasdaq, including global technology and innovation leaders like Apple and Nvidia.

These businesses are exposed to themes such as artificial intelligence, cloud computing, digital advertising, e-commerce, cybersecurity, and software.

Of course, the Nasdaq can be volatile. When interest rates rise or investors turn away from growth shares, the NDQ ETF can fall sharply.

But over the long term, I think owning some exposure to world-class technology businesses makes sense.

Foolish Takeaway

An ASX portfolio does not need 20 holdings to work.

I think a mix of the VAS, VGS, and NDQ ETFs could give investors a strong starting point. It provides exposure to Australian dividends, global businesses, and some of the world’s leading technology companies.

There will still be market downturns, and returns are never guaranteed. But for investors who want a straightforward way to build wealth over time, I think this three-ETF approach is hard to ignore.

The post How I’d build a simple ASX portfolio with just 3 ETFs appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has positions in Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, BetaShares Nasdaq 100 ETF, and Nvidia. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Apple, Nvidia, and 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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