2 ETFs that could be buys today for any ASX share portfolio

Building an ASX share portfolio does not have to mean picking every company individually.

I think exchange-traded funds (ETFs) can do a lot of the heavy lifting. They can add diversification, reduce reliance on any single stock, and give investors access to markets and sectors that may be difficult to replicate on their own.

That can be especially useful for Australian investors. The ASX has many strong companies, but it is also heavily weighted towards banks and miners. A few well-chosen ETFs can help broaden a portfolio beyond the local market.

Two ASX ETFs I think could be useful buys for many portfolios are named in this article.

Vanguard S&P 500 US Shares Index ETF (ASX: V500)

The first ETF I would consider is the Vanguard S&P 500 US Shares Index ETF.

This is a relatively new ASX ETF, but the idea behind it is very familiar. It seeks to track the return of the S&P 500 Net Total Return Australian Dollars Index, before fees, expenses and tax.

In plain English, it gives investors access to a diversified portfolio of the 500 largest publicly listed US companies across all major sectors.

I think that is a very attractive starting point for long-term investors.

The US market is home to many of the world’s most dominant businesses. These include companies across technology, healthcare, financial services, consumer goods, industrials, and communication services.

For Australians, that is valuable because it adds exposure that the ASX cannot easily provide. The local market has some excellent companies, but it does not have the same depth of global technology, software, semiconductor, digital advertising, and mega-cap healthcare names.

Another big positive is the cost. The V500 ETF has a management fee of just 0.07% per annum. That is low, and fees can make a meaningful difference over long periods. The less investors pay in fund costs, the more of the underlying return they can keep.

VanEck MSCI International Quality ETF (ASX: QUAL)

The second ETF I like is the VanEck MSCI International Quality ETF.

This ASX ETF takes a different approach. Rather than simply tracking the biggest companies in a market, it focuses on global businesses with quality characteristics.

The QUAL ETF looks for companies with strong returns on equity, earnings stability, and low financial leverage.

I like that because quality can be a powerful filter. The global share market contains thousands of companies, but not all of them are businesses I would want to own. Some are highly cyclical, heavily indebted, or inconsistent. The QUAL ETF aims to tilt the portfolio towards companies with stronger financial foundations.

Its holdings currently include world-class names such as Nvidia, Apple, and Microsoft, to name just three.

The management fee is higher than the V500 ETF at 0.40% per annum, so investors need to decide whether the quality screen is worth the extra cost. I think it can be.

Foolish Takeaway

A broad US ETF and a global quality ETF could add a lot to a portfolio. One offers low-cost exposure to America’s largest companies. The other brings a quality-focused lens to global share investing.

Neither ETF will rise every year, and both can fall when global markets weaken. But for investors building a long-term ASX share portfolio, I think they could be very useful building blocks.

The post 2 ETFs that could be buys today for any ASX share portfolio appeared first on The Motley Fool Australia.

More reading

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• These ASX ETFs are smashing record highs 
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• Is it time for investors to turn back to defensive ASX shares?

Motley Fool contributor Grace Alvino 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 Apple, Microsoft, and Nvidia. The Motley Fool Australia has recommended Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.