3 strong ASX ETFs for investors who want quality

Not all companies are created equal. Some businesses consistently earn high returns, carry manageable debt, and produce dependable profits. 

Others can look attractive when conditions are favourable but struggle when the cycle turns.

For investors who want to focus their portfolio on stronger businesses, these three ASX exchange traded funds (ETFs) could be worth considering.

VanEck MSCI International Quality ETF (ASX: QUAL)

The VanEck MSCI International Quality ETF provides investors with a simple way to own a portfolio of high-quality stocks from developed markets around the world.

Rather than buying stocks simply because they are large, the fund looks for businesses with characteristics such as high returns on equity, relatively low financial leverage, and stable earnings growth.

I like that approach because it puts the emphasis on the financial strength of the business rather than short-term market popularity.

That can lead to exposure to established global stocks that have already demonstrated an ability to generate attractive returns through different market conditions.

For investors looking for a long-term international holding with a clear quality bias, this ETF could be well worth considering.

Betashares Global Quality Leaders ETF (ASX: QLTY)

Another similar option is the Betashares Global Quality Leaders ETF.

This fund also focuses on financially strong businesses, but it takes a more concentrated approach. It currently holds around 150 stocks, compared with roughly 300 for the VanEck MSCI International Quality ETF.

Its portfolio is built around companies with high profitability, healthy balance sheets, and stable earnings, resulting in a more selective portfolio of quality businesses.

Of course, even excellent companies can become expensive, so valuation still deserves attention.

But for investors who want their international exposure tilted towards a smaller group of high-quality businesses, the Betashares Global Quality Leaders ETF could be an attractive option.

Betashares Australian Quality ETF (ASX: AQLT)

A final ASX ETF to consider is the Betashares Australian Quality ETF.

This one applies a similar philosophy closer to home. Instead of simply following the largest stocks on the ASX, the fund screens for Australian businesses with strong profitability, healthier balance sheets, and more reliable earnings.

That can result in a portfolio that looks quite different from a traditional Australian index fund, where banks and mining companies can have a very large influence.

I think that makes the Betashares Australian Quality ETF an interesting option for investors who want local exposure but would prefer to place greater emphasis on company fundamentals.

It won’t avoid every weak period, but over the long run, owning businesses with stronger financial characteristics could prove to be a sensible way to approach the Australian share market.

The post 3 strong ASX ETFs for investors who want quality appeared first on The Motley Fool Australia.

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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 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.