Why these ASX ETFs are on my watchlist

I like exchange-traded funds (ETFs) because they can open the door to markets and industries that are harder to access through individual ASX shares.

There are a few funds I am watching presently because I can see a strong long-term reason for owning them.

Here are three currently on my watchlist.

Global X Semiconductor ETF (ASX: SEMI)

Semiconductors sit behind an enormous amount of modern technology.

Artificial intelligence has pushed chips further into the spotlight, but the opportunity extends across data centres, smartphones, vehicles, industrial automation, cloud computing, and connected devices.

The SEMI ETF provides exposure to 30 major companies involved in the development and manufacturing of semiconductors.

I like the idea of approaching this industry through an ETF because predicting which chip company will lead the next generation of technology is difficult.

Demand can also shift across the semiconductor supply chain. One period might favour chip designers, while another could benefit memory manufacturers or the companies producing the equipment needed to make advanced chips.

The SEMI ETF spreads the investment across established industry leaders, allowing investors to participate in the broader growth of semiconductor demand.

Technology spending can move in cycles, so I would expect plenty of volatility along the way. But over a long timeframe, I think increasingly powerful computing creates a strong reason to keep this fund on my watchlist.

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

The MOAT ETF takes an approach that closely resembles how I would think about selecting individual shares.

The fund invests in US companies that have sustainable competitive advantages and are trading at attractive prices relative to their fair value.

That combination catches my eye. A strong competitive position can come from factors such as brand strength, switching costs, network effects, or cost advantages. These characteristics can help a business protect profits and continue investing as competitors try to take market share.

The valuation element is also important. Even an excellent company can produce disappointing returns if investors pay too much for it.

I think having both considerations built into the investment process makes the MOAT ETF an interesting alternative to simply buying the largest US businesses by market capitalisation.

Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE)

The VAE ETF is on my watchlist because I think Asia could offer some exciting long-term opportunities.

The fund invests across Asian markets, excluding Japan, Australia, and New Zealand, providing access to economies such as China, India, Taiwan, and South Korea.

This brings exposure to areas such as semiconductor manufacturing, online commerce, financial services, industrial development, and rising consumer spending.

I think the semiconductor exposure is particularly interesting, with Taiwan and South Korea playing major roles in the global technology supply chain.

There is also a much broader story. Rising incomes across parts of Asia could support businesses serving increasingly wealthy consumers for many years.

The VAE ETF will come with political, regulatory, and currency risks that can create periods of volatility. But I think the size and long-term growth potential of the region still make it worth watching.

Foolish takeaway

I think all three ETFs offer exposure to areas with strong long-term growth potential.

Semiconductors, high-quality US businesses, and Asia’s economic development could all create attractive opportunities over the coming decade.

As a result, these are three funds I would be comfortable considering for a long-term investment.

The post Why these ASX ETFs are on my watchlist appeared first on The Motley Fool Australia.

More reading

• 3 strong ASX ETFs for smart investors to buy and hold
• Down 21% in six weeks, what’s happened to SEMI ETF?
• 3 strong Vanguard ETFs to buy with $3,000
• Should investors be targeting the semiconductor boom?
• 3 ASX tech shares on the verge of rocketing to the moon

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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended VanEck Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.