The ASX shares that I think could make some of the best returns are ones that look like they could compound earnings at a strong pace over an extended period of time.

That’s why I think it’s a good idea for investors to look at businesses that have a long and impressive growth runway.

In my view, two of the ASX shares that could outperform the S&P/ASX 200 Index (ASX: XJO) over the next decade are the ones below.

Lovisa Holdings Ltd (ASX: LOV)

Lovisa is a fast-growing affordable jewellery retailer that focuses on younger shoppers with appealing products.

The ASX retail share‘s main growth tactic is to add more stores to its global network. In the FY26 half-year result, the company reported that between the end of FY25 and the end of the FY26 half-year period, it added 65 more stores, a rise of 6.3%.

Of those 65 locations, some of the highlights included four more stores in Australia, four in South Africa, 14 more in the UK, nine more in Germany, eight more in the US and nine more in Canada.

In my view, those core markets offer significant growth potential for Lovisa over the next decade.

I’m optimistic about how many more global stores the company can add in the next decade, particularly in countries where it has a small presence at this stage for the population size of the market, such as China, Vietnam, Spain, Poland, Canada and even the US.

In the HY26 report, the company reported more than 20% growth for its core revenue and net profit, which is an excellent rate of progress. I’m also hopeful its new business (initially in the UK) called Jewells can become a meaningful contributor in future years.

According to the forecast on CMC Invest, the business is projected to generate earnings per share (EPS) of $1.23 in FY28. That puts the ASX share’s valuation at the time of writing at less than 19x FY28’s estimated earnings.

Global X S&P World Ex Australia GARP ETF (ASX: GARP)

This exchange-traded fund (ETF) offers number of positives for investors.

For example, it invests in 250 global companies that have ‘growth at a reasonable price’ (GARP) characteristics.

The businesses in the portfolio need to have good growth with both strong sales and earnings growth.

They need to be good value, with an attractive price/earnings (P/E) ratio.

Finally, these businesses need to display quality, which is measured by the financial leverage and the return on equity (ROE).

By putting these elements together, that’s a powerful combination for potential returns.

Offering great businesses at appealing value could lead to market-beating returns in the long-term and outperform many other ASX shares.

The post 2 top ASX shares to buy and hold for the next decade appeared first on The Motley Fool Australia.

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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 positions in and has recommended Lovisa. The Motley Fool Australia has recommended Lovisa. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

I’d wager that most Australians would be quite familiar with most of the companies that make up the ‘Magnificent 7’, even though their home is half a world away.

Even if you have never invested in the likes of Microsoft Corporation (NASDAQ: MSFT) or Amazon.com Inc (NASDAQ: AMZN), chances are you have used their products or services, probably recently. Ditto with Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), Meta Platforms Inc (NASDAQ: META) and Apple Inc (NASDAQ: AAPL). Tesla Inc (NASDAQ: TSLA) and NVIDIA Corporation (NASDAQ: NVDA) are a little more niche. Even so, these last two of the seven are still household names, and possibly household presences.

Despite the ubiquity of the Magnificent 7 in Australian daily life, far fewer Australians would own shares of them directly. Saying that, international stock market investing has never been more popular in Australia. If an investor does own international stocks, there is a high chance that at least one of them will be a Mag 7 stock.

Personally, I directly own shares in five of the Magnificent 7. In fact, I have owned all seven of these ocmpaneis at various points (although never simultaneously).

Until quite recently, I thought of these positions as a small, although valuable portion of my overall portfolio. However, after a recent audit, I have discovered that I am far more invested in these seven stocks than I previously supposed.

The dominance of the Magnificent 7 stocks

It starts with an exchange-traded fund (ETF) that I own. As I have previously discussed, I recently sold my holdings in the BetaShares Nasdaq 100 ETF (AS:X NDQ) to buy a similar, but far cheaper ETF in the Schwab U.S. Large-Cap Growth ETF (NYSE: SCHG).

All seven of the Magnificent 7 are core holdings of this fund. As they are in almost every major US-based ETF listed on the ASX. That includes the iShares S&P 500 ETF (ASX: IVV) and the Vanguard MSCI Index International Shares ETF (ASX: VGS). Not to mention NDQ. Magnificent 7 stocks also sometimes pop up in the Schwab U.S. Dividend Equity ETF (NYSE: SCHD) and the iShares Core Dividend Growth ETF (NYSE: DGRO), which are also in my portfolio.

So that’s three.

Next, one of my largest investments is the listed investment company (LIC) MFF Capital Investments Ltd (ASX: MFF). This Buffett-esque LIC is a long-term holding of mine, and a favourite investment. As it happens, Alphabet, Amazon, Microsoft and Meta Platforms are all large positions in MFF’s portfolio. That’s four.

These components routinely pop up in yet another of my favourite, long-term holdings. That would be the VanEck Morningstar Wide Moat ETF (ASX: MOAT). That’s five major personal investments that are exposed to at least one Mag 7 stock. Outside my direct ownership of five of the Magnificent 7 stocks.

Don’t forget about your superannuation

The cherry on the cake comes in the form of my superannuation fund. Like most Australians, my super is partially invested in US stocks. And the Magnificent 7 are at the top of that list, too.

As it turns out, these seven US tech titans are far heavier in my portfolio and my overall wealth than I had previously thought.

I do view most of the Magnificent 7 as companies of the highest calibre. You don’t get to where they are now without being truly exceptional. As such, this high exposure doesn’t bother me.

However, there’s a big chance that other ASX investors out there are in the same boat. Thus, it may be worth checking out your own investments and seeing just how deep the Mag 7 goes. My exposure tolerance to these seven stocks may be higher than yours.

The post ASX investors: Are you overinvested in the Magnificent 7 without knowing it? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Some ASX growth shares are built around broad trends that sound exciting but are hard to turn into revenue.

DroneShield Ltd (ASX: DRO) is different.

The company is focused on a specific and growing problem: how governments, militaries, and organisations protect themselves from drones.

That makes it a higher-risk share, but I think the long-term opportunity is worth watching.

Drones are changing defence

The case for DroneShield starts with the way drones are changing security.

They are cheap, mobile, flexible, and increasingly capable. That makes them useful, but it also makes them a threat.

Recent conflicts have shown how important drones can be in military planning. They can be used for surveillance, targeting, disruption, and direct attacks. Outside the battlefield, drones can also create problems around airports, prisons, stadiums, critical infrastructure, public events, and borders.

This is why counter-drone systems are becoming more important.

DroneShield sells technology designed to detect and respond to these threats. I think that gives it exposure to a market that could remain a priority for years, especially as defence budgets adjust to new realities.

Hardware plus software

One thing I like about DroneShield is that it is not just a hardware story.

Hardware can win contracts and build presence in the field. But software can make the installed base more valuable over time.

Drone threats are constantly changing. New drone models, tactics, frequencies, and operating methods can emerge quickly. That means customers may need regular upgrades and software improvements to keep systems effective.

DroneShield has been investing heavily in hardware and artificial intelligence (AI)-enabled software to respond to these evolving threats.

That could be important for the quality of the business over time. If the company can grow recurring software revenue alongside hardware sales, the market may eventually view DroneShield as more than a defence equipment supplier.

A stronger platform to chase growth

DroneShield’s recent quarterly update shows the business is entering this growth phase with more resources than it had in the past.

It reported a strong cash balance, positive operating cash flow, and a large potential sales pipeline. It also has staff across multiple countries and a distributor network in key allied markets.

That is important for a company trying to win defence and government work globally.

These customers often need trust, support, local relationships, and the confidence that a supplier can deliver at scale. Having cash on the balance sheet also gives DroneShield more room to invest in people, technology, production capacity, and potential strategic opportunities.

But investors still need to be careful. A pipeline is not the same as revenue. Defence sales can be slow, uneven, and unpredictable. The company still needs to keep converting interest into firm orders and cash.

Foolish takeaway

DroneShield is not a traditional defensive investment, even though it operates in the defence sector.

It is a fast-growing technology company in a market that is still developing. That means the share price can move sharply in both directions.

But I think the long-term setup is compelling. Drones are becoming a bigger security challenge, and organisations will need better tools to deal with them.

If DroneShield can keep converting its technology, customer relationships, and pipeline into durable revenue, it could become a much larger business over time. 

I would treat it as higher risk, but it is the kind of ASX growth share I would want in my portfolio.

The post Why I think DroneShield could be an ASX growth share to buy and hold appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has positions in DroneShield. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield. 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.

The ASX dividend share Shaver Shop Group Ltd (ASX: SSG) may not be one of the most famous passive income stocks. But, in my view, it offers investors a significant number of positives.

Shaver Shop is one of the leading shaving product retailers in Australia and New Zealand, with its physical store network of well over 100 locations, its website and a presence on third-party marketplaces.

You may not think of a retailer as a strong ASX dividend share candidate for passive income, but I’m about to outline why it’s a compelling option.

Dividend yield

The first thing I want to highlight is, of course, the huge dividend yield of the business.

We can’t know what the FY26 annual dividend per share will be – that’s up to the Shaver Shop board of directors to decide in the coming weeks.

However, I do expect the annual dividend will be very similar – perhaps exactly the same – compared to the FY25 payout. The FY25 payout was 10.3 cents per share.

Therefore, at the time of writing, the business has a trailing grossed-up dividend yield of 11.1%, including franking credits. I believe the FY26 dividend will be very close to that level.

Payout stability

One of the main reasons why I’m confident that the business will deliver a stable (or higher) payout for investors is because the business has already demonstrated a track record of providing stability to investors.

Shaver Shop has not given shareholders a dividend payout reduction. The ASX dividend share started paying a dividend in 2017, increased its annual payout each year to FY23, maintained the payout in FY24 and hiked the dividend again in FY25.

We’ll see what happens in FY26, but there is breathing room with the dividend payout ratio. In FY25 it generated 11.5 cents of earnings per share (EPS) and cash EPS of 12.1 cents.

Earnings growth potential

The business is trading at a low price/earnings (P/E) ratio, even before taking into account the fact that it can grow earnings from its FY25 level.

According to the projection on CMC Invest, the business could generate EPS of 11.6 in FY26, 12.8 cents in FY27 and 14.1 cents in FY28.

Therefore, the ASX dividend share is trading at under 12x FY26’s estimated earnings and it’s projected to grow EPS by 21% between FY26 to FY28.

I think the business can grow its earnings through initiatives like store network expansion, gross profit margin improvement, online sales growth, more exclusive products from brands, expansion of its own brand Transform-U and potential product range growth in areas like oral health, hair care and beauty categories.

The post Is this ASX dividend share a buy for its 11% dividend yield? appeared first on The Motley Fool Australia.

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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 recommended Shaver Shop Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Accent Group Ltd (ASX: AX1) has been smashed.

The footwear and apparel retailer is trading at 55 cents at the time of writing, down around 70% from its 52-week high.

That sort of fall tells us the market has become deeply cautious about the outlook. I can understand why. Consumer spending has been under pressure, retail conditions have been difficult, and investors have not had much patience for discretionary shares.

But after such a large sell-off, I think Accent Group is worth a closer look.

A big fully-franked yield

The first thing that stands out is the potential income.

According to CommSec, the consensus estimate is for Accent Group to pay dividends per share of 4.2 cents in FY26, 6.2 cents in FY27, and 6.6 cents in FY28.

Based on a 55 cents share price, that would imply forward dividend yields of around 7.6%, 11.3%, and 12%, respectively.

Those dividends are expected to be fully franked.

That is a large potential income stream if the forecasts prove accurate. Of course, dividend estimates can change, especially for a retailer exposed to consumer demand. But the market appears to be pricing Accent as though a lot has already gone wrong.

If earnings stabilise and the dividend outlook holds up, the income case could look very attractive.

The valuation looks low

Accent Group also screens cheaply on earnings estimates.

CommSec’s consensus forecasts point to earnings per share of 6 cents in FY26, 8.8 cents in FY27, and 9.4 cents in FY28.

At 55 cents per share, that puts Accent on around 9 times FY26 earnings, just over 6 times FY27 earnings, and less than 6 times FY28 earnings.

That is not the valuation of a market favourite. It reflects genuine uncertainty. Investors are worried about consumer spending, margins, store performance, competition, and whether management can deliver on its improvement plans.

But I think that is where the opportunity may sit. A retailer does not need conditions to become perfect for a low valuation to start looking too harsh. It needs evidence that trading can improve, costs can be controlled, and earnings can recover.

A recovery plan is in motion

The third reason I am interested is that Accent Group is not standing still.

The company owns and operates a large portfolio of footwear and lifestyle banners, including The Athlete’s Foot, Platypus, Hype DC, Skechers, and Stylerunner. It also has exposure to global brands, owned brands, wholesale channels, and a large store network across Australia and New Zealand.

That gives Accent scale, customer data, landlord relationships, and brand access that many smaller retailers cannot match.

Its recent strategic update pointed to a plan built around efficiency, brand evolution, and expansion. That includes cost savings, store portfolio optimisation, The Athlete’s Foot franchise reacquisitions, and the rollout of Sports Direct across Australia and New Zealand.

There is execution risk here. Retail turnarounds can take time, and weak consumer conditions could keep pressure on the business for longer than expected.

But I like that Accent has several levers to pull. It can close weaker stores, improve costs, push stronger brands, expand promising formats, and benefit if shoppers become more confident again.

Foolish Takeaway

Accent Group will not suit investors who only want defensive earnings. This is a consumer-facing retailer, and the share price fall shows how quickly sentiment can turn when the market loses confidence.

But I think the current valuation and dividend forecasts are hard to ignore.

A fully-franked yield that could move into double digits, combined with a low earnings multiple and a credible recovery plan, makes this ASX dividend share look interesting to me.

The market is clearly worried. But if Accent Group can execute even reasonably well from here, today’s share price may end up looking too pessimistic.

The post Could this fully-franked ASX dividend share be too cheap to ignore? appeared first on The Motley Fool Australia.

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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 Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Owning Fortescue Ltd (ASX: FMG) shares has been a really good call for dividend income over the last several years.

The iron ore price is prone to quite sizeable swings, which can have a big impact on the size of Fortescue’s net profit and dividend.

In my view, the iron ore price has performed stronger than expected, with it sitting at around US$109 per tonne, according to Trading Economics, allowing the business to generate strong earnings in this financial year.

Let’s look at the dividend forecasts for the next few financial years.

FY26

The ASX mining share saw a solid performance in the first six months of the 2026 financial year. Revenue grew 10% to US$8.4 billion, net profit rose 23% to $1.9 billion and the dividend per share was hiked by 24% to 62 Australian cents.

Fortescue benefited from a 7% rise in the realised price for its hematite, while the production costs (C1 unit costs) fell by 3% – a powerful combination for profit growth.

How big could the FY26 annual dividend be?

The current forecast on Commsec suggests the business could deliver an annual dividend per Fortescue share of $1.03. That translates into a grossed-up dividend yield of 6.7%, including franking credits, at the time of writing.

FY27

However, while the 2026 financial year payout would be a solid dividend, experts are not certain that the dividend will continue to be as good.

In the 2027 financial year, the company is projected to pay an annual dividend per Fortescue share of 79.3 cents, according to the forecast on Commsec. That would represent a year over year reduction of 23% compared to the forecast for FY26.

The prediction for FY27 translates into a forecast grossed-up dividend yield of 5.2%, including franking credits, at the time of writing.

FY28

The 2028 financial year could be an even les rewarding year than FY27, with analysts pessimistic about the long-term direction of the iron ore price with increasing supply, particularly from Africa.

According to the projection on Commsec, the business is forecast to pay an annual dividend per Fortescue share of 66.8 cents. That would be a decline of 16% year over year. At the time of writing, the estimated payout translates into a grossed-up dividend yield of 4.3%, including franking credits.

Overall, this doesn’t seem like a great time to invest in Fortescue shares, in my opinion. The Commsec collation of 17 analyst ratings on the business says there’s currently eight sells, eight holds and just one buy.

There are better opportunities out there, in my view.

The post Here’s the dividend forecast out to 2028 for Fortescue shares appeared first on The Motley Fool Australia.

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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.

Brokers were as busy as ever this week updating their ratings and valuations for a good number of ASX shares.

Ten that were given the equivalent of buy ratings are listed below. Here’s what is being recommended:

Dicker Data Ltd (ASX: DDR)

In response to this computer hardware and software distributor’s trading update, Morgan Stanley has upgraded Dicker Data’s shares to an overweight rating with an improved price target of $11.00.

Eagers Automotive Ltd (ASX: APE)

This auto retailer released a trading update at its annual general meeting this week. In response, Macquarie retained its outperform rating on the ASX share with a trimmed price target of $27.10.

Goodman Group (ASX: GMG)

The team at Morgans was relatively pleased with this industrial property giant’s third-quarter update. In response to the update, the broker reiterated its buy rating with a $36.00 price target.

Guzman Y Gomez Ltd (ASX: GYG)

Ord Minnett is positive on this quick service restaurant operator’s decision to exit the US market. It responded to the news by retaining its buy rating with a $31.00 price target.

Life360 Inc. (ASX: 360)

Bell Potter was busy reviewing this location technology company’s quarterly update this week. It thinks the post-results selloff was an overreaction and has created a buying opportunity. This is especially the case given its strong growth in paying circles (paid subscribers). Bell Potter put a buy rating and $33.00 price target on Life360’s shares.

Liontown Ltd (ASX: LTR)

Over at UBS, its analysts are bullish on this lithium miner. This week, the broker retained its buy rating on Liontown’s shares with a $2.70 price target.

Mineral Resources Ltd (ASX: MIN)

This mining and mining services company announced the expansion of its Mt Marion lithium operation last week. Bell Potter was pleased with the plan and has retained its buy rating with an improved price target of $80.50.

Nufarm Ltd (ASX: NUF)

Morgans was pleased with this agricultural chemicals company’s half-year results and believes it is “on track to deliver strong underlying EBITDA growth in FY26.” As a result, the broker believes Nufarm shares are “materially undervalued” at current levels. It has put a buy rating and $4.15 price target on them.

Paladin Energy Ltd (ASX: PDN)

Macquarie has turned bullish on this uranium producer. This week, the broker upgraded the ASX uranium share to an outperform rating with a $13.25 price target.

Web Travel Group Ltd (ASX: WEB)

UBS responded to this travel technology company’s FY 2026 results by retaining its buy rating with a trimmed price target of $4.60. It felt the company delivered a solid result given the challenging finish to the year.

The post 10 ASX shares given buy ratings this week appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Goodman Group, Life360, and Web Travel Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goodman Group and Life360. The Motley Fool Australia has positions in and has recommended Dicker Data and Life360. The Motley Fool Australia has recommended Eagers Automotive Ltd and Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

I do not think investors need dozens of holdings to build serious wealth over time.

Diversification is important, but there is also a point where a portfolio can become so crowded that the best ideas barely move the needle.

If I were aiming for $1 million in retirement using ASX 200 shares, I would keep the plan simple. I would try to own around 10 high-quality businesses, invest regularly, reinvest dividends, and give compounding as much time as possible.

Where to start

Let’s say an investor starts with $10,000 and adds $500 a month.

If that portfolio returned an average of 9% per annum, it could grow to more than $1 million in around 30 years.

That return is not guaranteed. Share markets do not move in a straight line, and some years can be painful. But I think the example shows why time, consistency, and reinvestment are so powerful.

The investor does not need to find the next tiny stock that rises 20-fold. They need a sensible plan and the discipline to keep going through different market conditions.

Why just 10 ASX 200 shares?

I would not want my retirement plan to depend on one or two companies. That is too much single-stock risk.

But I also do not think I need to own every company on the ASX.

Owning 10 carefully selected ASX 200 shares could give exposure to different sectors, earnings drivers, and growth opportunities without making the portfolio too diluted.

For example, a portfolio could include Commonwealth Bank of Australia (ASX: CBA) for banking quality and fully franked dividends, Macquarie Group Ltd (ASX: MQG) for global financial exposure, BHP Group Ltd (ASX: BHP) for resources and copper, and Wesfarmers Ltd (ASX: WES) for retail and industrial strength.

I would also want healthcare exposure through ResMed Inc (ASX: RMD) and CSL Ltd (ASX: CSL), digital infrastructure through Goodman Group (ASX: GMG), property platform exposure through REA Group Ltd (ASX: REA), enterprise software through TechnologyOne Ltd (ASX: TNE), and global technology through WiseTech Global Ltd (ASX: WTC).

That is not a perfect list for every investor. But it shows the sort of balance I would want.

What I’d look for

The share price is only one part of the decision.

If I were building a retirement portfolio, I would care more about the quality of the business than whether the stock looks cheap on the day I buy it.

I would want companies with strong competitive positions, capable management, durable demand, and the ability to keep reinvesting for growth.

Dividends would also matter. Over decades, reinvested dividends can make a huge difference. Fully franked income from some ASX 200 shares can also be useful, depending on an investor’s tax situation.

But I would not build the whole portfolio around yield. A retirement portfolio still needs growth.

Staying the course

The hardest part of this plan would not be choosing the 10 shares. It would be holding them through market falls.

Over 30 years, there will almost certainly be recessions, interest rate scares, earnings disappointments, commodity sell-offs, and company-specific problems.

That is normal. I would review the portfolio regularly, but I would not want to trade it constantly. The aim would be to own strong businesses for long enough that their earnings, dividends, and reinvestment have time to compound.

Foolish takeaway

A $1 million retirement portfolio can sound like a distant target, but it becomes more realistic when the plan is broken down.

I would start with quality, keep the portfolio focused, add money consistently, and let time do its work.

Ten ASX 200 shares will not remove every risk. But if they are chosen carefully and held patiently, I think they could form the backbone of a portfolio capable of building serious retirement wealth.

The post I’d aim for $1 million in retirement buying just 10 ASX 200 shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has positions in CSL, Commonwealth Bank Of Australia, and Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Goodman Group, Macquarie Group, ResMed, Technology One, Wesfarmers, and WiseTech Global. The Motley Fool Australia has positions in and has recommended Macquarie Group, ResMed, and WiseTech Global. The Motley Fool Australia has recommended BHP Group, CSL, Goodman Group, Technology One, and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

For more than a decade, the Vanguard Australian Shares Index ETF (ASX: VAS) was the only choice for an investor looking for a cheap, established, reputable, and efficient ASX index fund that went beyond the scope of the S&P/ASX 200 Index (ASX: XJO).

There are many ASX index funds that cover the ASX 200 Index and meet the criteria listed above. One popular example is the iShares Core S&P/ASX 200 ETF (ASX: IOZ).

However, if an investor wanted to add some small-cap diversification by expanding into the S&P/ASX 300 Index (ASX: XKO), then Vanguard’s VAS was the only spot in town.

That all changed when provider Global X launched the Global X Australia 300 ETF (ASX: A300) last year. The admission of this ASX 300 index fund means that Australian index fund investors set on the ASX 300 index now have a genuine competition for their investing dollars.

So today, let’s dive into the pros and cons of both the VAS and A300 ETFs.

VAS vs. A300: Which SASX ETF comes out on top?

On the surface, these products seem almost identical. An investment in either index fund is effectively an investment in the same 300 shares, the largest 300 shares listed on the ASX, weighted by market capitalisation. Technically, VAS tracks the S&P/ASX 300 Index, while A300 follows the FTSE Australia 300 Index. But this is a ‘tomato, tomato’ situation in practicality.

Your money is essentially going towards the same 30 companies, with the lion’s share ending up with the likes of Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and the other large-caps of the ASX.

The only real point of differentiation between VAS and A300 is the fee. Both index funds charge relatively cheap and competitive fees by ASX standards. VAS is the more expensive of the two, asking 0.07% per annum. That’s $7 a year for every $10,000 invested. A300 undercuts this, charging 0.04% per annum ($4 per year for every $10,000 invested). Although that is a small difference, it is not negligible, and may sway some investors to pick A300.

There is one more caveat to mention, though. VAS is the established player here, with more than $24 billion in funds under management. In contrast, A300 is an upstart and currently only has a little over $12 million in its bank.

That’s typical of an ETF that is less than a year old. However, it still might give some investors pause. There’s never a risk to existing investors if a fund has low investment. However, it does indicate that the fund is probably running at a loss for its provider, given that ultra-low fee. The risk is that A300 doesn’t end up attracting enough capital to make itself economically viable and closes after a time.

If that does happen, investors will not lose their capital. However, they may be forced to liquidate their ETF units.

Aside from this risk, there is little reason to opt for the lower fee A300 offers. Plenty of investors may just choose to stick to the beloved Vanguard brand regardless, though.

The post ASX index funds: Is VAS or A300 the better choice? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in Vanguard Australian Shares Index ETF. 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 BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Picking winners in the clean energy sector is a difficult thing to do.

Solar panel manufacturers, wind turbine developers, electric vehicle companies, and battery storage businesses all move in different cycles and carry very different risk profiles.

For investors who want broad exposure to the clean energy transition without the risk of backing the wrong horse, the Betashares Climate Change Innovation ETF (ASX: ERTH) offers a simple and diversified solution.

What ERTH actually holds

ERTH tracks an index of up to 100 leading global companies that derive at least 50% of their revenues from products and services that reduce or avoid carbon emissions.

That definition is broad, capturing clean energy providers, green transport companies, energy efficiency businesses, waste management innovators, sustainable food producers, and energy storage specialists.

Top holdings include Vertiv Holdings, Bloom Energy, ABB, and ASML.

Investors therefore have exposure to companies operating across the entire clean energy value chain rather than any single technology.

The fund charges a management fee of 0.65% per annum and pays distributions annually.

Why the investment case is strengthening

The macro backdrop behind ERTH has rarely been more supportive.

The International Energy Agency estimates that global energy investment exceeded US$3 trillion in 2024, with roughly two-thirds directed towards clean energy, electrification, grids, and storage.

In its own research, Betashares has stated:

Climate technology should no longer be viewed as a discretionary or thematic allocation. The physical impacts of climate change are increasingly being felt and have material economic consequences, and the transition is increasingly underpinned by energy system economics rather than environmental policy alone.

The performance picture

ERTH had a difficult 2025, falling alongside the broader clean energy sector as higher interest rates weighed on growth-oriented and capital-intensive businesses.

That pullback has created a more attractive entry point for long-term investors.

ERTH’s one-year return is approximately 24%, recovering strongly from its late 2025 lows as rate cut expectations returned to global markets and clean energy sentiment improved.

The risks worth knowing

ERTH is not a defensive investment.

The fund carries meaningful volatility, and the clean energy sector remains sensitive to interest rate movements, government policy changes, and commodity price fluctuations.

The US’ rollback of several US clean energy incentives in 2025 weighed on parts of the portfolio, and investors should factor in the possibility of further policy headwinds in the United States.

Currency risk is also present, as the fund’s underlying holdings are denominated in US dollars and other foreign currencies.

Foolish takeaway

The clean energy transition is a multi-decade investment theme, and ERTH gives Australian investors a diversified, low-friction way to participate in it from a single ASX trade.

For investors who believe the energy system is being permanently rewired toward cleaner sources and want broad exposure to that shift without picking individual companies, ERTH is worth serious consideration.

The post Why this ASX ETF could be the simplest way to play the global clean energy boom appeared first on The Motley Fool Australia.

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Motley Fool contributor Mark Verhoeven 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 ASML, Abb, Bloom Energy, and Vertiv. The Motley Fool Australia has recommended ASML. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.