The investment world is always changing and the move towards passive investing is a huge shift compared to a generation ago.
'Passive investing' usually means investors who have chosen to invest in an index fund. An index fund is what it says on the tin, the fund invests its money across an index such as the ASX200.
One of the main ways to get access to these passive index funds is via an exchange-traded fund (ETF). This simply means that you can buy into that index fund via the ASX, rather than buying it directly from the fund provider.
ETFs can provide investors a simple way to gain access to the share market without needing to do much, if any, stock research.
However, even if you've identified that you want to go down the ETF route you still need to choose which ETFs you're interested in.
To make things easier for you, here are two of my favourites:
Vanguard MSCI Index International Shares ETF (ASX: VGS)
Vanguard is the most well-known ETF provider. Its winning selling point is that it offers its index funds at an extremely low cost compared to most other funds. If the underlying fund does well then investors will benefit from having negligible fees.
Even so, Vanguard offers a lot of different options. The fund I'm highlighting is the Vanguard MSCI Index International Shares fund. It invests in shares all across the world. It isn't just focused on Australia, America, Europe or Asia.
It is invested in around 1,600 businesses, which is fantastic diversification. Some of its top holdings include companies like Apple, Microsoft, Johnson & Johnson, Nestle, Proctor & Gamble and HSBC.
Overseas companies are much more conservative with their dividends, so this fund's dividend yield is lower than an Australian index fund product.
As long as the global share market keeps growing over the long-term (think decades), then this should be a good buy-and-hold-forever option.
BETANASDAQ ETF UNITS (ASX: NDQ)
The Vanguard fund is a good option, but it may be too diverse for some investors. Perhaps you want to find more growth. Perhaps you don't want exposure to Europe or Asia. Perhaps you want a more focused approach on the tech giants.
If you want more exposure to the tech giants then this NASDAQ fund is a great option.
It invests in the top 100 businesses on the NASDAQ, which is the stock exchange where all of America's tech giants are.
Other index funds give access to the tech giants, but this one provides concentrated investments. Apple is 12.2% of the fund, Alphabet is 9.2%, Microsoft is 9%, Amazon is 7.6% and Facebook is 5.8%.
It's hard to look past the technology giants for continued growth with how the world is developing.
Foolish takeaway
I think it's a good strategy to invest in ETFs to get diversification, particularly for international diversification.
