3 ETFs for a strong portfolio

Exchange-traded funds (ETFs) seem to be all the rage these days. It’s easy to see why – most ETFs have low costs and offer investors good diversification.

There are many different ETFs out there, some focus on indexes whilst others offer a slight twist on the index theme. One of the most widely-held Australian ETFs is the Vanguard Australian Share ETF (ASX: VAS) which offers a very easy way for people to invest into the Australian share market.

However, the index is weighted towards businesses that dominate industries and don’t have much room for growth.

Therefore, it might be better to invest in the BetaShares Australian Ex-20 Portfolio Diversifier ETF (ASX: EX20).

This ETF gives the investor exposure to Australian shares ranked from 21 to 200 based on their market capitalisation. These shares are much more likely to be growing at a good pace and not be so heavily focused on the finance sector. Some of its top holdings include Amcor Limited (ASX: AMC), Origin Energy Ltd (ASX: ORG) and Sydney Airport Holdings Ltd (ASX: SYD).

However, even this ETF may not be what investors want. Perhaps the American share market is where you want to be. Another good option could be Vanguard US Total Market Shares Index ETF (ASX: VTS). It offers exposure to the biggest companies in the world like Apple, Facebook, Alphabet (Google), Amazon and Berkshire Hathaway. The American share market has been a much better place to be invested than Australia over the past decade.

Investors may want to invest in an idea, perhaps a theme could beat the overall market. One idea is Betashares Global Cybersecurity ETF (ASX: HACK), this gives investors exposure to some of the world’s biggest cybersecurity companies. Cybersecurity is becoming increasingly important, governments and businesses are likely to increase spending to ensure customer details and intellectual property remain secret.

Foolish takeaway

I’m a fan of all three of these ETFs, BetaShares offer a number of other interesting options. At the current prices I’d definitely go for the cybersecurity index because I believe the other two are too highly priced, whereas cybersecurity companies could keep generating good underlying growth.

Want more diversification ideas? These top shares should provide strong returns over the next few years.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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