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2 ETFs for a strong and diverse portfolio

One of the things that I write most frequently about in my articles is that Australians are too dependent on Australian businesses. It’s not too bad if your ASX holdings generate revenue in other countries, but most don’t.

Therefore, I think Australian investors need to get exposure to overseas-listed shares. The easiest way to do this is by investing in exchange-traded funds (ETFs) that own international shares.

Here are two ETFs I’d be interested in owning:

Vanguard MSCI Index International Shares ETF (ASX: VGS)

This ETF is run by Vanguard, one of the global leaders in low-cost ETFs. It has a low management fee of 0.18% per annum, low costs mean more of the returns remain for you.

It has almost 1,600 holdings spread across almost every country that has a stock exchange. Obviously it owns US shares, but also shares based in Japan, the UK, France, Germany, Canada, Switzerland and so on.

Its top holdings are some of the world’s best companies like Apple, Microsoft, Amazon, Alphabet (Google) and Facebook.

Since inception, the ETF has delivered returns of 12.44% per annum, showing it can deliver decent returns.


If you want to try to find a sector that is going to perhaps beat the market then ETFs offered by BetaShares is a good way to do it.

This ETF provides exposure to the 100 biggest technology businesses on the NASDAQ. Its top holdings also include Apple, Amazon, Microsoft, Facebook and Alphabet (Google).

Now, you may realise that I’ve just listed the same businesses as the Vanguard holdings. However, the top 10 holdings of the Vanguard ETF represents 12.8% of the ETF. The Apple holding alone in the BetaShares NASDAQ ETF represents 11.9% and the top 10 holdings are over 55% of the ETF.

You are getting a fairly concentrated bet on the top technology businesses with this ETF.

It’s a decent way to spread the risk compared to just owning a couple of technology businesses and I believe that Facebook and Alphabet (Google) will continue to be very strong performers because they are investing into what could be huge new profit drivers such as automated cars and virtual reality.

Foolish takeaway

I’d be very happy to own either ETF in my portfolio. I’m a bit cautious about the Vanguard one at the moment because it essentially represents the global share market, which could fall due to rising interest rates.

I don’t own the NASDAQ one yet as I’ve always thought there was a better opportunity on the ASX when I was investing at the time. There’s a good chance I will own it, or another one like it, some time in the future.

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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 BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. 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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