The largest businesses on the ASX are perhaps some of the slowest growing.
Telstra Corporation Ltd (ASX: TLS) isn’t going anywhere quickly. The big banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) face a number of growth issues, including the huge costs and refunds from the Royal Commission.
Sadly, that means that diversified ASX index options like Vanguard Australian Share ETF (ASX: VAS) don’t actually offer much growth because of how large those slow-growing businesses are in the index. I suppose the dividend income isn’t too bad.
Over the long run I think growth-orientated exchange-traded funds (ETFs) will create stronger total returns, like these two ideas:
iShares Asia 50 ETF (ASX: IAA)
Asia has been growing at a faster rate than Western countries for a long time. China in-particular has been a powerhouse of economic growth. The growth rate is slowing, which is understandable considering the problem of size. But, just because the GDP growth is slowing doesn’t mean businesses aren’t picking up the growth pace.
The Asian middle class continues to grow and get wealthier every year, which should lead to more revenue and profit for Asian-based businesses like Tencent, Samsung, China Construction Bank and China Mobile – some of this ETF’s largest holdings.
Risks are higher with this ETF than many others – trade wars, Government and regulations could all be disruptive. So, I wouldn’t put more than a few percent of my portfolio to this ETF. But, I think the diversified growth opportunity is too big to ignore.
Betashares Global Cybersecurity ETF (ASX: HACK)
Another trend that keeps on going is the continued importance of data, intellectual property and connectivity.
You don’t have to physically rob a business to steal things from it any more. Tax & health information must be protected by Governments. Credit information must be protected by Visa, MasterCard and so on.
Cybersecurity is increasingly important. The most recent example was where Facebook details were hacked from millions of users.
You can imagine why this Betashares Cybersecurity ETF has gone up 41% over the past year. Some of its top holdings include Symantec, Raytheon, Cisco Systems, Palo Alto Networks and Splunk.
Whilst both of these ETFs have been solid performers, I think the upcoming few years could show a particular level of outperformance compared to the ASX, which is why I’d rather have them in my portfolio.
If you’re looking for individual shares to beat the ASX then this top growth stock could be at the top of the list of most likely candidates.
You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!
Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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.