Markets have moved up a little from their lows. But volatility remains and investors, as always, can’t be certain what comes next.
Stepping back from the day-to-day movements, I think it’s as good a time as any to buy shares. Long term investors will make their money through the holding of quality shares, not by clever timing.
With this in mind, I think it could be a sensible time to top up on the following exchange-traded funds (ETFs) if they line up with your own investment strategy.
Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE)
This ETF tracks the performance of a number of emerging markets throughout the world. For investors looking at getting exposure to fast growing economies like China and India, this could be a great option.
The ETF owns a total of over 4,600 companies from countries like China, India, Taiwan, Brazil, South Africa, Thailand and many others. Breaking it down by country, China has the highest weighting at 34.7%, followed by Taiwan at 14.1%.
Looking at the fundamentals, the Price/Earnings (PE) ratio is 12.3, and the dividend yield is 2.8%. This means you’re getting the underlying company earnings, which are growing quickly, for a relatively low price.
Emerging markets tend to be more volatile than developed markets, but for patient investors, the long term growth prospects could make up for that.
SPDR S&P/ASX 200 Fund (ASX: STW)
I know it’s often said that an Aussie index fund isn’t worth investing in because of the concentration in banks and miners. But I’m just not sure I buy that argument anymore.
The index has diversified a bit over the last few years. Our big banks like Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA)don’t carry quite the same weight they used to.
Only a couple of years ago, the weighting to financials was over 40%. That is now down to a little over 30%, and that includes a whole bunch of insurance companies, fund managers and other financial services businesses, not just banks.
As for our miners, the reason they’re such big companies is they’ve grown to be very profitable over the years, and are some of the most cost-competitive producers in the world, using Australia’s mineral wealth to their advantage.
Looking at the fundamentals, the Price/Earnings ratio is just 15.3, which is right around the long term average (and cheap if you consider record low interest rates). The current yield is higher than the historical average at 4.7%, not to mention the distribution is around 77% franked.
Both ETFs look quite attractive at today’s prices. There’s no guarantees of course, but if we look back in 10 or 20 years’ time, I think those who simply purchased these shares and kept reinvesting the dividends would be very glad they did.
Motley Fool contributor Dave Gow has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.