I strongly believe that the best place for any Australian’s money over the ultra-long-term is (ASX) shares. You don’t need to take on debt to buy shares and they have proven to deliver the strongest returns over time. Exchange-traded funds (ETFs) can offer easy investing and good returns as a way to access shares.
Most investors reading this article will have a good understanding of the businesses on the ASX, but it’s much harder to be knowledgeable about the other 98% of the shares listed around the world.
The easiest way to get exposure to overseas investments could be through an ETF. These funds can give diversification to a whole range of good quality shares, with a low management fee.
Here are two ETFs that could be good for simple investing and achieve good wealth:
Vanguard US Total Market Shares Index ETF (ASX: VTS)
With the ASX reaching a bubbly level of excitement after the election, it might be time to look elsewhere for opportunities.
The US share market could be one of the best places to look for opportunities because many of the biggest US businesses generate a lot of their earnings from right across the globe, so they can be described as global businesses. This is much better than just a domestic Australian business in my opinion.
This US-focused Vanguard ETF is invested in over 3,600 US businesses and has an extremely low annual management fee of only 0.04%, or perhaps even 0.03% from now on according to the Vanguard website.
Its top holdings include Microsoft, Apple, Amazon, Alphabet, Facebook, Berkshire Hathaway and Johnson & Johnson.
It has a low dividend yield of 1.9%, but its returns have been strong. Over the past five years it has delivered an average return of 16.4% per annum. However, the next five are not likely to be as good.
iShares S&P 500 ETF (ASX: IVV)
Some investors may prefer to invest in a well-known index fund like the S&P 500, which is very popular with financial gurus like Warren Buffett because of its diversification and low management fee costs.
The S&P 500 would cut out a lot of the smaller shares, so you may be left with a higher-quality group of businesses. But, 500 holdings is still very good diversification. Its top holdings are virtually identical to the Vanguard US ETF, but you get a higher exposure to each one.
The Blackrock iShares S&P 500 ETF also has an extremely low management fee cost of 0.04%.
It would be entirely possible to just own one of these two ETFs, and nothing else, because of how attractive the low management fee costs are and the diversification. A regular investment strategy would be a good tactic with these ETFs.
However, the US market is also trading expensively at the moment. It could be a better idea to invest in one of these leading ASX shares instead at the current prices.
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Motley Fool contributor Tristan Harrison 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.