Exchange traded funds (or ETFs) can be a cheap and easy way to add some international spice into your portfolio. Although we Australians love the franking credits and big dividends that ASX shares like National Australia Bank Ltd (ASX: NAB) provide, it is prudent in my opinion to look outside our shores.
Here are 2 ASX ETFs that provide cheap, easy diversification in one stock.
Vanguard International Shares Index Fund (ASX: VGS)
This ETF is run by the Vanguard group, who are famous for their rock-bottom fees. VGS tracks the MSCI World ex-Australia index, which basically follows the largest companies in the world outside Australia. It currently has over 1,600 underlying holdings, so you can be assured of some serious diversification. Some of VGS’s top holdings include Microsoft, Apple, Amazon, Nestle and Exxon Mobil. VGS is weighted 64% to the USA (reflecting that most of the largest companies are American) but also has exposure to the UK, Japan, France and Canada. This ETF charges a management fee of 0.18%, which is a pretty small price to pay for such broad investments.
iShares MSCI EAFE ETF (ASX: IVE)
This ETF is run by BlackRock, who is the largest asset management company in the world. IVE tracks a broad range of companies from Europe, Australia and the Far East (mainly Japan) – hence the EAFE name. If you are after a bit more of a balanced index sot so heavy on North American companies, IVE is a good alternative to VGS. IVE’s current top holdings include Royal Dutch Shell, Toyota, HSBC Bank and Swiss healthcare giant Roche Holdings as well as our own Commonwealth Bank of Australia (ASX: CBA). IVE charges a management fee of 0.31%, also very cheap considering this exotic range of companies.
ETFs can be a very useful tool to give your portfolio some easy diversification away from ASX stocks in one share. Both VGS and IVE would fill this role very handily, while not charging you a fortune for doing so. If you are overweight on ASX shares, and looking for some international spice, both of these picks would be good options to have a look at in my opinion.
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Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. 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.