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Are these the best 2 ETFs on the ASX?

In my opinion, investing in exchange-traded funds (ETFs) could be one of the best ways to achieve pleasing long-term returns for your portfolio.

But, you’re still faced wit the fact that you have to choose which ETF(s) to invest in. There dozens of good ETF options to consider, although I would probably only want to invest in one offered by Vanguard, BetaShares or Blackrock.

The reason why I think those three providers are the best to consider is because most of their investment options are cheap for what investment exposure is offered.

Two of the best ETFs on offer could be Vanguard US Total Market Shares Index ETF (ASX: VTS) and iShares S&P 500 ETF (ASX: IVV). The reason why I think they’re two of the best is because their annual management fees are so low.

The Vanguard US Total Market Shares Index ETF has an annual management fee of only 0.03% and iShares S&P 500 ETF has an annual management fee of 0.04% per annum. These are extremely cheap offerings. In the investment world, more expensive fees definitely doesn’t mean the same thing as ‘better’.

We can’t control what the investment returns will be, but we can do our best to limit the fees and expenses where possible. Over a lifetime fees can be a very sizeable detractor from compounding returns. Of course, there is the argument that some investment managers are worth the fees because they can outperform after fees. 

The main other benefit of these two ETFs is the diversification offered. Unlike the ASX which is dominated by resources and banks, the US exchanges are much more evenly balanced between industries like technology, consumer businesses, healthcare etc. The underlying earnings of the ETFs’ holdings are generated from across the world, not just in Australia.

Just think of businesses like Apple, Microsoft, Facebook, Visa and so on that are the top holdings of these ETFs – they are all large global players in their respective industries.  

I also like that with both of these industries you get exposure to hundreds upon hundreds of businesses, further adding to the diversification.

Foolish takeaway

I think owning more of overseas-based businesses is a good idea, but I’m hesitant about investing into these broad ETFs at all-time highs. I’d only invest today if you have a regular investment plan which you intend to follow for years to come.

Instead, I’d rather own shares of these leading ASX businesses which appear good value for the potential growth on offer.

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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.

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