Exchange-traded funds (ETFs) can be a great way to invest in a group of shares through a single investment.
There are various ETFs out there that focus on a single stock exchange like the Vanguard Australian Share ETF (ASX: VAS), and ETFs that aim to track a huge group of global shares like Vanguard MSCI Index International Shares ETF (ASX: VGS).
I’m not particularly interested in buying an ASX-focused ETF for my own portfolio because I think it’s too heavily weighted towards financial and resource businesses. I’d only want to buy some global ETFs if ETF investing were my main strategy.
I’m attracted to these two ETFs because I think they look good value and they could provide attractive diversification:
BetaShares FTSE 100 ETF (ASX: F100)
The UK share market is currently going through a rough time because of Brexit. The country seems unable to find a solution that breaks away from the EU nor decide to vote again on whether to stay in the EU.
Consequently the FTSE 100 – think of it like the ASX 100 – has a price/earnings ratio of around 12x at the moment. Many of the businesses listed in London are global businesses that just happen to be listed in Britain. Shares like HSBC, BP, Royal Dutch Shell, Astrazeneca, GlaxoSmithKline, Diageo and Unilever are all great businesses with quality global earnings.
UK shares have pretty attractive dividends too, the underlying index has a dividend yield of 5.1%.
The annual management fee for this ETF is a pretty affordable 0.45%.
Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE)
Asia is home to plenty of businesses that are growing at a fast pace like Alibaba and Tencent, whilst also being the home to some industry powerhouses like Samsung and Taiwan Semiconductor Manufacturing.
The Asian middle class continues to grow at an impressive rate each year and that trend is not likely to stop any time soon. It’s why we’re seeing more ‘middle class’ businesses like Ping An Insurance Group continue to grow quickly.
This Vanguard Asia ETF has a price/earnings ratio of 12.7x, yet displays an earnings growth rate of 10.7%, which is an attractive PEG ratio for an ETF in this low interest rate era.
Vanguard only charges a management fee of 0.40% per annum and, as a bonus, this ETF has a dividend yield of 2.7%.
Both of these ETFs look like good value to me. Over the long-term I expect the Asian ETF could outperform ASX-focused ETFs, but if Brexit comes to a positive conclusion then UK shares could bounce back quickly – so I’d be willing to invest a bit in the UK ETF today.
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Motley Fool contributor Tristan Harrison owns shares of VANGUARD FTSE ASIA EX JAPAN SHARES INDEX ETF. 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.