The Motley Fool

2 ETFs for easy investing and good returns

If you find it difficult to choose which share is the best to buy or when to sell, then exchange-traded funds (ETFs) could be the answer.

ETFs allow you to buy a large basket of shares in a single trade, meaning you don’t need to consider many individual implications or risks with a good-quality ETF investment.

But you still need to take care choosing an ETF. Some ETFs have high costs and some may not have the diversification you’re looking for. There are some ETFs that focus purely on one sector like gold.

The best ETFs are the ones that invest in whole share markets and have very low costs, such as these two:

iShares S&P 500 ETF (ASX: IVV) 

The world’s greatest investor Warren Buffett recommends that most (American) people should just stick with a S&P 500 fund – so who am I to argue with that?

The S&P 500 represents a list of 500 of the biggest businesses listed in the US. Don’t think these as American businesses, they’re listed in the US but a lot of the underlying earnings comes from across the globe.

If you buy this ETF you get exposure to top holdings like Microsoft, Alphabet, Amazon, Apple, Berkshire Hathaway, JPMorgan Chase, Visa, MasterCard, Disney and so on.

Not only do you get excellent diversification with this ETF but it comes at a wonderfully-low cost too. Blackrock only charges an annual management fee of 0.04% per annum.

I wouldn’t expect the next 10 years to be as good as the last 10 years from today’s price, but the best businesses usually create excellent compounding returns.

Vanguard Australian Share ETF (ASX: VAS)

If you want to stay a bit closer to home then this Vanguard ETF could be the best way to do it. Vanguard is a world leader in offering low-cost ETFs to regular investors like you and I.

There are tax advantages to investing in Australian businesses, such as franking credits and higher dividend yields.

This ETF gives us access to the ASX 300, which is obviously 300 of the biggest businesses on the ASX. I’m sure you know of the top holdings like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), BHP Group Ltd (ASX: BHP) and Telstra Corporation Ltd (ASX: TLS).

It also gives good exposure to some faster-growing businesses like CSL Limited (ASX: CSL), Aristocrat Leisure Limited (ASX: ALL) and Transurban Group (ASX: TCL). It’s a pretty good mix of income and growth. 

This ETF comes with a cheap management fee of just 0.10% per year.

Foolish takeaway

Both of these ETFs provide good diversification and easy access to lots of businesses creating good returns for shareholders. If I could only chose one of the two it would be the S&P 500 ETF for its better businesses, better growth prospects and a cheaper management fee.

NEW. The Motley Fool AU Releases Five Cheap and Good Stocks to Buy for 2020 and beyond!

Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading over 40% off its high, all while offering a fully franked dividend yield over 3%...

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.


Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited and Transurban Group. 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.