Exchange traded funds (ETFs) have exploded in popularity in recent years. With many experts describing ETFs as a defining trend of the era, it might be a good idea to consider whether ETFs should be a part of your own portfolio.
I personally like to use ETFs to easily diversify my own portfolio with stocks outside Australia. Buying individual international shares is typically very expensive and a little complicated in most cases, but by sticking with ASX-listed ETFs, you can really make the process a lot easier and cheaper.
So here are 2 of my favourite ETFs for international diversification.
iShares Asia 50 ETF (ASX: IAA)
This ETF follows the 50 largest companies across Asia. I think that Asian markets will play an ever-growing role in global growth throughout the remainder of this century at least, and I use IAA to try and get a slice of it.
Some of IAA’s top holdings include big names like Tencent, Samsung and Taiwan Semiconductor Manufacturing Co. With a 35% exposure to China, 22% to South Korea, 18% to Taiwan, 17% to Hong Kong and 5% to Singapore, I like the geographical balance we get as well. This ETF charges a management fee of 0.5%
VanEck Vectors Wide Moat ETF (ASX: MOAT)
MOAT is a US-based ETF that tracks companies on the US markets that it perceived to have a ‘wide moat’ (hence the name/ticker). The US has long been the most dominant economy in the world and MOAT is a good way (in my view) to get a piece of the action.
A ‘moat’ is a Buffett-ism that refers to an enduring competitive advantage a company may have – just think of the power of Coca-Cola or Apple’s brands and you get the idea. These are exactly the kind of companies I feel comfortable investing in and so this ETF checks a lot of my boxes. Some of MOAT’s current top holdings include Nike, Kellogg, Intel, Amazon and McDonald’s. This ETF charges a management fee of 0.49%.
With these 2 simple ETFs, I am getting exposure to both the Asian and US markets – 2 high-growth areas difficult to tap into with pure ASX shares. I feel like these 2 investments add some spice into my portfolio and I’m happy to hold them for the long-term.