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.
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Motley Fool contributor Sebastian Bowen owns shares of Ishares Asia 50 Etf and VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat 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.
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