2 quality share ETFs I'd buy in this falling market

If you want to buy quality ETFs during this falling market, then consider these 2 including VanEck Vectors MSCI World ex Australia Quality ETF (ASX:QUAL).

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When share markets are falling like they are it's understandable that investors are seeking safety and quality.

There are two ways to get invested into quality shares. You could directly invest into quality shares like Altium Limited (ASX: ALU), A2 Milk Company Ltd (ASX: A2M) and so on.

Another option is to invest in a quality portfolio of shares supplied by a fund manager or exchange-traded fund (ETF) provider.

Here are two quality ETFs that could be worth thinking about:

VanEck Vectors MSCI World ex Australia Quality ETF (ASX: QUAL)

This ETF is provided by VanEck, an investment firm that has been around for 60 years. VanEck is one of the world's largest Exchange Traded Product (ETP) issuers.

It invests in a diversified portfolio of quality international companies listed on exchanges in developed markets around the world, excluding Australia.

What does 'quality' mean for this index? It's based on three fundamental factors, high return on equity, stable year-on-year earnings growth and low financial leverage.

What this translates to is 71.6% of the portfolio being invested in US shares whilst the rest is invested in countries like the UK, Switzerland, Japan, France and so on.

In terms of its largest positions, its top 10 holdings are: Microsoft, Apple, Facebook, Visa, Johnson & Johnson, Alphabet, MasterCard, Roche, Procter & Gamble and Nestle.

It has a management fee of just 0.4%, so it's an attractive option for people looking for global diversification for a low cost.

BetaShares Global Quality Leaders ETF (ASX: QLTY

This is a similar sort of concept to the VanEck one with a focus on high return on equity, profitability, low leverage and earnings stability.

There is probably going to be a bit of an overlap. Looking at the country allocations, the US has a 68.7% allocation, Japan has a 11% allocation – higher than VanEck's – and Switzerland has a 4.4% allocation, the rest of the countries are steadily lower percentages.

Its biggest holdings are: Nvidia, Adobe, Novo Nordisk, Roche, Apple, Visa, Alphabet, TJX, Intel and Johnson & Johnson.

With ETFs one of the main things to keep in mind is the management fees. Lower costs are better. This ETF has an annual management fee of 0.35%.

Foolish takeaway

Both ETFs are quality options and have good holdings. They seem to provide quite similar returns. In the year to 31 January 2020 both of them returned just over 35%. BetaShares has a bit more of a varied portfolio compared to a typical international ETF, so that would be my pick with the slightly lower management fee.

Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of A2 Milk and Altium. 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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