Exchange-traded funds (ETFs) can be really good choices for easy investing and good returns.
It’s a lot easier to invest in exchange traded funds than identifying individual shares to buy. To outperform the share market you need to put in a lot of time to research the potential investments, think about how much it can grow, consider the balance sheet strength and so on.
Investing in an ETF needs less analysis. If you set up a regular investment plan then you don’t need to really think about much at all. Yet you still get access to the strong long-term returns. Some have very low annual management fees.
Option 1: Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE)
This is an ETF focused on the Asian share market. Predominately it’s invested in businesses located in China, Taiwan, South Korean, Hong Kong and India.
Before the coronavirus came along, Asian economies were growing at an attractive pace. Middle class wealth was rising quickly and eCommerce was growing strongly. I think that some Asian businesses are among the best in the world.
Among the top 10 holdings are: Alibaba, Tencent, Taiwan Semiconductor Manufacturing, Samsung and Ping An Insurance.
The ETF has a relatively low management fee of just 0.40% per annum, which is much cheaper than most Asian-focused Australian fund managers.
I think the returns of 8.9% per annum have been solid since inception in December 2015 (which includes the current decline).
It has over 1,200 holdings, a dividend yield of 3%, a p/e ratio of 12.3x and a return on equity (ROE) of 14.75%.
Option 2: Betashares FTSE 100 ETF (ASX: F100)
The UK share market has been pummelled just like most other markets. With this investment you can get exposure to 100 of the biggest businesses listed on the London Stock Exchange.
One of the benefits of the UK share market is that the ETF’s top 10 holdings of the FTSE are in industries that are holding up quite well. There’s pharmaceuticals (Astrazeneca and GlaxoSmithKline), alcohol (Diageo) and consumer products (Unilever and Reckitt Benckiser).
Within the next group of 20 shares are shares like mining (Rio Tinto and BHP), electricity distribution (National Grid), a telco (Vodafone) and a supermarket (Tesco).
I think the UK share market is pretty defensive with a solid dividend yield. At the end of April this BetaShares offering had a trailing dividend yield of almost 6%, though this will probably reduce somewhat.
BetaShares charges an annual management fee of 0.45% per annum.
Both of these ETFs look cheap today and have quality holdings that could be good for many years ahead. I’d probably prefer buying the UK ETF because of the defensive shares and high dividend yield, but getting exposure to Alibaba and Tencent sounds good to me too.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.