Motley Fool Australia

2 top ETFs for high growth

Exchange Traded Fund (ETF)

Some exchange-traded funds (ETFs) offer high growth for investors despite the coronavirus.

I like how cheap some ETFs out there are such as BetaShares Australia 200 ETF (ASX: A200) and Vanguard U.S. Total Market Shares Index ETF (ASX: VTS).

The ASX does have some impressive growth companies, but they’re not the largest positions within the ASX 200. The biggest businesses in Australia are mature businesses in slow growth industries.

I think these two ETFs have high growth, with an Asian flavour:

Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE)

The Asian region is handling the coronavirus much better than some western nations right now. South Korea, Singapore and Vietnam have all done impressive things with their own tactics. China is now in a much stronger position than the US to push on from this pandemic.

Vanguard is one of the best ETF providers in the world and this ETF has a management fee of just 0.4% per annum.

Due to Asia’s growing prominence, stronger savings rate and middle class wealth effect, I like the idea of getting exposure to Asian shares.

I think this ETF has high growth because it’s invested in businesses like Alibaba, Tencent, Taiwan Semiconductor Manufacturing, Samsung and Ping An Insurance. These businesses could easily be described as the equal of their western counterparts. But the ETF is actually invested in over 1,250 businesses, not just those few names, which is great diversification.

According to Vanguard, the ETF has an earnings growth rate of 11.6%, a return on equity (ROE) of 14.76% and a price/earnings ratio of just 13.3x. I believe these are attractive statistics and show the ETF has high growth potential.  

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

Perhaps you don’t want to be invested in 1,250 Asian shares. Maybe you just want exposure to 50 of the biggest and best Asian technology and online retail shares. Well that’s exactly what this ETF offers.

If you just looked at the holdings, you’d see similar names. But this ETF has larger positions of each tech name. Alibaba is 9.7% of the portfolio, Tencent is 9.7%, Taiwan Semiconductor Manufacturing is 9.2% and Samsung is 9%.

This high growth ETF has returned an average of 14.6% per annum after fees since inception in September 2018.

Around two thirds of the ETF is invested in three sectors: ‘semiconductors’, ‘interactive media & services’ and ‘internet & direct marketing retail’. These are attractive growth areas.

BetaShares Asia Technology Tigers ETF’s management fee is a bit higher at 0.67%, but it’s still a lot cheaper than typical active fund managers.

Foolish takeaway

Asian high growth ETFs have higher risks (particularly relating to China), but they could generate higher returns. If you just want a tech-focused ETF then the BetaShares offering could be a great pick. But choosing a broad investment exposure to the whole of Asia and every industry is also a very compelling prospect.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers 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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