Exchange-traded funds (ETFs) can be a great financial tool to build your wealth with a simple investment plan.
I have a lot of respect for investors that put in a lot of research and can identify market-beating opportunities. But not everyone has the ability, time or patience for investing in individual growth shares.
However, there are ETFs that I think can produce good returns over the long-term for a very reasonable cost. There are some very cheap ETFs like iShares S&P 500 (ASX: IVV) which have performed well. But there plenty of businesses in there that I wouldn't want exposure to.
I think these three ETFs are good candidates for simple long-term wealth building:
BetaShares NASDAQ 100 ETF (ASX: NDQ)
When you look across the global share market, there are few shares as good as the technology giants on the NASDAQ.
This ETF gives exposure to 100 of the largest businesses on the NASDAQ for an annual management fee of just 0.48% per annum.
I'm sure you've heard of many of the NASDAQ's largest businesses including Apple, Microsoft, Amazon, Facebook, Alphabet, Tesla, Intel, Nvidia and Netflix.
These businesses are doing very well despite the tough COVID-19 conditions. Businesses like Microsoft and Netflix are seeing higher demand for services due to people working at home and consuming more video entertainment at home.
The ETF has performed very strongly for long-term investors. After fees, over the past year it has returned 35.5%, over the past three years it has returned an average of 26.6% per annum and over the past five years it has returned an average of 21.5% per annum.
I am a bit concerned what may happen to the US share market over the next six to nine months. However, the higher Australian dollar compared to the US dollar makes it a bit cheaper to buy US shares at the moment.
BetaShares Global Sustainability Leaders ETF (ASX: ETHI)
Ethical investing is rising in prominence. This ETF now has net assets of $717 million.
Everyone has different ethics when it comes to investing 'ethically', but this ETF ticks a lot of the ethical boxes you may want ticked. It invests in businesses which are identified as 'climate leaders' and excludes businesses involved in alcohol, junk foods, human rights and supply chain concerns and so on.
But I'm not telling you about this ETF because it's just ethical. The shares in it are quality and high-performing. It owns around 200 names. The top 10 holdings are: Apple, Mastercard, Nvidia, Visa, Home Depot, Adobe, Paypal, Netflix, Tesla and Toyota.
The annual management fee is just 0.59% per annum. The returns have been very good. Over the past three years it has returned an average of 21.5% per annum.
I think that shows that ethical businesses can do very well for investors.
BetaShares Global Quality Leaders ETF (ASX: QLTY)
This ETF looks to give investors exposure to 150 quality global companies.
These businesses have to rank strongly on a few factors: return on equity, debt to capital, cash flow generation ability and earnings stability.
Most quality businesses should be able to perform well even through recessions like COVID-19.
The management fee for this high quality ETF is just 0.35% per annum, which is cheap for what you get. The top holdings are names like: Nvidia, Accenture, Intuitive Surgical, L'Oreal, Adobe, Apple, Cisco Systems, Alphabet, Unitedhealth and Johnson & Johnson.
Quality businesses have produced good returns. This ETF is still relatively new. Its inception date was November 2019, since then it has returned an average of 19.75% per annum.
Foolish takeaway
I think each of these ASX shares are exciting long-term ideas. They have already proven they're able to produce strong returns and I think they can do well over the next five years as well. At the current prices I think I'd probably go for the quality ETF, though I'd also be happy to invest in the ethical ETF.
