Trying to pick the next hot growth company is hard – particularly during a once-in-a-century global pandemic. How are you supposed to predict which ASX shares are going to light up the market when you can’t even be sure of what the world will look like next week?
But while certain sectors continue to be hit incredibly hard by the pandemic – traditional forms of retail and tourism instantly come to mind – there have been some surprising pockets of growth. Unlikely heroes like cloud-based network provider Megaport Ltd (ASX: MP1) have helped individuals and companies adapt to the crisis – and have seen their share prices surge higher as a result.
So, although picking individual winners might be tough, perhaps picking broader sectors is a bit easier. For example, you may not have had the foresight back in March to buy shares in Megaport (don’t worry, not many people did!), but you may have still predicted that many digital technology companies would benefit from a significant chunk of the population being cooped up indoors for months on end.
Well, luckily for you, there are plenty of exchange-traded funds (ETFs) on the market that can help you invest in those growth trends. ETFs operate more or less like ordinary shares, but give you exposure to a whole portfolio of companies that make up a certain index. Investing in this way reduces your risk through diversification, and saves you having to know the ins-and-outs of individual companies’ balance sheets.
Here are three of my favourite ETFs for growth investors.
BetaShares Asia Technology Tigers ETF (ASX: ASIA)
This ETF from BetaShares gives investors exposure to some of the largest technology and e-commerce companies in Asia. One trade gives you access to companies like Taiwan Semiconductor Manufacturing Company, the world’s largest pureplay semiconductor foundry, as well as Chinese ecommerce giant Alibaba Group Holding Ltd and South Korean tech conglomerate Samsung Group.
The fund has performed exceptionally well this year. Many Asian countries – such as South Korea, China and Taiwan – have been amongst the best in the world at keeping COVID-19 at bay, and this has played out in the Tigers share price. It easily shrugged off the effects of coronavirus back in March, and since then has been on an absolute tear, soaring close to 40% higher in the last 6 months.
VanEck Vectors China New Economy ETF (ASX: CNEW)
The name is a bit of a mouthful, but the goal of VanEck’s CNEW ETF is pretty simple: pick the 120 best growth companies in China. It selects companies from industries like technology, health care and consumer discretionary, all of which will support the long-term growth of China’s new economy. When selecting shares for its portfolio, the fund looks at fundamental attributes like cash flow, growth prospects and value.
The fund has also performed well this year, up more than 30% year to date. However, it has been more volatile recently, driven by heightened geopolitical tensions between China and the West. It almost goes without saying that, with all its investments held in Chinese companies, the fund is more exposed to these geopolitical risks than a more geographically diversified fund like Technology Tigers. This is worth keeping in mind if you choose to invest.
BetaShares Nasdaq 100 ETF (ASX: NDQ)
The last ETF on the list provides investors exposure to the top 100 non-financial companies listed on the New York Nasdaq stock market. These include some of the biggest and most innovative technology companies in the world, like Apple Inc. (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN) and Facebook, Inc (NASDAQ:FB).
Despite plenty of volatility on the United States markets this year, the fund has managed to gain over 17% year to date. Given the global pedigree of many of these companies, I believe this ETF is really a must for everyone’s portfolio, and provides instant global diversification.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Apple, Facebook, MEGAPORT FPO, and Microsoft. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS and recommends the following options: long January 2022 $1920 calls on Amazon, long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, and short January 2022 $1940 calls on Amazon. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended Amazon, Apple, BETANASDAQ ETF UNITS, Facebook, and MEGAPORT FPO. 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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