Motley Fool Australia

Where I’d invest $10,000 into ETFs right now

Exchange Traded Fund (ETF)

I think investing in exchange-traded funds (ETFs) could be a very good choice with $10,000.

But there are lots of different ETFs. Some are focused on one particular country like Vanguard Australian Shares Index ETF (ASX: VAS). Others are focused on a particular industry like Betashares Global Cybersecurity Etf (ASX: HACK).

If I had $10,000 to invest into ETFs then these are the ones I’d pick:

Betashares Global Quality Leaders ETF (ASX: QLTY) – $5,000

I think this could be one of the best ETFs to own. Some broadly diversified ETFs don’t produce strong returns. And country-specific ones are obviously limited to one country.

This idea gives exposure to quality businesses listed across the world. It’s invested in 150 great businesses outside of Australia. To make it into the ETF’s holdings, a business needs to rank well on: return on equity (ROE), debt to capital, cash flow generation ability and earnings stability.

If a business ranks well on those metrics then it gives it a great chance of producing good shareholder returns. The biggest holdings in the ETF are: Nike, Keyence, Nvidia, Novo Nordisk, Intel, Texas Instruments, Adobe, Intuit, UnitedHealth and Johnson & Johnson.

Around a third of the shares are outside of the US and more than half of the sector allocations are to IT and healthcare. I like those two sectors because they offer secular growth.

The ETF has annual management fees of 0.35% and since inception in November 2018 it has produced net returns of 19.6% per annum.

Betashares Ftse 100 ETF (ASX: F100) – $3,000

The UK share market has been unloved in recent years because of Brexit and now COVID-19. Indeed, over the past year the net return has actually been a decline of 14.4%.

But there are plenty of good, global businesses on the London Stock Exchange that are worth getting exposure to in my opinion. Investments include: Astrazeneca, Glaxosmithkline, British American Tobacco, Diageo, HSBC, Unilever, Rio Tino, Reckitt Benckiser, BP, Royal Dutch Shell, BHP, National Grid, Vodafone, London Stock Exchange, BAE Systems, Scottish Mortgage Investment Trust and Ocado.

I think these are high-quality names and will be able to do well over the long-term.

The ETF has an annual management fee of 0.45% per annum and it’s trading with a price/earnings ratio of just 15.

I believe getting exposure to just different companies and currencies is a good idea.

Vanguard FTSE Asia Ex-Japan Shares Index ETF (ASX: VAE) – $2,000

Asia has been one of the best regions in getting COVID-19 under control which has helped get their economies mostly back to normal.

Over the long-term I think Asia could be a region that delivers good economic growth, which should be helpful for the underlying businesses.

The ETF has over 1,350 holdings from across the region, excluding Japan. Its biggest holdings are: Alibaba, Tencent, Taiwan Semiconductor Manufacturing, Samsung, AIA, Meituan Dianping, Reliance Industries, JD.com, China Construction Bank and Ping An Insurance.

It has an annual management fee of 0.40% per annum. The ETF has delivered annual returns per annum of 9.7% since inception in December 2015 which has included issues like the trade war as well as COVID-19.

Aside from the Asia exposure, one of the main reasons to like this ETF so much is its investment metrics. According to Vanguard, it has a price/earnings ratio of around 17, an earnings growth rate of 12.7% and a return on equity ratio of 15.3%. These are solid numbers for an entire ETF. Earnings growth and return on equity is a good indicator of future returns. COVID-19 has harmed earnings in the short-term, but it could bounce back. 

Foolish takeaway

I like each of these investment ideas and I think they offer good diversification. They offer something quite different to a typical Australian or American based ETF. I think the BetaShares global quality one is best, but I like the look of UK shares and Asia right now too.

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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 BETA CYBER ETF UNITS. 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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