I don’t normally invest in exchange-traded funds (ETFs) for my portfolio, but there are at least two that I think could make really good buys today.
Why ETFs can make good investments
ETFs allow people to invest in a large number of assets in a single investment. If you want to get quick diversification then ETFs can be a really good way to get it. You can buy dozens or even hundreds of shares with one investment.
Most ETFs usually track an index, which should mean the costs can be very low compared to an active manager.
ETFs can either form part of your portfolio, along with individual shares, or they can be your entire portfolio.
There are some really good options out there like iShares S&P 500 ETF (ASX: IVV) and Vanguard Msci Index International Shares Etf (ASX: VGS). But there are couple of ETFs that I like the idea of even more:
Betashares Ftse 100 ETF (ASX: F100)
The UK share market has not recovered from the COVID-19 crash yet, unlike the US share market which is now higher than it was before the crash came long.
The FTSE 100, being the 100 businesses on the London Stock Exchange, is full of quality global businesses that I think can recover in value. COVID-19 won’t be an issue forever for the UK. Hopefully Brexit will be sorted sooner rather the later. But I think it’s a good time to buy shares when investors are fearful.
Within this ETF are quality names like AstraZeneca, GlaxoSmithKline, HSBC, Diageo, Unilever, Rio Tinto, Reckitt Benckiser, BHP, National Grid, Vodafone and the London Stock Exchange.
Industrial companies can generate pleasing long-term returns and this could be a good time to buy exposure to them.
The ETF may also be a solid option for dividends once the COVID-19 impacts end. Companies are currently being quite careful with their capital.
It has an annual management fee of 0.45% per year.
Betashares Global Quality Leaders ETF (ASX: QLTY)
An even better pick could be going for quality businesses, rather than just a random collection of businesses based on their size.
To get into this ETF’s holdings, a business must rank well on return on equity (ROE), profitability, low leverage and earnings stability.
It gives exposure to 150 high quality companies from a range of geographies and global sectors. It has a surprisingly cheap annual management fee of 0.35%, which is much cheaper than you’d pay for a typical active manager focused on quality.
Looking at the top 10 holdings, its biggest positions are: Nike, Keyence, Intel, Novo Nordisk, Nvidia, Texas Instruments, Apple, Adobe, Intuit and Intuitive Surgical.
Just under two thirds of the ETF is invested in the US. But it also gives exposure to markets like Japan, Switzerland, Denmark, France, Hong Kong, the UK, Spain and Finland.
Almost 60% of the portfolio is invested in the two sectors of IT and healthcare. I think it’s good to have that exposure because both of them offer secular long-term growth. However, there’s also decent diversification with industrials, communication services and consumer discretionary.
It has been a strong performer since inception in November 2018, returning 19.6% per annum after fees.
Both of these ETFs look like really good investment options to buy right now. UK shares are looking cheap, partly due to external events. Meanwhile, I think it’s nearly always a good idea to buy high quality shares, so I’d be very happy to make Betashares Global Quality Leaders ETF a large part of my portfolio if I shifted to ETFs.