I think that there are some exchange-traded funds (ETFs) that are always worth buying.
The US election is nearly here. It may throw up some volatility. If markets do go through a bit of a rough patch then it could be worth buying during that weakness.
Here are two ETFs I’d consider buying next week:
Betashares Global Quality Leaders ETF (ASX: QLTY)
I think that quality businesses will be able to prosper in good times and tougher times. We’ve seen that strength with the short-term performance of the ETF. Over the past six months it has delivered a net return of 12.5% and over the past year it has delivered a net return of 17.8%. Those are solid numbers despite all of the COVID-19 impacts.
Businesses that display good financial characteristics are worth owning. A portfolio of 150 quality businesses could be a great investment during volatile times.
To make it into this ETF a business must score well on four factors: return on equity (ROE), debt to capital, cash flow generation ability and earnings stability.
There are plenty of recognisable names in its top holdings like Facebook, Nike, Nvidia, Apple, Alphabet (Google), Adobe, Johnson & Johnson, 3M, L’Oreal, Cisco, Intel, Visa and Nintendo.
Of the 150 businesses that it owns, almost 60% of those businesses come from either the IT or healthcare sector. I think that’s attractive because those two industries can provide consistent growth – they aren’t really cyclical.
As a group, it’s not a surprise to see that they are delivering solid returns. The ETF has performed well since inception in November 2018 – it has delivered an average return per annum of 19.6%. I’m not sure that the long-term future returns will be around 20% per annum, but I think it has a good chance of outperforming the overall global share market.
Not only are the businesses high-quality, but the ETF is actually quite cheap with an annual management fee of just 0.35% per annum. That’s a lot cheaper than what you’d probably pay to an active fund manager to create a similar quality portfolio.
Betashares Nasdaq 100 ETF (ASX: NDQ)
If there is a bit of a selloff with the US share market then I think this ETF could be one of the best to buy.
The idea of this investment is to give investors exposure to 100 of the biggest businesses on the NASDAQ, which is a stock exchange in the United States.
Most of the large US tech shares are listed on the NASDAQ. So with this ETF you’re getting exposure to some of the world’s best technology businesses. Its top 10 holdings are a who’s who of the US tech sector: Apple, Amazon, Microsoft, Facebook, Alphabet, Tesla, Nvidia, PayPal, Netflix and Adobe.
Individual businesses within this ETF may not always be as strong as they currently are, but I think collectively the ‘NASDAQ 100’ – whichever companies make up that list in the future – will be a formidable cluster of (mostly) tech companies that can keep on delivering strong returns for shareholders.
Just think how much of our lives is spent using a service provided by Apple, Microsoft, Facebook, Netflix or Google. Consider all of the new services that may grow into big businesses from one of these companies: Apple TV, VR, automated cars, AI and so on. There is still a lot of potential growth.
The returns of this ETF have been incredible. The biggest businesses just keep on delivering, unlike the ASX where the big banks have been largely disappointing over the past decade.
This ETF has returned 39% over the past year and it has delivered average returns per annum of 21.4% since inception in May 2015. Those returns are after the 0.48% per annum fee charged by BetaShares.
I think both of these ETFs could make great long-term buys if the market drops next week.