It’s my belief that exchange-traded funds (ETFs) can be a great option for beginner investors. Most ETFs don’t offer the same risk levels that investing in an individual share does. An ETF can’t go bankrupt for instance. And since ETFs usually hold a broad basket of individual shares within them, the risks of a single company tanking your entire investment are also very low. As such, I would happily recommend an ETF to a beginner ASX investor as part of a diversified, balanced portfolio. Here are 2 that I think are worth a look today:
2 ASX ETFs for a beginner investor’s portfolio
iShares Global 100 ETF (ASX: IOO)
This ETF has a very simple mandate: holding 100 of the largest companies in the world that are listed in advanced economies. Most (72.7%) of the companies in this ETF are US-listed, but Switzerland, the United Kingdom, France, Germany, and Japan also have a presence. Some of the companies with the largest presence in IOO include Apple Inc, Amazon.com Inc, Johnson & Johnson, and Nestle SA.
This ETF’s very nature makes it a remarkably stable investment, and thus a great one for a beginner investor in my view. All of the companies in this ETF got to where they are for a reason, and many (such as Apple and Amazon) have thrived in 2020 under the dire circumstances of the pandemic. Thus, I just don’t think you can go wrong with a long-term investment in this one as part of a balanced share portfolio.
Vanguard US Total Market Shares Index ETF (ASX: VTS)
This ETF from Vanguard is a little less diverse than iShares Global 100. Rather than holding a basket of companies from around the world, VTS instead simply holds every share listed on the US markets (all 3,566 of them). The US has always been a great market to invest in – it is the country that produced Amazon, Apple, Netflix Inc, Berkshire Hathaway Inc, and Tesla Inc after all. You’ll of course find all those companies in the fund, as well as Microsoft Corporation, Facebook Inc, Visa Inc, and almost every other American company you can think of.
VTS has returned an average of 16.95% per annum over the past decade, and charges a management fee of just 0.03% per annum (or $3 for every $10,000 invested). As such, I think this is another ASX ETF which would work well for a beginner portfolio today. As with IOO, I think one can confidently buy VTS and throw it in the bottom drawer, content that it will continue to build wealth on your behalf.
Both of these ETFs offer access to top, global companies outside the ASX. Because of this, I think using either ETF as part of a balanced and diversified portfolio of shares is a great move for a beginner investor today.