There are some exchange-traded funds (ETFs) that are delivering returns that have been stronger than what the ASX index has been in recent years.
What is an exchange traded fund?
In the above link is a breakdown of an ETF, but in summary it provides investors exposure to a group of assets or businesses through a single investment. ETF providers do the hard work of buying all the different businesses for you.
It provides diversification instantly, whilst also saving a lot on brokerage. This diversification can supposedly lower risks because if there’s a problem with one business (or sector) then the exposure to the other businesses and sectors can mitigate that.
Here are two examples of ETFs that are in the technology space and are growing quickly:
Betashares Nasdaq 100 ETF (ASX: NDQ)
This ETF is about giving exposure to 100 of the biggest businesses that are listed on the NASDAQ.
Most of the biggest US technology businesses are actually listed on the NASDAQ. I’m sure you’re wondering which tech companies it holds in the portfolio. Those positions include: Apple, Microsoft, Amazon, Facebook, Alphabet, Nvidia, PayPal and Intel.
The large American technology companies get a large weighting from this ASX share. The businesses I mentioned above account for just over 50% of the portfolio.
There are also some slightly smaller technology holdings which are helping the returns of the ETF including Adobe, Netflix, Broadcom, Qualcomm, Texas Instruments, Advanced Micro Devices, Applied Materials, Intuit, Intuitive Surgical and MercadoLibre.
There are also some non-tech shares in the ETF as well including PepsiCo, Costco, Starbucks, Monster Beverage and Texas Instruments.
In terms of the annual management fee, it has yearly fee of 0.48%. That’s not as cheap as something like iShares S&P 500 ETF (ASX: IVV), but it’s cheaper than other ETFs like Betashares Asia Technology Tigers ETF (ASX: ASIA).
At 31 December 2020, the net returns of Betashares Nasdaq 100 ETF has been much stronger the ASX. Over the past year the ETF has returned 34.8%, over the past three years it has returned an average of 27.3% per annum, over the past five years it has returned an average of 22% and since inception in May 2015 it has returned an average of 21.4%.
Betashares Global Cybersecurity ETF (ASX: HACK)
This ETF is designed to give exposure to the world’s leading cybersecurity companies in a single ASX trade. BetaShares, the ETF provider, said that cybersecurity is under-represented on the ASX.
BetaShares also said that with cybercrime on the rise, the demand for cybersecurity services is expected to grow strongly for the foreseeable future.
The fund’s portfolio includes global cybersecurity giants, as well as emerging players, from a range of global locations.
There are a total of 40 businesses in the holdings. The top holdings include: Crowdstrike, Zscaler, Cisco Systems, Accenture, Splunk, Fireeye, Proofpoint, Palo Alto Networks, Snailpoint Technologies and F5 Networks.
A vast majority of the holdings in this ETF, almost 90%, are based in the US. Other countries that have a representation of 2% or more include the UK, Israel and Japan.
Betashares Global Cybersecurity ETF isn’t quite as old as the NASDAQ one, so it doesn’t have a 5-year history year yet. Over the past three years it has made an average return per annum of 25.6% and the net return was 36.75% over the last year. Since inception in August 2016, Betashares Global Cybersecurity ETF has made average returns per annum of 21.4%.