Why are ETFs useful?
Investing in ETFs allows investors to get exposure to a number, sometimes a big number, of businesses with just one investment.
Whilst there are ETFs that give exposure to over a thousand holdings, other ETFs may only own a few dozen holdings.
About VanEck Vectors Morningstar Wide Moat ETF
It’s an ETF provided by VanEck, one of the larger ETF providers on the ASX, though it’s not as big as others like Vanguard or Blackrock.
At the moment it owns around 50 holdings. These businesses are rated as high quality by the equity research team at Morningstar. The analysts are looking for companies that have wide economic moats. In other words, it means the ETF focuses on businesses that Morningstar analysts believe have sustainable competitive advantages, which can lead to good returns for VanEck Vectors Morningstar Wide Moat ETF.
What’s a moat?
Whilst legendary investor Warren Buffett isn’t the one picking the shares for this portfolio, he has previously said some wise words about moats. Guru Focus has quoted Mr Buffett:
What we’re trying to find is a business that, for one reason or another – it can be because it’s the low-cost producer in some area, it can be because it has a natural franchise because of surface capabilities, it could be because of its position in the consumers’ mind, it can be because of a technological advantage, or any kind of reason at all, that it has this moat around it.
But we are trying to figure out what is keeping – why is that castle still standing? And what’s going to keep it standing or cause it not to be standing five, 10, 20 years from now. What are the key factors? And how permanent are they? How much do they depend on the genius of the lord in the castle?
And then if we feel good about the moat, then we try to figure out whether, you know, the lord is going to try to take it all for himself, whether he’s likely to do something stupid with the proceeds, et cetera.
VanEck Vectors Morningstar Wide Moat ETF’s returns and fees
Not many ETFs are able to outperform the S&P 500 – but this one has.
At 28 February 2021, VanEck Vectors Morningstar Wide Moat ETF had outperformed the S&P 500 over the last month, three months, six months, three years, five years and since inception.
In terms of the actual numbers, VanEck Vectors Morningstar Wide Moat ETF’s net return over the last five years has been an average return per annum of 17.3% per annum. The ETF has an annual management fee of 0.49% per annum.
Over the last decade, the index that the ETF tracks has returned an average of 18.5% per annum.
What are some of the biggest VanEck Vectors Morningstar Wide Moat ETF holdings?
All of the businesses are listed in the US, though plenty of the earnings come from overseas sources.
The positions that currently have a weighting of 2.5% or more include: Charles Schwab, John Wiley & Sons, Wells Fargo, Corteva, Bank of America, Cheniere Energy, US Bancorp, Boeing, Intel, Blackbaud, Berkshire Hathaway, Aspen Technology, Constellation Brands, Raytheon Technologies and General Dynamics.