2 top ETFs that might be buys in August 2021

The S&P 500 ETF is one of two ideas that may be worth looking at this month.

| More on:
happy family playing video game

Image source: Getty Images

August 2021 could be a good month to consider some high-quality exchange-traded funds (ETFs).

There might be some really good options to consider for the long-term because of their underlying holdings that may have good growth potential.

Here are two that may be worth thinking about:

iShares S&P 500 ETF (ASX: IVV)

This is an ETF that is offered by Blackrock, one of the world’s biggest fund managers. This investment also happens to be one of the cheapest on the ASX, with an annual management fee of just 0.04%. That means almost all of the gross returns turn into net returns.

Those returns have been very good over the last five years, with an average return per annum of 17.2%. Though, past performance shouldn’t be seen as a reliable indicator of future performance.

How has the ETF managed to do so well? An ETF can only perform as well as its underlying holdings. With this investment, many of the world’s best technology businesses are the biggest holdings, which means they have the biggest influence on the ETF’s overall returns.

Those high-quality portfolio names include Apple, Microsoft, Amazon, Facebook, Alphabet, Tesla and Nvidia. Many of these businesses are changing the way we work, learn or entertain ourselves.

Of course, there’s more to the portfolio than just a few tech giants. Names like Berkshire Hathaway, Visa, PayPal, Home Depot, Mastercard, Walt Disney and Adobe are just some of the other positions.

As one of my American Fool colleagues pointed out, during the 2020 Berkshire Hathaway shareholder’s meeting, Warren Buffett said that “for most people, the best thing to do is to own the S&P 500 index fund.”

The S&P 500 offers plenty of diversification with 500 names across multiple sectors. But technology gets the biggest allocation.

VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)

This investment is a much more concentrated idea.

It is focused on the video gaming and e-sports industry. The ETF provides that exposure with 26 positions that are involved with gaming in some way whether it’s game development, e-sports, hardware or software.

The portfolio names come from a number of different places with the US (43.2%), China (19.5%) and Japan (18%) being the three countries with weightings of more than 10%.

Video gaming businesses have growing revenue at double digits for a number of years. Regions like Africa and Asia are contributing a sizeable amount of that revenue and growth.

E-sports in-particular has led to a lot of new potential revenue streams such as game publisher fees, media rights, merchandise, ticket sales and advertising. E-sports revenue has grown by an average of 28% each year since 2015. The competitive video gaming audience is expected to reach 646 million people globally in 2023.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended VanEck Vectors ETF Trust – VanEck Vectors Video Gaming and eSports ETF and iShares Trust – iShares Core S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ETFs