There are some compelling exchange-traded funds (ETFs) that may be good investment opportunities to consider for the long-term.
ETFs allow investors to invest in a (large) number of businesses in a single investment. That’s likely to be good news for people looking for diversification.
It may be an idea to consider businesses listed outside of Australia for different geographic earnings exposures.
Here are two to think about:
VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)
As the name suggests, this ETF is all about giving investment exposure to the video gaming and e-sports sector.
There are a total of 26 names in the portfolio. To give a sense the types of businesses in its portfolio, at the end of August 2021, these were the biggest ten positions: Nvidia, Advanced Micro Devices, Sea, Tencent, Unity Software, Activision Blizzard, Nintendo, Electronic Arts, Netease and Bandai Namco.
To be initially included in the underlying index, companies must generate at least 50% of revenue from video gaming or e-sports.
Why could the gaming sector be a good one to think about? The ETF provider VanEck has provided some of the reasons to consider it.
The competitive video gaming audience is expected to reach 646 million people globally in 2023, driven in part by rising population of people online. E-sports revenue growth has increased on average by 28% annually since 2015. E-sports has created new potential revenue streams from game publisher fees, media rights, merchandise, ticket sales and advertising.
There are now apparently more than 2.7 billion active gamers worldwide. VanEck said e-sports and online video games are a long-term disruptive force in the traditional media, entertainment technology industries.
The wider video gaming sector continues to see growth too. Video gaming has achieved 12% average annual growth since 2015.
Past performance is no guarantee of future performance. However, the index that VanEck Vectors Video Gaming and eSports ETF tracks has returned an average of 29.6% per annum over the last three years.
iShares S&P 500 ETF (ASX: IVV)
One of the world’s greatest investors, Warren Buffett, has often indicated his liking of S&P 500 funds for investors because of its low fees and diversification.
Blackrock offers this ETF with an incredibly low annual fee of just 0.04% per annum for Aussies. For investors, that means the ETF provider is costing hardly anything each year. It is one of the cheapest investment options on the whole of the ASX.
What is the S&P 500? It represents 500 of the biggest, most profitable businesses that are listed in the United States. However, note that many of the underlying businesses generate their profit from all over the world. Think how many countries Microsoft offers its Office suite, Alphabet provides Google Search and Facebook has its social media presence in most countries too.
Some of the other biggest names in the portfolio includes Apple, Amazon, Tesla, Nvidia, Berkshire Hathaway, JPMorgan Chase, Visa, Home Depot, Procter & Gamble, Walt Disney, PayPal, Adobe, Mastercard, Netflix, Salesforce.com, Pfizer, Accenture, Costco, Nike, Walmart and so on. It’s full of strong names.
Plenty of the holdings in the iShares S&P 500 ETF are the best in the US or even the whole world at what they do, with strong market shares and big economic moats.
Past performance is not a reliable indicator of future performance. However, over the last five years, the ETF has returned an average of 18.4% per annum.