Exchange-traded funds (ETFs) might be a good idea to look at for potential investment ideas in October 2021.
ETFs have the potential to offer a good level of diversification within a single investment, if investors choose an appropriate one.
Some ETFs give exposure to an index, such as iShares S&P 500 ETF (ASX: IVV). Whereas there are others that might focus on a particular theme or industry like cybersecurity or e-gaming.
Here are two to consider:
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This is an ETF that can provide quality international diversification for Aussies. The portfolio is focused on US shares.
The portfolio is based on an investment process used by Morningstar analysts that look for businesses with a wide economic moat. That simply means that the businesses have a very strong competitive position compared to the rest of the market.
In-particular, the analysts are looking for companies that are likely to have a wide economic moat for many years into the future.
After finding those businesses, the analysts will only put a business into the portfolio if it's trading at an attractive price compared to the Morningstar estimate of fair value.
At the moment, some of the ETF's largest positions include: Wells Fargo, Salesforce.com, Cheniere Energy, Alphabet, Microsoft, Compass Minerals, Guidewire Software, Tyler Technologies, Berkshire Hathaway, Boeing and Facebook.
In terms of sector diversification, there are five industries with weightings of more than 10% and only one that's just over 20%: healthcare (20.3%), IT (16.6%), industrials (15.4%), financials (13.3%) and consumer staples (11.1%).
Past performance is not a guarantee of future results, as VanEck says, but it has performed well over the last three years with a return of an average of 19.6% per annum. That was better than the S&P 500's average return of 17% per annum over the same time period. The ETF's return is after the annual management fee of 0.49%.
Betashares Nasdaq 100 ETF (ASX: NDQ)
This is an ETF that gives investors exposure to the biggest non-financial companies on the NASDAQ, which is a stock exchange in the US.
We are talking about the biggest names in the world like Apple, Microsoft, Amazon, Tesla, Alphabet and Facebook.
There is quite a heavy technology focus with this ETF, with around half the portfolio invested in IT. There is another 19.9% invested in communication services and 16.8% invested in the consumer discretionary sector. Those two sectors are also quite technology-based with Amazon and Tesla counting as consumer discretionary, whilst Alphabet (Google) and Facebook are counted as communication services businesses.
However, whilst the biggest global tech names get the largest allocations. This ETF gives diversification and exposure to a number of different business models, products and services.
Plenty of other companies in the portfolio are market leaders in the US, or even the world, at what they do. Some of the other decently-sized positions in the portfolio include PayPal, Adobe, Netflix, Costco, Honeywell, Intuit, Moderna, Advanced Micro Devices, Intuitive Surgical, MercadoLibre, Autodesk, ASML and so on.
The Betashares Nasdaq 100 ETF comes with an annual management fee of 0.48%. Including the fees, it has produced an average return per annum of 23.7% since the ETF's inception in May 2015. However, past performance is not a reliable indicator of future performance.
