2 excellent ETFs for potential long-term returns

Here are 2 high-quality ETFs with good potential.

| More on:
a business person in a suit traces the outline of an upward arrow in a stylised foreground image with the letters ETF and Exchange Traded Funds underneath.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • These 2 ETFs have been solid performers over the last few years. Recent volatility could mean they’re opportunities
  • VanEck Morningstar Wide Moat ETF owns a portfolio of strong, good value businesses
  • Betashares Nasdaq 100 ETF gives exposure to many of the strongest US names

Some of the leading exchange-traded funds (ETFs) have seen declines since the start of the year.

ETF prices simply reflect the movement of the underlying share prices of businesses. So, a cheaper ETF price means the underlying businesses have dropped in price too.

It's up to each investor to decide which investments they want to choose. But these two are known for being higher-quality:

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

This ETF is set-up to look at businesses with strong positions in their respective sectors.

The 'wide moat' part of the name refers to the size of the economic moat of a company. Economic moats can also be called a competitive advantage.

There are many different ways that Morningstar analysts judge whether a business has a competitive edge. A business may have a cost advantage compared to rivals, perhaps due to to economies of scale. Patents and brands can be another form of advantage. Network effects or switching costs can also be factors for an economic moat.

But for this ETF, the length of time that the competitive moat is expected to endure is a key factor. 'Wide moat' businesses are ones that excess normalised returns must, with near certainty, be positive 10 years from now. In addition, excess normalised returns must, more likely than not, be positive 20 years from now.

After deciding on that high-quality list, businesses only get added to the portfolio if they're trading at attractive prices compared to Morningstar's estimate of fair value.

Some of the positions in the portfolio have been held for a long time, whilst others come and go. These are the current positions that have a weighting of at least 2.75%: Cheniere Energy, Wells Fargo, Lockheed Martin, Berkshire Hathaway, Bristol-Myers Squibb, Corteva, Philip Morris, Altria Group and Dominion Energy.

Past performance is not a guarantee of future results. However, the VanEck Morningstar Wide Moat ETF has returned an average of 18.9% per annum over the last five years.

Betashares Nasdaq 100 ETF (ASX: NDQ)

Much has been made about the decline of technology shares in 2022. The NDQ ETF has fallen around 10% since the start of the 2022 calendar year. This means that investors can get access to some of the strongest global tech businesses, for a cheaper price.

This offering from BetaShares owns many highly-recognised names including: Apple, Microsoft, Amazon.com, Tesla, Alphabet, Nvidia, Meta Platforms (Facebook), Adobe, Netflix and PayPal. In total, it has 100 positions from the NASDAQ.

Many of the above businesses are growing revenue at a fast rate, leading to strong compounding growth over the years.

However, the Betashares Nasdaq 100 ETF isn't just about tech names. In the portfolio are leading businesses like PepsiCo, Costco, Starbucks, Mondelez International and Moderna.

More than half of the portfolio is classified as IT. Amazon and Tesla are classified as consumer discretionary. Alphabet and Meta count as communication services. So, the unofficial tech weighting of the portfolio is even higher.

Many of the businesses involved are among the national or global leaders at what they do.

Past performance is not a reliable indicator of future performance, but since inception in May 2015 the NDQ ETF has returned an average return per annum of almost 22%. That's after the annual management fee of 0.48%.

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. owns and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia owns and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat 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

asx share price boosted by us investment represented by hand waving US flag across winning athlete
ETFs

Which ASX ETFs give Aussie investors access to US stocks?

We canvas some options to help you get your research started.

Read more »

Man holding Australian dollar notes, symbolising dividends.
ETFs

Want the latest dividend from the Vanguard Australia Shares ETF (VAS)? Here's what you have to do

If you want to bag the latest VAS dividend, here's what you need to do.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
ETFs

Why these ASX income ETFs could be top options

Here's how investors can use ETFs to generate income.

Read more »

ETF written on cubes sitting on piles of coins.
ETFs

2 rewarding ASX ETFs I'd buy to build a second income

There are a few different ETFs that can provide good dividends. Here are two.

Read more »

A young man wearing glasses writes down his stock picks in his living room.
ETFs

The pros and cons of buying the iShares S&P 500 ETF (IVV) right now

It’s important to ask the question of whether it’s a good time to buy.

Read more »

A graphic illustration with the words NASDAQ atop a US city and currency
ETFs

How much would I have now if I'd invested $10,000 in the BetaShares Nasdaq 100 ETF (NDQ) a year ago?

Was it a good idea to buy this ETF a year ago?

Read more »

young man smiling in blue shirt
ETFs

Invest $500 in these outstanding ASX ETFs

Could these ETFs deliver the goods for investors over the long term?

Read more »

A group of young ASX investors sitting around a laptop with an older lady standing behind them explaining how investing works.
ETFs

Buy and hold these ASX ETFs until 2034

These ETFs could be great long-term options. Let's see why.

Read more »