When the share market drops considerably, it can be difficult to know which shares to choose.
The main benefit of an ETF is that investors can buy a whole group of attractively-priced businesses at the same time. I like diversification, and I also like buying great businesses.
Here are two that I think give investors exposure to a great group of companies.
Betashares Nasdaq 100 ETF (ASX: NDQ)
This ETF aims to track the performance of the 100 largest businesses on the tech-heavy NASDAQ stock exchange in the United States.
The Betashares Nasdaq 100 ETF has many of the world’s biggest tech companies in its portfolio. These include Apple, Microsoft, Amazon.com, Alphabet, Meta Platforms, and Nvidia.
But it’s not just the giants in there. There are plenty of other attractive, quality businesses in the portfolio including Broadcom, Adobe, Costco, Cisco Systems, Advanced Micro Devices, Qualcomm, and Texas Instruments.
One of the main things I like about these holdings is that many of them are the best at what they do in the Western world, or perhaps the whole world. I think this ETF’s holdings are high quality.
The annual management fee seems reasonable to me at 0.48%. While it’s not as cheap as some other ETFs, I think the net returns of the NDQ ETF will be great over the long term because of the strength of the underlying holdings. Plus, it’s a cheaper fee than many active fund managers charge.
Over the five years to April 2022, the average net return of the Betashares Nasdaq 100 ETF was 19.76% per annum. That compares to an average net return per annum of 14.1% from the Vanguard US Total Market Shares Index ETF (ASX: VTS) over the same period. The VTS ETF has an annual fee of 0.03%.
Vanguard aims to keep its fees as low as possible for investors. It isn’t looking to make a profit, unlike BetaShares.
The Betashares Nasdaq 100 ETF share price has fallen by almost 23% in 2022.
Betashares Global Cybersecurity ETF (ASX: HACK)
This is another ETF, but it’s focused on a particular industry. As you may have already guessed, it’s all about the global cybersecurity sector.
The HACK ETF has about 40 positions. While most (87%) of the portfolio is invested in US businesses, the underlying earnings come from across the world.
Sadly, cybercrime continues to rise. Indeed, there are predictions that cybercrime costs could more than triple between 2015 to 2025.
The businesses in this ETF’s portfolio are at the forefront of defending against the bad guys. Some of the biggest names in the portfolio include Crowdstrike, Cisco Systems, Zscaler, VMware, Mandiant, Booz Allen Hamilton, Leidos, Sailpoint Technologies and Akamai Technologies.
I think the HACK ETF has an attractive earnings growth outlook. BetaShares outlines that, according to Statista, the projected size of the global cybersecurity market is expected to rise to US$223.68 billion in 2022 (up approximately 10% from 2021) and then further increase to US$248.26 billion in 2023.
Cybersecurity is also very important for businesses, governments, and organisations – I’d guess it’s the last thing that would be cut from expenditure, so I believe that might make the HACK ETF more defensive than ETFs with cyclical stocks.
The Betashares Global Cybersecurity ETF share price has dropped by almost 17% in 2022. So, I think it looks even more attractive now.