The ASX exchange-traded fund (ETF) sector is a great place to find opportunities that can provide diversification and growth for a portfolio. I'd love to add two of them to my portfolio.
I like the companies that are on the ASX, but the Australian share market is only a small part of the overall picture. So I think it's a good idea to get exposure to good global businesses.
There are many good ways to invest in global shares via ETFs. But, I think these two options would be high-quality picks and improve my portfolio.
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Betashares Global Cybersecurity ETF (ASX: HACK)
The concept of this ASX ETF is that it provides exposure to leading companies in the global cybersecurity sector.
Readers may have heard of, or even use, some of the largest businesses in the portfolio: Fortinet, Cisco Systems, Broadcom, Palo Alto Networks, Infosys, Okta, Open Text, Juniper and Crowdstrike. Most of these positions are listed in the US.
While it's a concerning situation, the growing amount of cyber-attacks means that cybersecurity businesses could continue to see growing demand. Just look at what's happened to some ASX names recently like Medibank Private Limited (ASX: MPL), Latitude Group Holdings Ltd (ASX: LFS) and IPH Ltd (ASX: IPH).
According to BetaShares, the cybersecurity market is expected to grow from US$248.26 billion in 2023 to US$478.68 billion in 2030.
I think this can be both a defensive and growth ASX ETF.
VanEck MSCI International Quality ETF (ASX: QUAL)
The VanEck MSCI International Quality ETF is invested in the world's "highest quality companies based on key fundamentals" including a high return on equity (ROE), earnings stability and low financial leverage.
VanEck says that "investments focusing on companies with quality characteristics have delivered outperformance over the long term relative to global equity benchmarks."
It's invested in around 300 companies across a range of geographies and sectors.
As at 29 March 2023, the ASX ETF had the following positions with weightings of more than 2.5%: Microsoft, Apple, Nvidia, Meta Platforms, Home Depot, Visa and Alphabet.
I think the quality of the investment method and holdings have come through with its long-term net returns – over the past five years VanEck MSCI International Quality ETF has returned an average of around 12.30%, beating the average return of the MSCI World ex Australia Index of 10.06% per annum.
Past performance is not a reliable indicator of future performance, but I think this impressive outperformance can continue over the long term because of the quality focus.
