The VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT) has been a high-performing exchange-traded fund (ETF) for investors. In this article, we'll examine how much of a difference it could make to someone's wealth in real terms.
Ultimately, investing is all about making returns and this ETF has been one of the best and most consistent at doing that. Of course, there's no guarantee that the good returns will continue in the short term or even the long term.
The MOAT ETF has been on the ASX since June 2015, so it has built up a fairly long history of good returns.
How much would $10,000 have grown into?
Share markets have been through a lot of volatility since June 2015, with both Australia and the US seeing major political changes, including a global pandemic and rolling waves of inflation worldwide.
Between inception on 26 June 2015 and 31 March 2024, the MOAT ETF delivered an average return per annum of 16.4%. That's after the annual management fee of 0.49%.
If someone invested $10,000 on day one (and reinvested the distributions), making 16.4% per annum would result in a value of around $39,200. It would have gone up almost four times!
The MOAT ETF has sometimes experienced periods of decline (as the chart below shows), but the pullbacks were not as significant as those in the global share market. Why?
One important factor to keep in mind is that the ETF is invested in US shares. The weakening Aussie dollar during those periods of market decline meant the ETF's net asset value (NAV) and unit price decline in Australian dollar terms wasn't as much as the drop in US dollar terms. The shifting foreign exchange led to a cushioning for Aussie investors.
How has the MOAT ETF achieved strong investment performance?
In my mind, there are two factors that enable this ETF to do so well.
First, it focuses on quality US companies that Morningstar believes possess sustainable competitive advantages, or wide economic moats. Businesses with these sorts of advantages usually have an ability to make good profit – reinvestment of that profit for more growth can mean very good results over time.
Second, it targets companies trading at attractive prices relative to Morningstar's estimate of fair value. That means the MOAT ETF only invests in quality businesses at good prices.
Due to that investment strategy, it's possible for the ETF to do well in most market environments, in my opinion.
