One of the easiest ways to boost diversification is through exchange-traded funds (ETFs) because of the portfolios they provide. Under-the-radar ASX ETFs could provide extra diversification that the biggest ETFs can't.
If we look at some of the most popular ETFs, we can see that their portfolios are focused on just a few stocks.
The Vanguard Australian Shares Index ETF (ASX: VAS) has a heavy exposure to a few ASX bank shares and ASX mining shares. The iShares S&P 500 ETF (ASX: IVV) is heavily allocated to the largest US tech companies.
There are other share markets that are more attractive than Australia and the US, and there are other tech companies with growth potential beyond the largest ones.
So, I'm going to outline two ASX ETFs that could be helpful investment options.
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Betashares India Quality ETF(ASX: IIND)
India is a fascinating country with more than 1.4 billion people, according to the World Bank. Its economy is rapidly growing – Goldman Sachs suggests the Indian economy could grow at an average of 6.5% per year between 2025 and 2030.
Goldman Sachs also suggests the Indian economy could be "relatively insulated against global shocks over the coming year — including tariffs levied by the new administration of US President-elect Donald Trump."
The investment bank also expects the businesses represented within the 'MSCI India' to see earnings growth of 12% and 13%, respectively, for the calendar years 2024 and 2025. That's a little less than what other analysts expect.
How can we gain exposure to the Indian economy?
The IIND ETF owns a portfolio of 30 of the highest-quality Indian businesses, including Infosys, Tata Consultancy Services, ICICI Bank, Axis Bank, and HDFC Bank.
Since inception in August 2019, the ASX ETF has returned an average of 10.1% per year, which I think is a solid return.
Betashares Cloud Computing ETF (ASX: CLDD)
The world is becoming increasingly technological, partly thanks to businesses that provide operations related to the Internet and cloud computing.
As Betashares says:
Cloud computing has been one of the strongest-growing segments of the technology sector, and given much of the world's digital data and software applications are still maintained outside the cloud, continued strong growth has been forecast.
Businesses must make a large percentage of their revenue from cloud computing services. Inclusion in the portfolio is prioritised for companies that generate a majority of their revenue from cloud-based services.
The sorts of businesses that are in this ASX ETF's portfolio of 37 names include Snowflake, Shopify, Twilio, Workiva, Wix.com, Salesforce and Dropbox.
Companies with digital operating models usually have pleasing operating leverage. They have already built their digital infrastructure, so more users or subscribers can boost profit margins because the new revenue can largely drop to the operating profit (EBITDA) line of the financials.
