Aussies are lucky enough to have a good home share market in which to invest. But they may be missing out on a wide range of opportunities outside of Australia. Exchange-traded funds (ETFs) can give us exposure to those stocks.
The Australian share market only accounts for approximately 2% of the global share market. If Aussies have more than 2% of their portfolio invested in ASX shares, then they have a bigger allocation than what the global share market would suggest.
I'm not going to suggest that investors need to go out and gain exposure to every country that has a stock market. It's not necessary to invest for an allocation to 'emerging markets'.
But, I do believe that it's a good idea to invest in businesses that are among the best in the world at what they do. That's why I think it's a good idea to consider international share ASX-listed ETFs like the two below.
Betashares Nasdaq 100 ETF (ASX: NDQ)
Some of the best businesses that Aussies may be missing out on are the giant US tech companies. Virtually all of them seem to be listed on the NASDAQ, a North American stock exchange.
The NDQ ETF allows investors to invest in 100 of the largest non-financial businesses on the NASDAQ ETF.
The biggest positions in this fund include Apple, Nvidia, Microsoft, Amazon, Broadcom, Tesla, Meta Platforms, Alphabet, and Costco.
These businesses have been driving many of the technological changes in the last twenty or so years, including smartphones, cloud computing, AI, gaming, online gaming, e-commerce, social media, online video, electric vehicles, and more – at least one of the major US companies above was involved in each of those themes I mentioned.
I think trends like AI, e-commerce, and cloud computing can help drive the earnings of the NDQ ETF for many years into the future, making it an attractive option for investors who want diversification in addition to their Australian shares.
Impressively, the NDQ ETF has returned an average of just over 20% per year since it started in May 2015. I'm not expecting the next decade to be as good as that, but I believe its long-term returns can outperform the S&P/ASX 200 Index (ASX: XJO).
Betashares FTSE 100 ETF (ASX: F100)
I'd understand if some investors were cautious about investing in the US share market right now, even just because of the elevated valuation it's currently trading at.
One place to consider investing instead could be the UK share market, which has several appealing businesses. The Australian share market is dominated by a few banks and miners, so why not consider another share market with similar values to Australia but different companies in different sectors?
Five industries within the F100 ETF have a weighting of more than 10%: energy, healthcare, industrials, consumer staples, and financials. That's a pleasing level of diversification, in my opinion.
You may recognise some of the businesses in this fund's top 10 holdings, which total 100 positions. Those top ten company exposures are AstraZeneca, Shell, HSBC, Unilever, RELX, BP, British American Tobacco, Diageo, London Stock Exchange Group, and GSK.
It has been a somewhat difficult period for the UK share market in the past decade, but it has outperformed the ASX share market in the last three years, so it could be unlocking a period of stronger returns in the 2020s.
