This will be my next ASX ETF buy

This fund is exactly what my portfolio needed.

| More on:
ETF in blue with person's hand in the direction of green and red bars on graph.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I'm a big believer that ASX shares can generate good returns and build my wealth. However, many ASX companies are focused on generating earnings from Australia (and New Zealand). Certain ASX-listed exchange-traded funds (ETFs) can help with geographic diversification.

I like selecting ASX companies for my portfolio, such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Brickworks Ltd (ASX: BKW), WAM Microcap Ltd (ASX: WMI) and Bailador Technology Investments Ltd (ASX: BTI). However, the ASX only accounts for around 2% of the global share market, and I want to ensure I gain exposure to some of the best businesses in the other 98%.

The VanEck MSCI International Quality ETF (ASX: QUAL) is one way I'm trying to benefit from top global companies.

Here's why it appeals to me and why I'm going to buy more in the next few weeks.

High-quality companies in a diversified portfolio

There are many thousands of companies listed in various countries, such as the United States, Canada, the United Kingdom, the Netherlands, Switzerland, France, and so on. I don't necessarily want to own shares in all of them, just the great ones.

Any business considered for this ASX ETF should have a high return on equity (ROE), earnings stability, and low financial leverage.

Making strong and consistent profits for shareholders while having a very healthy balance sheet is a great combination. Having a whole portfolio of global companies that tick the boxes sounds good to me.

The QUAL ETF holds businesses from various countries, including Italy, Germany, Canada, Ireland, Sweden, France, Denmark, the Netherlands, Japan, the UK, Switzerland, and the US. That's a lot of good diversification, in my view.

Great returns

The QUAL ETF has performed very well over the long term, though that is not guaranteed to continue in the future.

In the ten years to December 2024, the QUAL ETF has returned an average of 15.6% per annum, which is excellent.

It'd be wise to be conservative and not expect as big returns in the next decade. But, with how the portfolio is set up, I'm optimistic it can outperform the S&P/ASX 200 Index (ASX: XJO).

Reasonable fees

The ETF has an annual management fee of 0.40%, which isn't the cheapest around, but the most important thing is the net returns, which have been appealing and could continue to be.

A lot of research and effort has gone into constructing this portfolio, so I think the management fees are reasonable.

Motley Fool contributor Tristan Harrison has positions in Bailador Technology Investments, Brickworks, VanEck Msci International Quality ETF, Wam Microcap, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bailador Technology Investments, Brickworks, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Bailador Technology Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ETFs

Two smiling work colleagues discuss an investment or business plan at their office.
ETFs

2 ASX ETFs I'm thinking about buying next

Now is a great time to consider investing in these two funds, in my view.

Read more »

Five young people sit in a row having fun and interacting with their mobile phones.
ETFs

5 of the best ASX ETFs to buy in February

Check out these funds that could be great picks for Aussie investors this month.

Read more »

Middle age caucasian man smiling confident drinking coffee at home.
ETFs

Buy these ASX ETFs for passive income this month

Here are some top options for income investors to choose from right now.

Read more »

ETF spelt out with a rising green arrow.
ETFs

3 top ASX ETFs to buy and hold for 10 years

Let's see why these funds could be worth holding onto for the long term.

Read more »

ETF in written in different colours with different colour arrows pointing to it.
ETFs

3 top ASX ETFs I'd buy for instant diversification

I believe these funds can offer Aussie investors a lot.

Read more »

A young woman drinking coffee in a cafe smiles as she checks her phone.
ETFs

Worried about Magnificent Seven concentration risk? These ASX ETFs offer varied exposure

The Magnificent Seven makes up about a third of the S&P 500's total market capitalisation.

Read more »

The letters ETF with a man pointing at it.
ETFs

4 excellent ASX ETFs to buy with $4,000 for 2025

Here are a few options for Aussie investors to choose from on the Australian share market.

Read more »

ETF written in white with a blackish background.
ETFs

3 excellent ASX ETFs to buy in February

Let's see what funds could be top picks for investors this month.

Read more »