When markets turn volatile, investors often hear the phrase "flight to quality" — and for good reason.
In times of uncertainty, businesses with strong fundamentals, resilient earnings, and competitive advantages tend to outperform, protecting portfolios when others falter.
That is exactly the philosophy behind two standout ASX ETFs from VanEck: the VanEck MSCI International Quality ETF (ASX: QUAL) and the VanEck Morningstar Wide Moat ETF (ASX: MOAT).
Buying quality ASX ETFs
Both of these ASX ETFs are designed to give investors exposure to companies that can weather tougher conditions and come out stronger on the other side.
According to VanEck portfolio manager Cameron McCormack, the quality factor isn't just another investing trend — it is the foundation for navigating periods like the one we are now facing.
With trade wars heating up, volatility levels spiking to their highest points since the pandemic, and recession risks on the horizon, quality's importance has never been clearer.
The QUAL ETF
The VanEck MSCI International Quality ETF focuses on international companies with high returns on equity, stable year-on-year earnings growth, and low financial leverage. These aren't just good businesses — they are leaders in their industries, known for strength and consistency.
VanEck points out that during previous crises like the dot-com bubble, the Global Financial Crisis, and the COVID-19 crash, quality companies tended to lose less during market falls and recover faster once conditions stabilised.
The MOAT ETF
Meanwhile, the VanEck Morningstar Wide Moat ETF offers a different but complementary approach by tracking US companies that analysts have identified as having wide economic moats — that is, sustainable competitive advantages that protect profits over time.
This currently includes companies like tech behemoth Microsoft (NASDAQ: MSFT), entertainment giant Walt Disney (NYSE: DIS), and sportswear leader Nike (NYSE: NKE) — names that are not only dominant today but have the internal strength to fend off competitors for decades.
Foolish takeaway
Looking back over the past three decades, periods of heightened volatility have repeatedly favoured quality investing. Whether it was during major bear markets, slowdowns, or stagflation periods, quality has provided relative protection — exactly what many investors are seeking now.
Of course, quality doesn't always top the performance charts during booming bull markets when riskier assets soar. But history shows that including a focus on quality can deliver strong, resilient returns across the full market cycle.
This could make these two ASX ETFs worth considering for a balanced investment portfolio today.
