ASX-listed exchange-traded funds (ETFs) can be excellent investments for a few different reasons, including good returns and diversification.
I'm going to talk about two of my favourite ASX ETFs which I think could be some of the best performers over the next five years.
It's not an accident that businesses with excellent qualities usually produce stronger returns, in my view.
The two below ASX ETFs are designed to be great investments in multiple ways.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This fund aims to own some of the best, long-term businesses listed in the US.
The MOAT ETF looks at a wide range of businesses and then creates a shortlist of companies that Morningstar think have wide economic moats. In other words, Morningstar analysts expect these stocks to produce strong profits for at least two decades.
Economic moats, or competitive advantages, can come in various forms. For example, network effects, cost advantages, brand power, intellectual property and so on.
With a watchlist of great US businesses, the MOAT ETF only invests in businesses that Morningstar considers to be trading at an attractive price compared to their underlying value.
That combination of great businesses at good prices can help it outperform the market. According to the ASX ETF's provider, VanEck, it has returned an average of 14.2% per year over the three years to 31 May 2025. Of course, past performance is not a guarantee of future performance.
Global X S&P World EX Australia GARP ETF (ASX: GARP)
This fund aims to find businesses delivering high growth at a fair price. GARP is an investment strategy that stands for 'growth at a reasonable price'. Its purpose is to provide exposure to companies with good sales/earnings growth, solid financial strength and are trading at reasonable valuations.
In my view, this ASX ETF also provides excellent global diversification by giving exposure to 250 companies spread across multiple countries and sectors. There are a number of countries with a weighting of more than 1% in the portfolio, including: the US, Japan, the Netherlands, France, the UK, Canada, Spain, Israel, Italy, Singapore, Germany, Denmark, Switzerland, Ireland and Sweden.
On the sector side of things, there are six industries in the portfolio with a weighting of approximately 10% or more: financials, IT, energy, communication services, industrials and consumer discretionary.
For multiple reasons, I think it clearly ticks the diversification box.
It also has a very reasonable fee of 0.30%, which I think is good for the long-term net returns.
I think this fund is set up in a way that can allow it to outperform the S&P/ASX 200 Index (ASX: XJO) materially over the long-term.
