The RBA surprised a lot of Australia by holding the official cash rate at 3.85% in July. Is the RBA going to leave interest rates higher than expected or is this just a delay by one month? Whatever happens, it could be a good idea to buy some ASX-listed exchange-traded funds (ETFs).
For now, it seems to be just a delay.
In the RBA's statement the central bank said:
The Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis.
In a press conference after that decision, RBA governor Michele Bullock said:
…the biggest thing here is that it wasn't really directionally, where we think we're heading in terms of easing. It was more about timing.
Interestingly, the Australian dollar has risen 0.6% since Monday according to Google Finance. Since the start of 2025, the Australian dollar has climbed close to 6% against the US dollar. The recent strength of the AUD could help Aussies buy high-quality US/global assets.
Regardless of foreign currency changes, I'm a fan of the below ASX-listed as long-term investments.
Image source: Getty Images
Vanguard MSCI Index International Shares ETF (ASX: VGS)
This is one of my favourite ASX ETFs because it gives investors a mixture of both excellent diversification and exposure to strong businesses.
Its purpose is to provide exposure to many of the world's largest companies listed in major developed countries.
There are numerous markets with an exposure of at least 0.3% of the portfolio, including the US, Japan, the UK, Canada, France, Germany, Switzerland, the Netherlands, Sweden, Spain, Italy, Denmark, Hong Kong, Singapore, Finland and Belgium. There are almost 1,300 businesses in the portfolio, so it's really diversified.
Some of the strongest businesses the world has ever seen are the biggest positions in this portfolio, which I think has been helpful for the VGS ETF's returns for shareholders. You may have heard of the fund's largest five holdings: Nvidia, Microsoft, Apple, Amazon and Alphabet (Google). These businesses are at the forefront of trends like AI, cloud computing, e-commerce, smartphones and driverless cars.
With a portfolio return on equity (ROE) of 19.6%, I'm not surprised the VGS ETF has returned an average of 15% per year over the last five years. Of course, past performance is not a guarantee of future returns.
iShares S&P 500 ETF (ASX: IVV)
This fund is about investing in the US share market. As the name suggests, it gives investors exposure to 500 businesses listed in the US.
While they may be on an American stock exchange, many of them generate earnings from numerous other countries outside of the US. Just think about how many people around the world use Google, have Apple smartphones or use Microsoft software on their computer.
The IVV ETF invests in the largest and most profitable US businesses such as Nvidia, Microsoft, Apple, Amazon, Meta Platforms, Broadcom, Alphabet, Berkshire Hathaway, Tesla, JPMorgan, Eli Lilly, Visa and Netflix.
As a huge economy, the home of a gigantic pool of capital and an entrepreneurial spirit, the US is a great place to find high-performing businesses with big economic advantages that can deliver good returns. The S&P 500 has been a great place to invest for many decades and I imagine it will continue to be over the ultra-long-term too, even if there is some short-term volatility.
Over the past decade, the IVV ETF has returned an average of 15.2% per year and it has a very low annual management fee of 0.04%. Past performance is not a guarantee of future returns of course.
