Most investors who buy individual stocks and ASX exchange-traded funds (ETFs) that aren't index funds do so in the hope that they can achieve a rate of return greater than that of the broader market. Otherwise, it makes more sense just to buy those index funds that merely provide the market's returns, rather than bothering with ASX stock picking.
Of course, that is easier said than done. It is difficult for even professional investors to consistently beat the market's return over long periods of time.
But it can be done. I think one of the best ways to try and achieve this lofty goal is by buying ASX ETFs that invest in winning trends (not fads), or use a tried-and-true stock picking methodology.
We have an example of each today.
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2 ASX ETFs that I think can keep beating the market
BetaShares Global Cybersecurity ETF (ASX: HACK)
First up, we have this fund (with possibly the best ticker code on the ASX). As its name suggests, HACK invests in a portfolio of global companies that are all leaders in the cybersecurity industry. This is an area that has seen phenomenal growth over the past decade, with no signs of slowing.
It's not hard to see why. No company wants its name to appear in the news as a victim of those all-too-frequent data breaches that put delicate customer information into the public domain. As such, companies all around the world, as well as individuals and governments, are willing to spend more and more to protect themselves.
This trend directly benefits the companies that appear in the Betashares Cybersecurity ETF. These include Broadcom, Zscaler, Palo Alto Networks and CrowdStrike Holdings.
As of 30 September, this ASX ETF has returned an average of 18.93% over the past five years. That easily outperforms an ASX index fund, which has delivered a return of 12.9% per annum over the same period.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
Next up, we have a fund from VanEck. Instead of tracking a trend or industry, this ASX ETF follows an investing strategy pioneered by the legendary Warren Buffett. This involves choosing companies that display signs of possessing what's known as a wide economic moat. This refers to an intrinsic competitive advantage a company can have.
Perhaps it is an ability to offer products at a cheaper price than competitors. It could also be a strong brand that commands customer loyalty, or providing a product that consumers find difficult to avoid using.
We can see this in action in MOAT's portfolio. Some of its current holdings include Caterpillar, Alphabet, Nike and Airbnb.
MOAT unit shave returned an average of 15.55% per annum over the past five years (as of 30 September). Again, that's well above what an ASX index fund would have returned to an investor.
