Many, though not all, Australian exchange-traded funds (ETFs) are suited to investors who just wish to buy an investment and hold it passively for the rest of their lives. A simple fund that holds, say, the largest 300 stocks listed on the Australian share market, would arguably be aptly suited for such a goal. An ASX ETF that holds oil futures, perhaps less so.
With this in mind, let's discuss three Australian ETFs that I believe any investor can purchase today and hold for decades to come.
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Three Australian ETFs that anyone can buy and hold forever
Vanguard Australian Shares Index ETF (ASX: VAS)
First up, we have this Australian ETF from Vanguard. This fund is one that does indeed hold the largest 300 stocks listed on the Australian markets. That's everything from Commonwealth Bank of Australia (ASX: TLS) and Telstra Group Ltd (ASX: TLS) to Coles Group Ltd (ASX: COL) and Ampol Ltd (ASX: ALD).
Decades of data have shown that simply investing in the Australian share market has produced relatively high returns for investors if we use a long-term lens. Australian shares have historically delivered decent capital growth, strong dividend income, and valuable franking credits. Investors can buy VAS units today, safe in the knowledge that while the largest 300 companies in Australia will move over time, this Australian ETF will move with them by watering the winners and weeding out the losers.
iShares S&P 500 ETF (ASX: IVV)
This next Australian ETF works similarly to VAS. However, instead of holding stakes in the largest 300 Australian shares, it owns stakes in the largest 500 companies listed on the American stock market. That's everything from Apple, Amazon, Netflix, Microsoft, Mastercard, Walmart, Coca-Cola Co, and ExxonMobil.
The US has also been a historically lucrative market for long-term investors. Even the legendary Warren Buffett has repeatedly stated that he believes an S&P 500 Index (SP: .INX) fund like this one is the best choice for most investors.
Given that the US is still home to the vast majority of the world's most successful businesses, I would be happy to buy and hold this ETF for the rest of my life.
Vanguard All-World ex-US Shares Index ETF (ASX: VEU)
Both the Australian and American markets are great places to invest, at least historically speaking. However, the more prudent long-term investors may wish to add another layer of diversification to their forever portfolios. That's where the Vanguard All-World ex-US Shares Index ETF can play a useful role.
This is a highly diversified Australian ETF, holding thousands of underlying stocks from dozens of countries. These include Japan, the United Kingdom, Canada, Taiwan, India, Germany, Singapore, Mexico, and Norway, amongst many others. Some of the individual stocks that make up this Australian ETF include Taiwan Semiconductor Manufacturing Co, Tencent Holdings, AstraZeneca plc, and Samsung Electronics Co.
Again, this ETF is designed to evolve with its underlying markets over time. I would be happy to hold it for an indefinite period as a counterweight to the other two ETFs we've discussed today.
