Warren Buffett, one of the world's leading investors, has a history of making great investment picks, including highlighting certain investment funds. I believe there are a couple of ASX-listed exchange-traded funds (ETFs) that could be excellent ideas which Buffett would appreciate.
ETFs make it very easy to invest in a whole group of shares at the same time, giving instant diversification.
I believe some ASX ETFs have a higher-quality portfolio than others, making it more likely they can deliver pleasing (and ASX-beating) returns. Let's look at those ideas.
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iShares S&P 500 ETF (ASX: IVV)
The fund that Warren Buffett may be most likely to recommend is this S&P 500 fund, which invests in 500 of the largest and most profitable businesses listed in the US.
In his 2013 annual shareholder letter, Buffett wrote the following, outlining his recommendation of a low-cost S&P 500 fund:
My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I've laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife's benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.
You can see the appeal of that choice – 500 businesses provides great diversification.
The biggest holdings are some of the most impressive global companies with strong profit margins, significant market shares of their respective industries, fortress balance sheets and plenty of earnings growth potential. We're talking about names like Nvidia, Apple, Microsoft, Amazon, Alphabet, Broadcom, Meta Platforms and Berkshire Hathaway.
With an annual management fee of just 0.04%, it's one of the cheapest funds on the ASX.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
The other fund I'll highlight, which I think Warren Buffett would appreciate, is the MOAT ETF.
Warren Buffett is a big fan of economic moats, which are competitive advantages that allow businesses to generate profits (and grow) despite other competitors wanting to steal their lunch.
There are some economic moats that Morningstar analysts believe are more likely than not to endure for 20 years. Owning something for 20 years would count as ultra-long-term investing, in my book.
Having an economic moat that could last that long would allow plenty of profit generation and hopefully share price gains. These long-term moat businesses are the only ones the fund considers.
On top of that, the MOAT ETF only invests when the businesses are priced attractively to what analysts think they're worth.
Together, I think that's a winning strategy for the fund and could allow it to deliver very good returns in the future.
