Could this ASX ETF be the easiest way to invest in global quality?

This ASX ETF does not simply buy the world's biggest companies. It uses a quality filter to narrow the global market.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Picking individual global shares can be difficult.

There are thousands of companies to choose from, and many Australian investors may not have the time or interest to closely follow overseas businesses.

That is where exchange-traded funds (ETFs) can help.

One ASX ETF I think could be a simple way to own a portfolio of high-quality global shares is named in this article.

Two people work with a digital map of the world, planning their logistics on a global scale.

Image source: Getty Images

VanEck MSCI International Quality ETF (ASX: QUAL)

The VanEck MSCI International Quality ETF is one of my preferred ASX ETFs for global exposure.

This fund does not simply buy the biggest companies in the world. It focuses on businesses with quality characteristics, including strong returns on equity, earnings stability, and lower financial leverage.

I like that approach because not every large company is a great business.

Some businesses are highly cyclical. Others rely too heavily on debt. Some have inconsistent earnings or operate in sectors where returns can move around sharply.

A quality filter helps narrow the field. The QUAL ETF gives investors exposure to global companies that have already proven they can generate attractive financial results.

Its holdings currently include world-class names such as Nvidia, Apple, and Microsoft.

But I do not just like the fund because of the famous names.

I like it because it gives investors a rules-based way to own global companies with strong financial traits without needing to decide which one will win next. That is useful because even great businesses can go through periods of weaker performance.

For Australian investors, this ASX ETF can also help balance a portfolio.

The ASX is heavily exposed to banks, miners, supermarkets, infrastructure, and property. Those sectors can be good, but they do not give investors the same access to global technology, healthcare, software, consumer brands, and industrial leaders.

The QUAL ETF can fill some of that gap.

The management fee is higher than that of a basic index ETF, so investors need to be comfortable paying more for the quality screen. There is also no guarantee that quality shares will outperform every year.

In some markets, cheaper cyclical shares or more speculative growth stocks may do better.

But over the long term, I think owning financially strong global businesses is a sensible strategy. Companies with durable profitability and resilient earnings can be very powerful compounders when given enough time.

Foolish Takeaway

I think investing globally is a great thing for a portfolio.

The hard part is building a portfolio that can survive different market conditions and still compound over time.

That is why I like the QUAL ETF. It is not trying to be the flashiest ETF on the ASX. It is trying to give investors access to global quality in a disciplined way.

For a long-term portfolio, I think that can be a very useful building block.

Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Microsoft, and Nvidia. The Motley Fool Australia has recommended Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ETFs

ETF spelt out with a rising green arrow.
ETFs

2 ASX ETFs I think Warren Buffett would buy

I think the Sage of Omaha would really like these investments.

Read more »

Happy woman on her phone while her electric vehicle charges.
ETFs

3 excellent ASX ETFs that could supercharge your portfolio

Let's see what makes these funds top picks right now.

Read more »

ETF written on wooden blocks with a magnifying glass.
ETFs

3 of the hottest thematic ASX ETFs for investors to target this week 

These funds started the week off with a bang.

Read more »

ETF written in yellow with a yellow underline and the full word spelt out in white underneath.
ETFs

Where to invest $10,000 in ASX ETFs in June

Let's see what makes these funds stand out as potential buys next month.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
ETFs

2 ETFs that could be buys today for any ASX share portfolio

A few well-chosen ETFs can help broaden an ASX portfolio beyond banks and miners. Here are two I think could…

Read more »

A young man sits at his desk working on his laptop with a big smile on his face.
ETFs

If I could buy only one ASX ETF for the next 10 years, this could be it

Looking for a long-term investment for your hard-earned money? Here's one to consider.

Read more »

Robot touching a share price chart, symbolising artificial intelligence.
ETFs

Could this ASX ETF be the easiest way to invest in AI?

This ETF gives investors exposure to AI and big data companies without relying on a single stock to get everything…

Read more »

Person stacking rocks in their hand with water in the background.
Share Market News

ASX ETFs to target this month that focus on undervalued sectors

It could be time to pounce on these undervalued sectors.

Read more »