ASX-listed exchange-traded funds (ETFs) can be some of the easiest ways to invest and become wealthy.
Being able to invest in a single transaction and get exposure to a wide range of businesses is very compelling, in my opinion.
But, there are so many options, which one to buy? I think it depends on an investor's goals.
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Simple ASX ETF investing
For investors who just want a very simple investment strategy that can help grow wealth passively in the background without needing to monitor it. There are plenty of possible ASX ETFs.
Aussies can get the return of the share market for very little cost by choosing one of the cheapest ones.
I really like the Vanguard MSCI Index International Shares ETF (ASX: VGS) because it invests in more than 1,000 businesses worldwide. Over time, global businesses are collectively growing profits, supporting long-term share price growth.
Over the past 10 years, the VGS has returned an average of 13.5% per year. Past performance is not a guarantee of future returns, of course, but it has been an excellent long-term investment.
High-quality
Some investors may not want to own thousands of businesses across the global share market. What about just investing in the best ones?
There are a variety of options that aim to invest in the highest-quality businesses. One of my favourites is the VanEck MSCI International Quality ETF (ASX: QUAL) – it invests in 300 of the highest-quality global businesses, as measured by quality metrics.
High-quality businesses can perform better during downturns and over the long term. In the last decade, it has returned an average of 14.6% per year.
Technology
Over the last 20 years, tech businesses have been some of the strongest-performing investments. With the current trajectory of many large tech companies and their strong profit margins, investors may want targeted exposure to the exciting sector.
One of the best options for a tech allocation, in my opinion, is the Betashares Nasdaq 100 ETF (ASX: NDQ) – that's 100 of the biggest tech businesses listed in the US.
It's important to remember that past performance is not a reliable indicator of future performance. Having said that, it has returned an average of 19.2% per year in the past five years.
Passive investing
ASX ETFs can be an excellent way for investors to unlock passive income. Many funds don't have high dividend yields because the underlying businesses themselves don't have much dividend yield.
But some funds deliberately target higher-yielding businesses, while some ASX ETFs can provide a pleasing dividend yield.
The WCM Quality Global Growth Fund (ASX: WCMQ) invests in a high-quality portfolio of global shares with strengthening economic moats and corporate cultures that support those competitive advantages. The fund aims to deliver a 5% distribution yield to investors.
One of the ASX's most appealing options for passive income is Vanguard Australian Shares High Yield ETF (ASX: VHY). It looks to invest in just the higher-yielding ASX shares.
In my view, a good ASX ETF is a great investment, though it is not the only effective investment.
