From low-cost local exposure to global growth leaders, here are five of the best ASX ETFs to consider today.

Vanguard Australian Shares Index ETF (ASX: VAS)

First up is this popular Vanguard ETF, which remains a go-to core holding for local market exposure. This fund tracks a broad basket of Australian shares and includes many of the ASX's biggest dividend payers like BHP Group Ltd (ASX: BHP) and Wesfarmers Ltd (ASX: WES).

If you want a reliable, set-and-forget foundation for your portfolio, VAS is hard to beat.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

For global diversification, the ASX ETF stands out. It gives investors access to hundreds of companies across major developed markets, including the US, Europe, and Japan.

With names like Apple Inc (NASDAQ: AAPL) and Microsoft Corp (NASDAQ: MSFT) in the mix, it's a powerful way to tap into global growth trends. This fund remains one of the most popular ETFs and it helps reduce overexposure to Australian banks and miners.

BetaShares Australia 200 ETF (ASX: A200)

If keeping fees as low as possible is your priority, take a look at the BetaShares Australia 200 fund. The ASX ETF offers exposure to 200 of Australia's largest companies at one of the lowest management fees on the market.

Over the long term, those lower costs can make a meaningful difference to your returns. This BetaShares fund could be a low-cost alternative to VAS.

iShares S&P 500 ETF (ASX: IVV)

Want more direct exposure to the powerhouse US market? This index fund is a popular pick. It tracks the S&P 500, giving you access to 500 of America's largest companies.

With the US continuing to lead in innovation — particularly in tech and Artificial Intelligence — IVV offers a simple way to ride that wave.

VanEck MSCI International Quality ETF (ASX: QUAL)

Finally, for investors looking for a quality tilt, this VanEck fund is worth a look. It's great for investors who want Warren Buffett-style businesses globally.

This ETF focuses on high-quality global companies with strong balance sheets, stable earnings, and competitive advantages. It's a great option if you want to reduce risk while still staying invested in global equities.

Foolish Takeaway

The bottom line? You don't need to overcomplicate things.

A handful of high-quality ETFs like these can form the backbone of a strong, long-term portfolio — and April could be a great time to get started.

The post 5 of the best ASX ETFs to buy in April appeared first on The Motley Fool Australia.

For investors seeking a simple, 'set and forget' approach, a diversified portfolio with exchange-traded funds can offer exactly that. By spreading your money across markets, sectors, and asset classes, you reduce the impact of any single downturn.

Here's an ASX ETF mix designed to balance growth and defense.

SPDR S&P/ASX 200 Fund (ASX: STW)

This ASX ETF provides exposure to 200 of the largest companies on the Australian share market, offering a solid foundation of income and stability.

Two of its biggest holdings include blue chips BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA). They're household names with strong market positions and consistent dividend histories.

The fund's broad diversification across sectors like banking, mining, and healthcare helps smooth returns over time.

Fees are also relatively low, with a management cost of around 0.13% per year. This makes it a cost-effective way to access the Australian market.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

To truly weather market shocks, diversification beyond Australia is essential — and that's where this Vanguard ASX ETF comes in.

This ETF tracks a broad index of developed markets, giving investors exposure to global giants such as Apple Inc. (NASDAQ: AAPL) and Microsoft Corp (NASDAQ: MSFT).

These companies benefit from global revenue streams, strong competitive advantages, and long-term growth trends in technology and innovation.

VGS also comes with a low management fee of around 0.18%, making it an efficient way to tap into international markets.

BetaShares Global Government Bond 20+ Year ETF (ASX: GGOV)

While shares drive long-term growth, bonds play a crucial role during downturns.

This ASX ETF invests in long-dated government bonds from major economies, which have historically performed well during periods of equity market stress. When share markets fall, bond prices often rise, helping to cushion portfolio losses.

This fund focuses on high-quality sovereign issuers such as the US Treasury and other developed market governments.

The trade-off is a slightly higher fee of around 0.35%, but many investors consider it worthwhile for the added diversification and downside protection.

Why this mix works?

This three ASX ETF portfolio blends income and stability from Australian shares, growth potential from global equities and defensive protection from government bonds

Just as importantly, it keeps costs low — a key driver of long-term returns. With all three ASX ETFs charging relatively modest fees, more of your money stays invested and compounding over time.

Foolish Takeaway

No portfolio can eliminate volatility entirely. But by combining broad diversification with low costs and a defensive component, this ASX ETF mix is designed to help investors stay the course.

And in investing, staying invested – especially during market crashes – is often what makes the biggest difference over the long run.

The post The stress-free ASX ETF portfolio built to weather market crashes appeared first on The Motley Fool Australia.

Thanks partly to our unique system of franking, as well as some good old fashioned love of country, it's fair to say that ASX investors have a strong local bias.

When we do branch out to invest beyond our shores, it is usually a direct flight to the US markets. As I've written here before, the US is, as it should be, the first port of call for ASX investors seeking international diversification. No one can deny that the US is home to the vast majority of the world's best and most dominant businesses. No other country's share market constituents can match the size, scope and scale of top US stocks like Amazon, Alphabet, Microsoft, Netflix, Mastercard, Procter & Gamble, Apple, and countless others.

However, that doesn't meaning investing in US stocks isn't without risk. The US-Iran war that has been raging all month proves that. As such, I think the prudent investor might wish to consider diversifying beyond just Australia and America. The easiest way to do this, by far, is by using exchange-traded funds (ETFs).

Let's go through some of the best options for stocks outside Australia and the US.

3 ASX ETFs that can help diversify a portfolio

First up, there's the Vanguard All-World ex-US Shares Index ETF (ASX: VEU). This ETF, as its name implies, throws a whole bunch of different countries' stock markets together, with the notable exception of the US. The largest contributors to VEU's portfolio include Japan, the United Kingdom, China, Canada, India, and Taiwan. A healthy mix of advanced and developing economies there. ASX do feature in this ETF as well, although they make up just 4.3% of the entire portfolio.

Another option to consider is the Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE). VGE focuses exclusively on emerging economies, so you won't find European, British or Japanese stocks here. Instead, VGE's largest contributors are countries like China, Taiwan, Brazil, South Africa and Saudi Arabia.

Finally, investors can consider the iShares MSCI EAFE ETF (ASX: IVE). This fund covers markets from Europe, Asia and the Far East (EAFE). It offers exposure to countries ranging form Japan, Spain and the UK to Germany, Singapore and Israel. Again, Australia is included as well, but contributes just over 6% to IVE's holdings.

Foolish takeaway

All three of these ASX ETFs offer Australian investors an easy way to add exposure to stocks from Europe, Asia and Africa to their portfolios. These regions are under-represented in the vast majority of ASX portfolios, and can help insulate investors from adverse movements on the American or Australian markets.

The post These 3 ASX ETFs can help protect your portfolio in 2026 appeared first on The Motley Fool Australia.

These funds can provide diversification, exposure to resilient assets, and lower volatility during economic downturns.

Rather than trying to time market swings, defensive ASX ETFs aim to smooth returns. They do this by investing in assets that have historically held up better during crises, such as government bonds, gold, and high-quality global companies.

If I were building a more resilient portfolio today, these three ASX ETFs would be on my radar.

Vanguard Australian Fixed Interest ETF (ASX: VAF)

This Vanguard ASX ETF focuses on investment-grade Australian bonds, including government and high-quality corporate debt.

Bonds are often considered one of the most reliable defensive assets because they tend to perform better when economic growth slows and central banks cut interest rates. During equity market selloffs, investors frequently rotate into bonds for safety, which can support prices.

The fund tracks a broad bond index and includes securities issued by the Australian government as well as major financial institutions such as Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB).

The strength of this ASX ETF is stability. Income from interest payments can help cushion portfolios during equity downturns, and the diversification across many issuers reduces individual credit risk.

However, bond ETFs are not completely risk-free. Rising interest rates can push bond prices lower, which means returns may be weaker during periods of tightening monetary policy.

Global X Physical Gold ETF (ASX: GOLD)

The Global X Physical Gold ETF offers investors exposure to the price of physical gold stored in secure vaults.

Gold has long been viewed as a hedge during financial crises, inflation shocks, and currency volatility. When investors lose confidence in financial markets, demand for gold often increases.

That dynamic has helped the metal perform well during several major market disruptions, including the Global Financial Crisis and the COVID-19 market crash.

Unlike equity ETFs, this ASX ETF doesn't hold corporate shares. Instead, it tracks the price of physical bullion. While gold mining giants such as Newmont Corporation (ASX: NEM) and Barrick Mining Corp (NYSE: B) are often influenced by the same underlying commodity trends, this ETF gives direct exposure to the metal itself.

The key strength here is diversification. Gold often moves differently from shares and bonds, which can help reduce overall portfolio volatility.

The main drawback is that gold does not generate income like dividends or interest, meaning long-term returns depend entirely on price appreciation.

VanEck MSCI World ex Australia Quality ETF (ASX: QUAL)

The VanEck ASX ETF focuses on high-quality global companies with strong balance sheets, high returns on equity, and stable earnings.

Quality investing is a defensive strategy because companies with durable competitive advantages and consistent cash flow often perform better during economic slowdowns.

The ETF holds global leaders such as Apple Inc (NASDAQ: AAPL) and Microsoft Corp (NASDAQ: MSFT), along with dozens of other financially strong multinational businesses.

One of the biggest advantages of this ASX ETF is exposure to resilient global franchises that dominate their industries. These types of businesses tend to maintain profitability even when economic conditions weaken.

The main risk is that the fund still invests in equities, meaning it can fall during broad market selloffs. However, quality stocks have historically been less volatile than the broader market over the long term.

The post 3 defensive ASX ETFs to battle through market turmoil appeared first on The Motley Fool Australia.

You do not need to pick individual stocks straight away. You do not need to forecast earnings next quarter. And you definitely do not need to trade every week.

Exchange-traded funds (ETFs) can provide instant diversification and exposure to global markets with a single trade.

With that in mind, here are three ASX ETFs that could make sense for beginner investors in March and beyond.

iShares S&P 500 ETF (ASX: IVV)

The first ETF for beginner investors to consider buying is the iShares S&P 500 ETF.

This fund tracks the famous S&P 500 index, giving investors exposure to 500 of the largest stocks in the United States. That includes businesses such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Walmart (NYSE: WMT).

Rather than trying to pick which US stock will perform best, this ASX ETF spreads your investment across the broad US market. The S&P 500 index has historically delivered strong long-term returns, supported by innovation, corporate profitability, and economic growth.

For beginners, this type of broad exposure can provide a solid foundation.

Betashares Australian Quality ETF (ASX: AQLT)

If you want exposure closer to home, the Betashares Australian Quality ETF could be worth a look.

This ASX ETF focuses on high-quality Australian shares that boast strong balance sheets, stable earnings, and high return on equity. It aims to tilt towards the best businesses rather than simply tracking the market.

Holdings often include established names with durable competitive positions and solid financial metrics.

For a new investor, a quality-focused approach can reduce exposure to weaker businesses and provide a smoother ride over time. This fund was recently recommended to clients by analysts at Betashares.

VanEck Morningstar Wide Moat AUD ETF (ASX: MOAT)

Another beginner-friendly option is the VanEck Morningstar Wide Moat AUD ETF.

This ASX ETF invests in US stocks that have sustainable competitive advantages. These advantages can include brand strength, intellectual property, or cost leadership.

Its holdings change periodically but currently include shares such as United Parcel Service (NYSE: UPS), Bristol-Myers Squibb (NYSE: BMY), and Huntington Ingalls Industries (NYSE: HII).

Instead of chasing fast-growing but speculative businesses, this fund focuses on shares that can defend their profits over the long term. This has proven to be a highly successful strategy for legendary investor Warren Buffett. And it is never a bad idea for beginners to follow in his footsteps.

The post 3 ASX ETFs for beginner investors to buy in March appeared first on The Motley Fool Australia.

Due to concerns over artificial intelligence (AI) disruption, ASX software shares have been sold off.

Bell Potter has been looking at the sector and has given its take on recent selling.

What is the broker saying about AI and ASX tech shares?

Commenting on what has caused the selling, the broker said:

The recent market retreat was partly driven by Anthropic's release of various specialised plug-ins for its agentic AI platform. By introducing tools for legal, sales, finance, and analytics applications, Anthropic has heightened fears that AI-native models will fundamentally disrupt or replace incumbent software providers.

But don't worry, because it isn't the end of ASX tech shares. Far from it, according to Bell Potter. It adds:

The recent software sell off was indiscriminate, but we see this as overblown and do not believe AI will displace every company. Instead, we see an 'AI-augmented' future for many software companies. By being selective, investors can now find high-quality companies trading at attractive valuations.

Which shares should you buy?

While the broker's top pick globally is Microsoft (NASDAQ: MSFT), it has named its preference on the ASX boards. That tech share is WiseTech Global Ltd (ASX: WTC).

Rather than replacing the logistics solutions technology company, Bell Potter believes AI could enhance its platform. It said:

On the ASX, WiseTech (WTC.AX) remains our analysts' top pick. Trading at a 12-month forward P/E of 37x, the stock appears undervalued relative to its 30% earnings growth and 10-year historical average of 75x. While AI disruption remains a risk, WTC possesses many of the defensive attributes identified above; in fact, we believe AI could actually enhance the power of WTC's software rather than displace it.

Bell Potter currently has a buy rating and $87.50 price target on WiseTech's shares.

Based on its current share price of $50.94, this implies potential upside of 72% for investors over the next 12 months.

Anything else?

It is also worth noting that in a separate note, the broker has named another ASX tech share as a buy.

This morning, Bell Potter has retained its buy rating on Catapult Sports Ltd (ASX: CAT) shares with a trimmed price target of $5.50. This implies potential upside of 55% for investors from current levels. It said:

Catapult has a March year end so will not report its next result till May and we do not expect much if any news flow between now and then. There is some potential for Catapult to be removed from the S&P/ASX 200 Index at the next rebalance in March – given the recent price fall and despite the equity raising in November – after only being included in September last year.

This potential removal has perhaps also contributed to the fall in the share price. In its favour, however, Catapult is still one of the few good quality tech stocks in the mid cap space – even if it gets removed from the 200 but stays in the 300 – and so any rebound in the sector will likely see Catapult move in tandem.

The post Buy this ASX tech share after the AI software selloff appeared first on The Motley Fool Australia.

This isn't about picking a single winner. It's about spreading bets across global growth engines and letting time do the heavy lifting.

Here's where I'd put $500 each.

Vanguard FTSE Asia Ex-Japan Shares Index ETF (ASX: VAE)

The Vanguard FTSE Asia Ex-Japan Shares Index ETF gives exposure to one of the most important long-term growth regions in the world.

This ETF invests across Asia excluding Japan, with meaningful weightings to China, Taiwan, India, South Korea, and Hong Kong. These markets are home to globally significant companies and industries, including semiconductors, financial services, ecommerce, and infrastructure.

What I like about allocating a modest amount here is diversification. Asian economies don't always move in sync with Australia or the US, and long-term growth rates in parts of the region remain structurally higher. It can be volatile at times, but as a long-term allocation, I think Asia deserves a seat at the table.

Putting $500 into the VAE ETF feels like a sensible way to tap into that growth without taking on single-country risk.

Vanguard FTSE Europe Shares ETF (ASX: VEQ)

The Vanguard FTSE Europe Shares ETF is a region many investors overlook, but I think it's worth considering.

European equities tend to trade at more conservative valuations than US markets and offer exposure to world-class global businesses across healthcare, consumer goods, industrials, and financials. These are companies that generate revenue globally, not just within Europe.

The VEQ ETF provides broad exposure across developed European markets, which helps smooth out country-specific risks. It's not the fastest-growing region in the world, but it does offer diversification and a different return profile to US-heavy portfolios.

For me, allocating $500 here would be about balance. It reduces reliance on a single market and adds exposure to high-quality global operators at reasonable valuations.

iShares Global 100 AUD ETF (ASX: IOO)

The iShares Global 100 AUD ETF is the ETF I'd choose for simple, concentrated exposure to the world's largest and most influential companies.

The IOO ETF tracks the S&P Global 100 Index, which includes 100 multinational blue-chip businesses that dominate their industries. Its top holdings read like a who's who of global corporate powerhouses, including NVIDIA, Apple, Microsoft, Amazon, Alphabet, Broadcom, JPMorgan Chase, Eli Lilly, and Exxon Mobil.

What appeals to me here is clarity. You know exactly what you're getting. These are companies with scale, pricing power, and global reach. They're not early-stage growth stories, but they've proven their ability to generate cash flow and compound earnings over time.

As a long-term holding, the IOO ETF provides instant access to global leaders across technology, healthcare, energy, and financials, all in a single trade.

Foolish takeaway

If I were investing $1,500 today, I'd be very comfortable spreading $500 each across the Vanguard FTSE Asia Ex-Japan Shares Index ETF, the Vanguard FTSE Europe Shares ETF, and the iShares Global 100 AUD ETF.

Together, they offer exposure to emerging growth in Asia, established global businesses in Europe, and the world's largest blue-chip companies. It's not about perfection. It's about sensible diversification, global reach, and staying invested for the long term.

The post Why I would invest $500 in each of these ASX ETFs appeared first on The Motley Fool Australia.

By investing internationally, you gain exposure to industries, companies, and growth drivers that simply don't exist locally.

The good news is that ASX exchange traded funds (ETFs) make that process easy, allowing investors to access world-class businesses without leaving the local market.

With that in mind, here are three ASX ETFs that offer different ways to invest in some of the best stocks in the world.

Vanguard MSCI International Shares ETF (ASX: VGS)

The first ASX ETF to consider is the Vanguard MSCI International Shares ETF.

Rather than trying to pick which country or sector will outperform, this fund takes a broad, all-weather approach. It invests across developed markets, giving exposure to thousands of companies spanning the US, Europe, and Asia.

Holdings include businesses such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Nestle (SWX: NESN).

What makes the Vanguard MSCI International Shares ETF appealing is not any single stock, but the way it captures global economic progress as a whole. As industries rise and fall, and new leaders emerge, the index naturally evolves. This makes this fund a useful foundation for investors who want global exposure without having to constantly adjust their portfolio.

Betashares Global Quality Leaders ETF (ASX: QLTY)

Another way to invest in the world's best stocks is through a quality lens, which is exactly what the Betashares Global Quality Leaders ETF aims to do.

This fund focuses on businesses with strong profitability, robust balance sheets, and consistent earnings. Instead of spreading exposure as widely as possible, it narrows the field to stocks that have demonstrated an ability to perform through different market conditions.

Holdings include stocks such as Johnson & Johnson (NYSE: JNJ), Tokyo Electron, and Meta Platforms (NASDAQ: META). These are businesses that often benefit from pricing power, brand strength, or structural advantages.

This fund was recently recommended to clients by Betashares.

VanEck MSCI International Value ETF (ASX: VLUE)

A final ASX ETF to consider is the VanEck MSCI International Value ETF, which takes a different approach to global investing.

Rather than focusing on growth or quality, it looks for international companies trading at relatively attractive valuations based on fundamentals such as earnings, cash flow, and book value. This often leads to exposure in areas that are out of favour but not necessarily broken.

Holdings include companies such as Intel (NASDAQ: INTC), Verizon Communications (NYSE: VZ), and Toyota Motor Corporation (FRA: TOM). These businesses may not dominate headlines, but they play important roles in the global economy.

VanEck recently recommended this fund to clients.

The post Want to invest in the best stocks in the world? Try these ASX ETFs appeared first on The Motley Fool Australia.

If you are one of them, or are planning to become one, and are looking for investment ideas, then read on.

Listed below are three super ASX exchange traded funds (ETFs) that could be top picks for an SMSF. Here's what you need to know about them:

VanEck MSCI International Quality ETF (ASX: QUAL)

The first ASX ETF that could be a strong fit for an SMSF is the VanEck MSCI International Quality ETF.

This ETF focuses on high-quality global companies with strong balance sheets, consistent earnings, and high returns on capital. Rather than chasing short-term growth, it targets businesses that have proven their ability to perform across economic cycles.

Holdings include stocks such as Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), and Visa (NYSE: V). These businesses operate at global scale and benefit from entrenched positions in their respective markets.

For an SMSF, the VanEck MSCI International Quality ETF can work as a core international holding, offering exposure to global leaders while leaning toward financial strength and durability rather than speculation.

It was recently recommended to investors by the fund manager.

Betashares Global Defence ETF (ASX: ARMR)

Another ASX ETF that may appeal to SMSF investors is the Betashares Global Defence ETF.

This fund provides exposure to global defence companies at a time when government spending in this area is increasing. Geopolitical uncertainty, regional conflicts, and heightened focus on national security have led many countries to commit to higher defence budgets over the long term.

Holdings include companies such as Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), and RTX Corporation (NYSE: RTX). These businesses often benefit from long-dated government contracts, which can provide revenue visibility.

Overall, the Betashares Global Defence ETF offers exposure to a sector that is less tied to consumer spending and economic cycles, adding diversification to a long-term portfolio.

This fund was recommended by the team at Betashares.

Betashares Global Cash Flow Kings ETF (ASX: CFLO)

A final ASX ETF to consider for an SMSF is the Betashares Global Cash Flow Kings ETF.

This fund invests in global companies with strong and consistent free cash flow generation. This focus can be particularly attractive for retirement-focused investors, as cash flow underpins dividends, reinvestment, and balance sheet strength.

Holdings include stocks such as Alphabet (NASDAQ: GOOGL), Costco Wholesale (NASDAQ: COST), and Johnson & Johnson (NYSE: JNJ). These businesses generate significant cash while operating in industries with long-term demand.

The Betashares Global Cash Flow Kings ETF could complement growth-oriented holdings by adding exposure to companies that emphasise financial discipline and sustainable returns. It was also recently recommended by the fund manager.

The post 3 super ASX ETFs to add to your SMSF appeared first on The Motley Fool Australia.

The market's reaction was in sharp contrast to Meta Platform (NASDAQ: META), whose shares surged, despite both companies committing to massive AI capital expenditure (capex) programs.

For Australian investors, the move is highly relevant. Both Microsoft and Meta are major holdings in several ASX-listed ETFs, including BetaShares NASDAQ 100 ETF (ASX: NDQ), VanEck Morningstar Wide Moat ETF (ASX: MOAT), ETFS FANG+ ETF (ASX: FANG), and Global X Artificial Intelligence ETF (ASX: GXAI).

What did Microsoft report?

At first glance, Microsoft's result looked strong. Revenue rose 17% year on year to US$81.3 billion, cloud revenue topped US$50 billion for the first time, and adjusted profits climbed more than 20%.

Demand for AI-powered services remains robust, particularly across Azure and Copilot, and management stressed that customer demand still exceeds available supply.

So why did the market sell the stock?

The short answer is spending, its timing, and the narrative around it.

Microsoft's capital expenditure jumped 66% year on year, driven by an aggressive build-out of data centres, GPUs, and AI infrastructure. While this spending underpins long-term ambitions, it's hitting earnings now. Investors also focused on slightly slower momentum in Azure growth, which, while still very strong, failed to exceed already-high expectations.

In other words, Microsoft delivered good numbers, but not enough to justify the near-term hit to margins from front-loaded AI investment.

The other issue is the narrative around this capex spend. Investors need reassurance that this massive capex on AI initiatives will deliver a good return on investment, and whilst Microsoft CEO Satya Nadella tried his best to encourage investors to think beyond just Azure into other areas like Copilot, the narrative just wasn't as convincing as it was with Meta.

Meta also announced eye-watering AI spending, with capital expenditure expected to reach up to US$135 billion next year. Yet its shares jumped.

The difference lies in where the payoff is showing up. Meta convinced investors that AI is already improving advertising performance and accelerating revenue growth, making today's spending feel like an enabler rather than a drag.

Microsoft's AI story is arguably broader and deeper, spanning cloud infrastructure, enterprise software, and consumer tools. But it's also more capital-intensive and slower to translate into visible margin expansion.

Foolish bottom line

For Australian investors, the takeaway isn't that Microsoft's AI bet is wrong. Far from it. The company remains one of the best-positioned players in the AI ecosystem, with unmatched enterprise reach and enormous recurring revenues.

Instead, the market reaction highlights a more subtle point: AI spending alone isn't enough. What matters is how quickly that spending turns into earnings leverage.

Meta showed that link clearly. Microsoft may get there too, but for now, the market is asking for more proof.

Microsoft's share price drop reflects short-term caution, not long-term doubt. Investors believe in its AI strategy, but they may have to wait a little longer to see when the payoff moves from infrastructure to profits.

The post Microsoft shares slump as investors are split on the AI capex boom appeared first on The Motley Fool Australia.

With more than $8 billion in assets under management, QUAL is currently the fifth most popular ASX ETF on our markets. It comes in behind the Vanguard Australian Shares Index ETF (ASX: VAS), the Vanguard MSCI Index International Shares ETF (ASX: VGS), the iShares S&P 500 ETF (ASX: IVV) and the BetaShares Australia 200 ETF (ASX: A200).

Unlike those four ETFs, though, QUAL isn't a market-wide index fund that blindly invests in companies according to their market capitalisation, with few other considerations.

Instead, it tracks an index that actively screens companies to identify their quality. These screens include factors like a stock's return on equity, earnings stability and financial leverage.

After applying these screens to a range of internationally listed shares, the VanEck International Quality ETF settles on a portfolio of around 300 different stocks, hailing from more than a dozen different countries. These countries range from Switzerland, Japan and the United Kingdom to China, Denmark and Ireland.

However, the vast majority of QUAL's portfolio is drawn from the United States of America, which commands more than three-quarters of this ETF's weighted holdings.

So, let's get into what you're actually buying when purchasing QUAL units in 2026.

QUAL: What's in this ASX ETF's box?

Here are the current top ten holdings of the VanEck International Quality ETF, as well as their respective weightings in the QUAL portfolio:

1. Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) at 5.67% of the total QUAL portfolio
2. Meta Platforms Inc (NASDAQ: META) at 5.02%
3. NVIDIA Corporation (NASDAQ: NVDA) at 4.64%
4. Apple Inc (NASDAQ: AAPL) at 4.62%
5. Microsoft Corporation (NASDAQ: MSFT) at 4.46%
6. Eli Lilly & Co (NYSE: LLY) at 3.44%
7. Visa Inc (NYSE: V) at 2.92%
8. ASML Holding N.V. (AMS: ASML) at 2.52%
9. Johnson & Johnson (NYSE: JNJ) at 1.86%
10. Walmart Inc (NYSE: WMT) at 1.77%

Some other significant QUAL holdings include Mastercard Inc (NYSE: MA), Netflix Inc (NASDAQ: NFLX), Costco Wholesale Corp (NASDAQ: COST) and Caterpillar Inc (NYSE: CAT).

Not only does this list reveal how dominant the US is in this ASX ETF, but it shows how similar its holdings are to a broad-market US index fund like the iShares S&P 500 ETF. We discussed that ETF just the other day, so check out how its holdings compare to QUAL's here.

This methodology seems to have worked quite well for the VanEck International Quality ETF, though. As of 31 December, QUAL units have returned an average of 14.8% per annum over the past ten years, and 22.85% per annum over the past three. It will be interesting to see if this performance keeps up in 2026.

This ASX ETF charges a management fee of 0.4% per annum.

The post Investing in the VanEck International Quality ETF (QUAL)? Here's what you're really buying appeared first on The Motley Fool Australia.

Only two Mag 7 shares delivered impressive capital growth, while the other five underperformed the major US indices.

Yep, they underperformed.

The health of the Mag 7 companies matters to Australian investors because we are heavily invested in them, whether we like it or not.

Got a superannuation fund? Chances are a chunk of your retirement savings are invested in these seven high-tech companies.

Own exchange-traded funds (ETFs) tracking the US or global markets?

You're definitely invested in the Mag 7 stocks.

The Mag 7's high market caps mean they dominate the S&P 500 Index (SP: .INX) and the Nasdaq Composite Index (NASDAQ: .IXIC).

Therefore, their performance has a direct impact on many Australians' investments.

Let's take a look at how the Magnificent 7 stocks performed in 2025, starting with the No. 1 riser.

And no, it's not the stock you think!

Magnificent Seven stocks in 2025

To set the scene for you, the S&P 500 rose 16.39% and the Nasdaq Composite lifted 20.36% last year. (Compare that to ASX shares here.)

Here's how the Magnificent Seven stocks compared to the broader market.

1. Alphabet Inc Class A (NASDAQ: GOOGL)

Both Class A and Alphabet Inc Class C (NASDAQ: GOOG) shares lifted 65% in 2025.

Class A stock closed at US$313 per share, and Class C shares closed at $313.80.

Nvidia Corp (NASDAQ: NVDA)

US stock market darling Nvidia still put in a good performance as it continues to leverage the artificial intelligence megatrend.

Stock in the US graphics and AI chip designer rose 39% to close at US$186.50 per share on 31 December.

In October, Nvidia became the first company in the world to reach a US$5 trillion market cap.

Investment platform Stake reports that Nvidia was one of the five most traded US stocks by Australian traders last year.

According to Stake's 2025 Retail Investor Report Card:

It beat revenue estimates every quarter in 2025 by an average of 8.9% and is on track to generate US$212B in FY26.

Its earnings have become a global market catalyst: Nvidia's results serve as a directional signal for traders worldwide.

For Stake investors, the biggest 'buy-the-dip' moment came during the DeepSeek moment in January, when Nvidia lost US$260B in market cap but buy orders surged 460%.

Microsoft Corp (NASDAQ: MSFT)

The Microsoft stock price rose 15% to close 2025 at US$483.62 per share.

Meta Platforms Inc (NASDAQ: META) 

Meta Platforms shares rose 13% to finish the year at US$660.09.

Tesla Inc (NASDAQ: TSLA)

Stock in electric vehicle manufacturer Tesla rose 11% to US$449.72 per share.

Stake analysts said Tesla was the only Magnificent Seven stock not to set a new share price record in 2025.

Apple Inc (NASDAQ: AAPL) 

US technology stock Apple rose by 9% to close at US$271.86 per share on 31 December.

Amazon.com, Inc. (NASDAQ: AMZN) 

The Amazon share price inched 5% higher to close at US$230.82 on 31 December.

Interesting sidenote

My US Fool colleague Trevor Jennewine recently covered the third-quarter report from Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B).

The report showed that the 'Oracle of Omaha', who retired at the end of last year, bought Alphabet stock — the best performer of the Magnificent Seven in 2025 — and continued to sell down Apple — the second-worst performer of the group — during the third quarter.

Berkshire Hathaway purchased 17.8 million shares in Alphabet, which now accounts for 2% of the company's $267 billion portfolio of 41 stocks.

Berkshire sold 41.7 million Apple shares, and although the company remains Berkshire's largest holding at 21%, its position has reduced by 74% in just two years.

The post Here's how the US Magnificent Seven stocks performed in 2025 appeared first on The Motley Fool Australia.

Given this enduring popularity, it's a great time, as we start another lap around the sun, to do a deep dive into this index fund. So let's talk about two reasons ASX investors might want to buy the Vanguard Australian Shares ETF in 2026, and two reasons why they might wish to reconsider an investment.

Two reasons why the VAS ETF is an ASX buy in 2026

VAS: Simple and cheap

One of the reasons ASX investors love investing in VAS is its simple nature. This index fund offers exposure to the largest 300 stocks listed on the ASX, weighted by market capitalisation. Nothing more, nothing less. Like all index funds, this avenue is appealing for many investors who wish to take a hands-off, passive approach to investing. The largest 300 companies in Australia change over time, VAS changes with them though, periodically rebalancing its portfolio to ensure that the successful stocks are added to, while the losers are weeded out.

The Vanguard Australian Shares ETF charges a relatively cheap 0.07% per annum for this service.

A stellar long-term track record

We can point to decades of historical data that show the Australian share market has always generated wealth-building returns for investors. The Vanguard Australian Shares Index ETF has itself returned an average of 9.15% per annum since its inception in 2009. But, as we looked at in August of last year, Vanguard itself has calculated that the Australian market returned 9.3% per annum over the 30 years to 30 June 2025.

Past performance is never a guarantee of future returns, of course. But it still gives us an insight into the potential benefits of long-term investing.

Two reasons to sell the Vanguard Australian Shares ETF (VAS)

So there are plenty of positives in buying the VAS ETF for an ASX portfolio. But this is arguably no slam dunk. Many investors have justified concerns about ploughing more capital into this fund in early 2026. Let's go through two.

Banks and miners

One of the primary concerns over buying more VAS units in the ASX investor community is its over-concentration on two sectors of the Australian share market. Most ASX investors know that bank stocks like Commonwealth Bank of Australia (ASX: CBA) and mining shares like BHP Group Ltd (ASX: BHP) dominate the ASX. But a look at VAS' portfolio throws this dynamic into sharp relief.

As it currently stands, more than 50% of any investment in VAS today would go into either financial or mining shares. That's 32.1% to financials and 22.1% to miners. The next most influential sector in this ASX ETF is healthcare, making up just 7.9% of VAS' portfolio. The big four banks alone attract more than $1 of every $5 invested in the fund.

This might be just fine with investors who prioritise dividend income. But any investor who wants true diversity might wish to at least dilute this heavy exposure to banks and miners with other ASX ETFs.

VAS: Where's the innovation?

Another potential concern that some ASX investors might have with the Vanguard Australian Shares ETF is the lack of innovative, exciting and quick-growing companies at its highest echelons. VAS' banks and miners might be mature, profitable businesses. But there aren't too many companies in this ETF that are moving fast or breaking things, to paraphrase Mark Zuckerberg.

While the flagship S&P 500 Index that tracks the US markets holds innovators like Amazon, Microsoft, NVIDIA and Zuckerberg's own Meta Platforms among its top holdings, most of the ASX's top stocks have been delivering steady but slow growth for decades.

If you'd like to invest in an index fund that includes at least some innovative, exciting companies that are growing at healthy clips, VAS might not be the fund for you.

The post 4 pros and cons of buying the Vanguard Australian Shares ETF (VAS) in 2026! appeared first on The Motley Fool Australia.

• Washington H. Soul Pattinson and Co Ltd (ASX: SOL)
• REA Group Ltd (ASX: REA)
• MFF Capital Investments Ltd (ASX: MFF)
• Wesfarmers Ltd (ASX: WES)
• TechnologyOne Ltd (ASX: TNE)

My US picks were:

• Amazon.com Inc (NASDAQ: AMZN)
• Doulingo Inc (NASDAQ: DUOL)
• S&P Global Inc (NYSE: SPGI)
• Costco Wholesale Corp (NASDAQ: COST)
• Mastercard Inc (NYSE: MA)

Obviously, not much has changed in a week, and I would still love to own more of all ten of these companies in 12 months' time.

But we're not stopping wth those stocks. Today, let's discuss ten more stocks that I think anyone can buy today to start 2026 off on a strong note. We'll once again do five ASX shares and five US stocks.

5 top ASX shares to kick off 2026 with a bang

I love consumer staples companies, and Coles Group Ltd (ASX: COL) is one of my favourites here on the ASX. Coles is a strong dividend payer with a defensive and mature earnings base that can provide protection against both recessions and inflation. It will, in my view, be around for decades to come.

Telstra Group Ltd (ASX: TLS) is another veteran ASX stock I like for 2026. Its dominance of the defensive mobile and internet markets gives it a strong moat and, thus, a reliable dividend. This company's fully-franked payouts are historically some of the best on the ASX.

Turning to a faster-growing company now, Xero Ltd (ASX: XRO) is another top stock looking interesting as we start the new year. Xero has a remarkably sticky product in its cloud-based accounting software. Consumers seem willing to keep paying those monthly fees to use Xero's platform. The company's growth plans are very exciting too.

JB Hi-Fi Ltd (ASX: JBH) is our fourth pick of the day. JB has proven itself to be one of the ASX's best retailers, having savvily evolved from selling hi-fi products to becoming an all-out electronics and appliances retailer over the past two decades. Customers love JB's distinctive marketing tactics and innovative store layouts. With JB having a rare lacklustre year in 2025, this one is looking tempting as we start 2026.

Our final ASX stock worth discussing today is more left-field. It is the gold miner Newmont Corporation (ASX: NEM). Normally, I shy away from more speculative investments like Newmont. But Newmont can be viewed as an insurance policy of sorts. If 2026 produces geopolitical or economic uncertainty on the global stage, Newmont could benefit from a rush to the 'safe haven' of gold. If some experts are to be believed, it could have another bumper year in 2026.

5 top US stocks to check out too

When I named Mastercard as one of my top US picks last week, it was partly due to my conviction that contactless and electronic payments are in the middle of a powerful long-term tailwind. That's why I am also happy to own and spruik Mastercard's arch-rival Visa Inc (NYSE: V). Visa is the largest payments company in the world, and is an extraordinarily profitable stock. However, I think its best days lie ahead.

We can say the same for Magnificent Seven winner Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL). Google-owner Alphabet owns several of the world's best businesses. These include Google Search, YouTube, Google Cloud, and AI-platform Gemini. I'm also excited about the company's self-driving division.

I would be happy to own Alphabet's Magnificent 7 sibling, Microsoft Corp (NASDAQ: MSFT), too. Buying Microsoft stock means buying a share in Windows, Office, Xbox, Teams, Activision Blizzard, LinkedIn, and many other leading digital products and services that Microsoft owns. I rest my case.

Netflix Inc (NASDAQ: NFLX) is another winner that I think will keep on winning. If Netflix manages to acquire the assets of Warner Bros Discovery Inc (NASDAQ: WBD) this year, it will own one of the most extensive and valuable collections of intellectual property on the planet. Even if it doesn't, Netflix owns a service that is well on its way to becoming an internationally recognised household essential.

Our final stock is a simple one that we all know and may love. McDonald's Corporation (NYSE: MCD) is one of the most resilient businesses in existence. Its brand is universally recognised, having transcended into popular culture decades ago. As an inflation and recession-resistant stock, I'd be happy to buy more McDonald's this January.

The post My 10 top stocks to buy to start the New Year off right appeared first on The Motley Fool Australia.

The good news is that exchange-traded funds (ETFs) remove much of that pressure and offer a simple way to invest.

With a single investment, you can gain instant diversification and exposure to hundreds or even thousands of companies.

For Australians starting their investing journey in 2026, here are five ASX ETFs that stand out as sensible, beginner-friendly options.

Vanguard Australian Shares ETF (ASX: VAS)

The Vanguard Australian Shares ETF is often considered a cornerstone ETF for local investors. It provides exposure to the 300 largest shares listed on the ASX, making it an easy way to invest in the Australian economy as a whole.

Its portfolio includes blue-chip names such as BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), CSL Ltd (ASX: CSL), and Wesfarmers Ltd (ASX: WES). For beginners, this fund offers simplicity, diversification, and a steady stream of income over time.

iShares S&P 500 ETF (ASX: IVV)

If you want global exposure without complexity, the popular iShares S&P 500 ETF is a strong place to start. It tracks the S&P 500 Index, giving investors access to 500 of the largest stocks in the United States.

Holdings include Microsoft Corp (NASDAQ: MSFT), Apple (NASDAQ: AAPL), NVIDIA Corp (NASDAQ: NVDA), Johnson & Johnson (NYSE: JNJ), and Visa Inc (NYSE: V). For beginners, this fund offers exposure to some of the world's most profitable businesses with a single, low-cost investment.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

The Vanguard MSCI Index International Shares ETF could be worth considering. It is designed for investors who want broad international diversification beyond Australia. It invests across developed markets such as the United States, Europe, and Japan.

Its holdings include companies like Alphabet Inc (NASDAQ: GOOGL), Nestlé (SWX: NESN), Toyota Motor Corp (TYO: 7203), and LVMH Moët Hennessy Louis Vuitton (FRA: MOH).

Betashares Australian Quality ETF (ASX: AQLT)

The Betashares Australian Quality ETF takes a quality-focused approach to Australian shares. Rather than simply tracking the biggest companies, it targets businesses with strong balance sheets, reliable earnings, and solid cash flow.

Top holdings include Telstra Group Ltd (ASX: TLS), Macquarie Group Ltd (ASX: MQG), National Australia Bank Ltd (ASX: NAB), and Woodside Energy Group Ltd (ASX: WDS). This ETF could suit beginners who want a more selective take on the local market. It was recently recommended by analysts at Betashares.

Betashares Nasdaq 100 ETF (ASX: NDQ)

Finally, the Betashares Nasdaq 100 ETF adds a growth tilt to a beginner portfolio by tracking the Nasdaq-100 Index. It provides exposure to innovative companies shaping technology, healthcare, and consumer trends.

Holdings include Amazon.com (NASDAQ: AMZN), Meta Platforms (NASDAQ: META), Broadcom (NASDAQ: AVGO), and Netflix (NASDAQ: NFLX).

The post 5 fantastic ASX ETFs for beginners in 2026 appeared first on The Motley Fool Australia.

Microsoft (NASDAQ: MSFT) has been an OK stock pick in 2025. While it's up around 15% so far in 2025, which would normally be considered successful, the S&P 500 is up more than 16%. This places Microsoft as a market loser, which nobody wants to own. However, the tides could shift in 2026, and Microsoft could be one of the best artificial intelligence (AI) stocks to own.

Two billionaires are incredibly confident in Microsoft's potential and loaded up on its stock during the third quarter. Is there something they know that we don't for 2026? 

Billionaires love Microsoft's stock

The two billionaires I follow who loaded up on Microsoft stock during the third quarter were the legendary Peter Thiel and Daniel Loeb at Third Point. Thiel is a legend on Wall Street, as he was one of the founders of PayPal and Palantir Technologies. He was also one of the first outside investors of Facebook (now Meta Platforms). When he makes a move, investors should pay attention, as he has a phenomenal track record.

During Q3, Thiel sold off a hefty amount of Tesla stock and all of his Nvidia stock. He then used some of those proceeds to take a $25 million stake in Microsoft, now his second-largest holding. That's a big deal, and could indicate that he believes Microsoft is due for a strong 2026.

Loeb at Third Point more than doubled its stake in Microsoft during Q3, and it now accounts for its third-largest position at 6.9% of the portfolio. That's a huge move, and signals something big could be coming.

Other billionaires own Microsoft stock, like Chase Coleman at Tiger Global Management. Although he didn't buy any Microsoft stock in Q3, it's his portfolio's largest position at a 10.5% weighting.

Clearly, Microsoft stock is incredibly popular among billionaires, but why is that the case?

Microsoft is an AI facilitator

Microsoft has delivered strong growth since the artificial intelligence arms race began. While it hasn't developed its own generative AI model, it has partnered with others who have. None is more significant than OpenAI. Microsoft owns about a 27% stake in OpenAI, so an investment in Microsoft acts as a proxy investment in OpenAI -- a company generally recognized as being one of the leaders of the generative AI movement.

That's likely the biggest reason why Microsoft is a top investment among these funds, but its regular businesses aren't too shabby either. During its fiscal 2026's first quarter (ended Sept. 30), Microsoft's revenue rose 18% year over year while diluted earnings per share (EPS) rose 13%. Those are impressive figures, and a key part of that is Microsoft's top-tier cloud computing offering, Azure.

Azure grew 40% in the quarter, far outpacing some of its cloud computing peers. Azure has become a top spot to build AI applications in, as it offers access to multiple generative AI models -- not just OpenAI's ChatGPT. This makes it an attractive offering, and is a key reason why it's growing so quickly. 

Microsoft may be doing well right now, but its market underperformance is something many investors are likely concerned about these days. Some of that value would be unlocked by OpenAI going public, as Microsoft's stake in OpenAI would be easier to value. Still, Microsoft is fairly pricey as is.

At a price-to-earnings ratio of 35, it's among the more expensive AI stocks on the market.

MSFT PE Ratio data by YCharts

While Microsoft's growth has been strong, it's nothing compared to what some others are proposing. This makes Microsoft's stock look expensive with no future in sight, which will make returns difficult to come by. I think Microsoft will be a market-average stock next year, with the only help coming from an OpenAI IPO.

Microsoft is a great company, but it just doesn't have the growth for me to recommend it over some other faster-growing AI stocks today.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2 billionaires just loaded up on Microsoft stock. Do they know something we don't for 2026? appeared first on The Motley Fool Australia.

These range from broad index tracking funds, to niche thematic funds.

What's equally as important to understand, is not every fund is successful, and it's not uncommon that ASX ETFs actually have to shut down entirely. 

Running an ASX ETF involves ongoing costs such as index licensing fees, market-making and trading costs, administration, compliance, and regulatory reporting. 

Investors cover some of these costs in the form of management fees.

These costs exist regardless of how much money is invested in the fund and are largely fixed for the issuer. 

Because of this, an ASX ETF could be forced to shut down if it isn't attracting enough investors to be worth running. 

If a fund has low money invested in it or very little trading activity, the fees collected may not cover these costs. 

15 years of ups and downs

A recent report from Vanguard showcases just how hard it can actually be for a fund to have long term success. 

Over the last 15 years, we've seen:

• COVID-19
• 2022 inflation and interest rate shock
• Geopolitical conflicts
• Tariff and trade escalation and de-escalation
• Brexit
• European debt crisis

All of these impacted international markets. 

According to Vanguard, over that period, Australian investors had access to just over 1,000 multi-asset funds.

Over half have closed or ceased reporting performance data. 

Vanguard said there are approximately 200 funds that have at least a 15-year track record as at 30 September 2025.

What does this tell us? To have long term success is easier said than done.

Which funds have had long term success?

While it's important to note past performance doesn't guarantee future returns, there are ASX ETFs that have stood the test of time. 

The first, is the iShares S&P 500 ETF (ASX: IVV). 

As the name suggests, it invests in the performance of the S&P 500 Index which is the largest US companies by market capitalisation. 

This includes global powerhouses like Microsoft Corp (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL), Nvidia Corp (NASDAQ: NVDA). 

It was first listed in 2008, and is up 650% total in that span. 

Over the last 10 years, it has provided annual returns of roughly 15%. 

Another fund that has provided long term success is Vanguard Australian Shares Index ETF (ASX: VAS). 

The fund tracks the return of the S&P/ASX 300 index – Australia's largest 300 companies. 

It is actually the largest ASX ETF by market cap. 

Recent data (October 2025) shows it has a market cap of more than $22 billion.

Historically, dating back to its initial inception in 2009, it has offered returns of roughly 9% per annum.

The post The ASX ETFs that have stood the test of time appeared first on The Motley Fool Australia.

So you may be surprised to learn that Microsoft pays more dividends (in terms of total cash spent) than any other S&P 500 company -- even more than Apple, JPMorgan Chase, and high-yield behemoths like ExxonMobil, Chevron, Johnson & Johnson, and Verizon Communications.

In fiscal 2025, which ended on June 30, Microsoft spent $18.42 billion on stock buybacks and $24.08 billion on dividends. In September, Microsoft announced a 10% dividend raise, marking its 16th consecutive annual increase.

Despite only yielding 0.7%, here's why Microsoft is an excellent dividend-paying growth stock for long-term investors to buy now. 

Microsoft is an underrated dividend stock

One of the biggest mistakes dividend investors make is overly focusing on a stock's forward dividend yield, which is the return you can expect to make from the stock's annualized dividend, divided by its current stock price. Forward dividend yield is useful, but limited. It's merely a snapshot of a dividend yield at a moment in time. It doesn't accurately reflect a stock's true passive income potential, which is more closely tied to the dividend growth rate.

The best dividend-paying growth stocks are companies that consistently growth their earnings, and in turn, can justify paying a higher dividend expense. And if investors are confident that earnings can continue rising, the stock price should go up over time. There's even an elite group of companies known as Dividend Kings that have raised their payouts annually for over 50 consecutive years -- like Coca-Cola.

Microsoft is the fourth most valuable company in the world and has produced monster gains for long-term investors. But it has also become a passive income powerhouse.

If you had bought Microsoft 10 years ago for around $56 per share, your yield on cost would be 6.5%. Yield on cost takes the annualized dividend and divides it by the price you paid for the stock, rather than its current price, which better represents the dividend income generated based on your initial investment.

The issue with forward dividend yield is that it punishes high-performing stocks and rewards underperforming stocks. Many of the highest-yielding companies in the S&P 500 are stocks that have gone down in price in recent years, rather than companies that are rapidly raising their dividends.

By comparison, Microsoft has increased its dividend by over 250% over the last decade, but the stock price has gone up even more, so the yield has dropped -- overshadowing Microsoft's commitment to its dividend.

What's more, Microsoft also buys back a ton of stock -- far more than it pays in stock-based compensation. Like dividends, stock buybacks are a lever companies can pull to return capital directly to shareholders. If buybacks are larger than stock-based compensation, the outstanding share count will fall. And with fewer shares to go around, earnings per share will rise faster than net income, making the stock a better value for long-term investors.

Microsoft's spending is bold, but controlled

Microsoft is the most balanced Magnificent Seven stock to buy for 2026 because it rewards shareholders through a combination of organic growth, dividends, and buybacks. The company has a booming cloud computing business through Microsoft Azure; is a major player in artificial intelligence (AI) through OpenAI (which powers a lot of Microsoft's AI tools); has a massive software, gaming, and personal computing presence; and owns a variety of platforms -- from GitHub to LinkedIn.

But no single segment makes or breaks the investment thesis. Rather, Microsoft has numerous high-margin ways to deploy capital, which can reduce the temptation to bet too heavily on a single idea.

Big tech companies have been in the spotlight for their AI spending, with concerns that the payoff of that spending is uncertain or won't be realized for several years. Microsoft is spending heavily on AI, but not to the point where it's straining free cash flow (FCF).

FCF is a crucial metric for determining the amount of cash flowing in or out of the business. The formula is simply cash flow from operations minus capital expenditures (capex). As you can see in the chart, Microsoft's capex has exploded higher in recent years, but so has its cash from operations. So it is still growing FCF.

Data by YCharts.

However, some companies, like Meta Platforms, are growing capex faster than cash flow from operations, which is leading to lower FCF. Meta still has a phenomenal balance sheet and high margins, but the aggressive spending adds more pressure for investments to pay off.

A foundational stock to buy now

Microsoft's high dividend growth rate and commitment to returning capital to shareholders should allow it to maintain its position as the S&P 500 component with the largest dividend expense for years to come. Investors who buy the stock today will only get a 0.7% yield based on its current price, but they can expect the yield on cost to be much higher in the future as Microsoft raises its payout.

Microsoft's growing dividend, reasonable valuation, and high-margin diversified business make it one of the most balanced stocks to buy and hold, even if there's a stock market sell-off in 2026.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Meet the "Magnificent Seven" stock that pays more dividends than any other S&P 500 company. Here's why it's a buy before 2026. appeared first on The Motley Fool Australia.

What's unusual is that the Google parent was substantially smaller than the software giant until recently, when Alphabet pulled ahead. Considering that surge by Alphabet, is it the better investment among multitrillion-dollar companies in the AI realm, or should investors stick with Microsoft?

The case for Microsoft

Microsoft has long been a leading cloud company, but it stood out in the AI race because early on it took what is now a 27% ownership stake in OpenAI. Thus, upon the release of GPT-4, that partnership appeared to put Microsoft stock in a strong position as the frenzy around generative AI began to take hold.

To this end, it has developed its own AI engine, called Copilot, which stands out within Microsoft's ecosystem. Still, Microsoft has likely drawn the most investor attention from its partnerships. Despite its OpenAI stake, both companies are free to partner with other AI companies. More recently, Microsoft made an agreement with Anthropic to scale Claude AI on Azure servers powered with Nvidia chips.

Microsoft can also afford such investments. Over the last 12 months, it generated almost $78 billion in free cash flow, and that does not include the $69 billion in capital expenditures (capex) invested over that time.

Moreover, with the earlier ties to OpenAI, Microsoft rose significantly in prior years, so year-to-date gains have slowed to about 14%. It also trades at a P/E ratio of 34, though it is not far above the S&P 500 average of 31. Ultimately, given its continued progress in AI, that slightly above-average valuation is unlikely to stop the steady rise of Microsoft stock.

Why investors might choose Alphabet

After ChatGPT came on the scene, investors began to question whether Alphabet's Google Search engine was on the way to obsolescence. Its AI-enabled queries bypassed the ads that have long been the source of most of Alphabet's income.

However, Alphabet launched Google Gemini to compete with ChatGPT. At first, it seemed like just another AI engine, but over the last few months, it has emerged as the site of choice for real-time information, video generation, and unstructured prompts thanks to the improvements in Gemini 3.

Additionally, even amid the skepticism, Alphabet's revenue grew, and it continued to generate massive free cash flows. This has funded Gemini's improvements, along with its other AI-related businesses, such as Google Cloud and the autonomous driving platform Waymo.

Furthermore, investors should expect continued improvements as the company plans to spend $91 billion to $93 billion on capex this year alone. Despite that spending, its free cash flow was just under $74 billion over the last 12 months, an indication it can afford these massive outlays.

Also, despite gaining around 70% so far this year, Alphabet stock trades at a 32 P/E ratio, close to the S&P 500 average. When one also factors in the increasing strength of its AI-related businesses, such conditions could make the Google parent an attractive choice.

Microsoft or Alphabet?

Both stocks have shown they are industry leaders in AI, and thus, it is likely that both stocks will continue moving higher. However, if you're choosing between the two, Alphabet likely holds the edge.

Indeed, investors should commend Microsoft for its early moves in AI and its ability to make itself essential to more than one major AI engine.

Still, both the stock price and valuation seem to already reflect that growth. Conversely, Alphabet investors may still benefit from a delayed reaction to the Google parent's AI.

Alphabet has spent more than Microsoft on capex, and it has overcome perceptions that AI was passing it by. When also considering its slightly lower valuation, Alphabet should remain in a stronger position to drive higher returns over time.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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For long-term investors, one way to harness these forces is through exchange-traded funds (ETFs) that provide diversified exposure to the stocks driving them.

Here are three ASX ETFs that tap directly into megatrends that look set to run for decades.

Betashares Cloud Computing ETF (ASX: CLDD)

The shift to the cloud is no longer a future trend, it is now core infrastructure for the global economy. Businesses are increasingly moving data storage, software, and computing power away from offline systems and into scalable, cloud-based platforms.

The Betashares Cloud Computing ETF provides exposure to companies enabling this transformation. Its holdings include cloud software and infrastructure leaders such as Microsoft Corp (NASDAQ: MSFT), ServiceNow (NYSE: NOW), and Shopify (NASDAQ: SHOP). These businesses sit at the centre of enterprise digitisation, e-commerce, and workflow automation.

As data usage grows and artificial intelligence (AI) workloads expand, demand for cloud services is likely to keep compounding over time, making the Betashares Cloud Computing ETF a pure-play way to access that structural shift. It was recently recommended by analysts at Betashares.

Betashares Global Robotics and Artificial Intelligence ETF (ASX: RBTZ)

Automation and artificial intelligence are rapidly becoming essential productivity tools. Labour shortages, rising costs, and the need for efficiency are pushing companies to invest heavily in robotics and AI-driven systems.

The Betashares Global Robotics and Artificial Intelligence ETF targets businesses leading this transformation. Its portfolio includes Nvidia Corp (NASDAQ: NVDA), a key supplier of AI computing hardware, Intuitive Surgical (NASDAQ: ISRG), a pioneer in robotic-assisted surgery, and ABB Ltd (SWX: ABBN), a global leader in industrial automation.

This is a megatrend driven by necessity rather than hype. As economies digitise and industries modernise, robotics and AI adoption is likely to accelerate across healthcare, manufacturing, logistics, and services. It was also recently recommended by the team at Betashares.

Global X Battery Tech & Lithium ETF (ASX: ACDC)

Electrification is transforming transport, energy storage, and power generation, and batteries sit at the heart of that transition. The Global X Battery Tech & Lithium ETF provides exposure to the stocks building the supply chain behind electric vehicles and renewable energy storage.

Its holdings span miners, battery manufacturers, and technology leaders such as Tesla Inc (NASDAQ: TSLA), Albemarle Corp (NYSE: ALB), and Contemporary Amperex Technology Co Ltd (CATL). Together, they reflect the end-to-end ecosystem required to support the global shift away from fossil fuels.

With governments and consumers pushing toward cleaner energy solutions, and battery costs continue to fall, demand for battery technology and lithium materials could grow strongly for many years. This bodes well for the companies held by this fund.

The post 3 ASX ETFs that benefit from unavoidable megatrends appeared first on The Motley Fool Australia.