I think the 2 exchange-traded funds (ETFs) in this article can provide strong returns with an easy investing strategy for your portfolio.
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I believe that exchange-traded funds (ETFs) are a great way to generate good returns through easy investing.
With ETFs it’s quite easy just to invest a regular amount like $1,000 a month without needing to do too much thinking about valuations. Most index-based ETFs have lower management fees than active managers too.
There are some ETFs that I’m not a big fan of because they offer low growth potential such as the ASX focused ones like Vanguard Australian Shares Index ETF (ASX: VAS).
Instead, I think there are other ETFs with much better growth potential such as these two:
BetaShares Global Cybersecurity ETF (ASX: HACK)
The world is getting increasingly technological. Think of all of the data that’s stored on databases which are accessible through the internet. Lots of information (and money) is stored by banks, governments, tech giants and so on. That information needs to be completely secure against hackers and criminals.
It’s important that intellectual property remains guarded. Infrastructure such as electrical networks need to be protected. And so on. I think the demand for cybersecurity services will keep rising as cybercrime continues to increase, unfortunately.
BetaShares Global Cybersecurity ETF offers investors exposure to many of the world’s leading cybersecurity companies. It gives exposure to existing global cybersecurity giants as well as emerging players from across the world, though around 87% of the ETF is invested in the US.
Its top holdings include Crowdstrike, Broadcom, Okta, Splunk, Cisco Systems, Zscaler, Cloudflare, BAE Systems, Checkpoint Software Technologies and Booz Allen Hamilton.
The ETF comes with an annual management fee of 0.67% per annum. That’s a high fee compared to some ETFs, but it’s reasonable for what it offers.
Its net returns has been strong since inception in August 2016, with average returns per annum of 18.6%. Over the past year it has returned 18.8% and over the past three years it has returned 22.6% per annum.
BetaShares Asia Technology Tigers ETF (ASX: ASIA)
Many of the world’s strongest technology businesses are listed in the US. However, others are listed in Asia. It’s a great region for e-commerce businesses to operate because the Asian population is huge (and growing), the citizens are fairly wealthy and have a high level of technology adoption.
This ETF can give Aussie investors exposure to Asian businesses like Taiwan Semiconductor Manufacturing, Meituan Dianping, Alibaba, Tencent, Samsung, JD.com, Netease, Infosys, Pinduoduo and Xiaomi.
It has 50 holdings which is invested in a variety of different industries including internet and direct marketing retail, semiconductors, interactive media and services and so on.
This is a China-heavy ETF with 54.4% of the investments listed in China at 31 July 2020. Another 22.7% of the ETF is invested in Taiwan. Other places with notable allocations include South Korea, India and Hong Kong.
It has an annual management fee of 0.67% per annum.
The ETF has been a strong performer. Over the three months to 31 August 2020 it generated a net return of 23%, over six months it returned 28.5%, over a year it returned 58.7% and since inception in September 2018 it has returned 28% per annum. Those are very strong returns and highlight the power of China’s e-commerce sector. It has recovered strongly from the COVID-19 impacts.
There are risks when it comes to Chinese investments. Investors need to be aware of the variable interest entity (VIE) structure, but I think it’s worth a small-ish spot within a portfolio.
I really like both of these ETFs. They offer diversification to businesses that many popular ETFs don’t give a meaningful investment into. Both ETFs have performed strongly and could keep going higher. The Asian ETF probably has better growth potential, but the cybersecurity one doesn’t come with the Chinese risks, so I’d probably go for that one first.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.