Insights

2 ETFs to buy for strong diversification

The below two exchange-traded funds (ETFs) offer investors very strong diversification, including iShares S&P 500 ETF (ASX:IVV).
The post 2 ETFs to buy for strong diversification appeared first on The Motley Fool Australia. –

businessman holding world globe in one hand, representing asx etfs

Exchange-traded funds (ETFs) are a really good way for investors to get strong diversification through a single investment.

Some ETFs only give exposure to a few dozen shares, whilst others give exposure to a few hundred or even thousands of shares.

However, more investments in a portfolio can lead to slightly smaller returns. So, the below two investments are potential ideas for good returns and very strong levels of diversification:

iShares S&P 500 ETF (ASX: IVV)

A S&P 500 fund is one of Warren Buffett’s favourite ideas to talk about for investors because of its low fees, good returns and solid diversification.

This investment gives investors exposure to 500 businesses that are listed in the US. These are among the biggest, best and most profitable companies listed there.

You do get exposure to the biggest names, with its top holdings being some of the biggest companies in the world such as: Apple, Microsoft, Amazon, Facebook, Alphabet, Berkshire Hathaway, JPMorgan Chase, Tesla and Johnson & Johnson.

One of the main advantages with S&P 500 shares is that they are usually global companies in their sector. That means that it’s not just a US ETF, but it’s a globally-focused ETF. These businesses have huge addressable markets and have created very impressive profit margins because of how large they have become, benefiting from economies of scale.

Another of the main benefits of this ETF is how low the management fee is at just 0.04%. That means almost all of the return is left in the hands of the investors. Over the last decade this investment has created an average return per annum of just over 18% with a very diversified portfolio.

Vanguard Msci Index International Shares ETF (ASX: VGS)

Whilst the first ETF gives exposure to US-listed shares, this ETF is about most of the global share market. It’s invested in every major share market including the US, the UK, France, Germany, the Netherlands, Japan and Canada.

In total, it’s actually invested in more than 1,500 businesses. Whilst it’s invested in the same global US names as the S&P 500, it is also invested in other major businesses like LVMH, ASML, SAP, Nestle, Unilever and GlaxoSmithKline.

The Vanguard Msci Index International Shares ETF has an annual management fee of 0.18% per annum. That’s a bit more than the first ETF, but still cheaper than most other active fund managers.

The returns have been in the double digits over the longer-term. Over the last three and five years, the average return per annum has been 13.26% and 13.76% respectively.

However, whilst this ETF is more globally diversified than the S&P 500, it still has more than two thirds of the portfolio invested in US-listed businesses.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended iShares Trust – iShares Core S&P 500 ETF and Vanguard MSCI Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 2 ETFs to buy for strong diversification appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!