I think these two exchange-traded funds (ETFs) would be good for any portfolio. 1 pick is Betashares Asia Technology Tigers ETF (ASX:ASIA).
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I think that some exchange-traded funds (ETFs) can be good investments for any portfolio.
There are some ETFs focused on ASX shares like Vanguard Australian Shares Index ETF (ASX: VAS) which are decent options for income but many of them aren’t demonstrating the ability to generate capital growth.
An ETF’s returns is dictated by the underlying investments. Many of the ASX’s biggest companies like National Australia Bank Ltd (ASX: NAB) haven’t done much over the past decade.
I think it’s important that investors focus on total returns, of which capital growth (and earnings growth) is a very important part.
Betashares Asia Technology Tigers ETF (ASX: ASIA)
As I mentioned, growth is important. This ETF is very growth focused – it’s invested in 50 of the best Asian technology companies outside of Japan.
Which businesses? Well, its largest holdings are: Taiwan Semiconductor Manufacturing, Meituan Dianping, Alibaba, Tencent, Samsung, JD.com, Infosys, Netease, Pinduoduo and Sea.
There is a high level of technology adoption in Asia and that’s partly why many of this ETF’s holdings are doing so well. COVID-19 impacts have also caused a shift to digital services, which businesses like Alibaba and Tencent provide.
The performance of this ETF has been very impressive. At the end of August 2020 it showed a net return, after the management fees of 0.67% per annum, of 58.65% over the prior 12 months and 28% per annum since inception in September 2018.
One of the main risks of this ETF is that 57.4% is invested in Chinese businesses. Aussies may feel nervous about getting exposure there. Yes, there are risks with China, but remember that the rest of the ETF isn’t invested in China businesses.
I think this Betashares Asia Technology Tigers ETF is worth an allocation, you don’t need to make it a large position.
BetaShares Global Sustainability Leaders ETF (ASX: ETHI)
Some Aussie investors may want to invest ethically, or at least not own businesses that don’t align with their viewpoints.
This ETF from BetaShares excludes many categories of businesses that people not agree with.
It’s invested in 200 large global shares from developed market countries, excluding Australia, that have been identified as climate leaders and excludes fossil fuel industries.
The ETF also avoids investing in businesses materially involved with: gambling, tobacco, armaments, uranium and nuclear energy, alcohol, junk foods, pornography, mandatory detention of asylum seekers, destruction of valuable environments, human rights and supply chain concerns and lack of board diversity.
You might be wondering which businesses pass this stringent test. Its top holdings include: Apple, Nvidia, Mastercard, Visa, Home Depot, Adobe, PayPal, Tesla, Toyota and Netflix. I think this is a high quality list.
It has actually performed really well. The ETF’s inception date was 5 January 2017. Over the past three years the ETF has delivered an average annual net return of 23.5% per annum. Remember, that’s after the yearly fees of 0.59% per annum.
In terms of sector diversification, there is a large allocation to IT. It made up 38.9% of the ETF’s holdings at the end of last month. I think it’s good to best invested strongly in this sector because this is where the growth is coming from.
Other double-digit allocations include a 15% exposure to consumer discretionary shares, a 14.7% exposure to healthcare and a 14.1% exposure to financials.
I like the global diversification offered by the ETF. It’s not a US-only ETF, though 72.2% of the ETF’s holdings are listed in the US. Remember that many large US shares have global earnings, they aren’t solely American earners. Other countries are represented including Japan, Switzerland, the Netherlands, Hong Kong, France, the UK and so on.
Both of these investment options give quality diversification that you just don’t get with ASX shares. They have generated good returns and they could keep doing well over the long-term. I’d be happy to buy a starting position in both of them today.
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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. 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.
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