The 2 exchange-traded funds (ETFs) could be top investments to buy, including the popular choice of iShares S&P 500 ETF (ASX:IVV).
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There are a number of quality exchange-traded funds (ETFs) that are worth thinking about as long-term investments.
ETFs can be an easy way to get exposure to a large number of different businesses in a single investment, giving useful diversification.
Here are two ETFs that may be worth considering:
iShares S&P 500 ETF (ASX: IVV)
Berkshire Hathaway’s Warren Buffett himself has said that investors would do well by simply investing in a S&P 500 fund.
The S&P 500 is an index of 500 of the biggest and most profitable businesses that are listed in the US.
It’s an index that has been around for decades and has proven can generate good investment returns. Many US businesses are global leaders in their respective industries.
Looking at the ETF’s current top holdings, its biggest 10 exposures right now are: Apple, Microsoft, Amazon, Alphabet, Facebook, Tesla, Berkshire Hathaway, JP Morgan Chase, Johnson & Johnson and Visa.
But it’s not like the global quality stops there. As you look through the list you’ll see more and more recognisable names like: Walt Disney, Nvidia, Proctor & Gamble, Mastercard, PayPal, Home Depot, Bank of America, Intel, Netflix, Adobe, Salesforce, Broadcom, Walmart and Nike.
The performance of this ETF has outperformed the ASX over the last decade, with a net return per annum of 16.4%.
One of the key selling points of this ETF is that it has an annual management fee cost of just 0.04%. which means that nearly all of the gross returns made by this ETF stay in the hands of the investor.
According to Blackrock, the ETF currently has a price / earnings ratio of almost 29 times.
VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)
This is an ETF that focuses on high quality businesses with wide economic moats, or sustainable competitive advantages, according to Morningstar’s equity research team.
A business only makes it into the portfolio of this ETF if, after a rigorous equity research process, the Morningstar analysts believe that the target company is trading at an attractive value compared to Morningstar’s estimate of fair value.
The ETF has a diverse portfolio, with five different sectors having a weighting of more than 10%. Those sectors are: healthcare, IT, financials, industrials and consumer staples.
Looking at the actual holdings, it has almost 50 positions right now. In order of weighting, the largest positions are: Charles Schwab, John Wiley & Sons, Wells Fargo, Corteva, Bank of America, US Bancorp, Cheniere Energy, Intel, Blackbaud, Aspen Technology, Zimmer Biomet and Constellation Brands.
VanEck Vectors Morningstar Wide Moat ETF only has a management fee of 0.49%, which is considerably lower than many other global fund managers based in Australia.
The performance of the ETF has been strong over the last five years, with a net return per annum of 17.1%, which is better than the S&P 500 return of 14.4% per annum.
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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 VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.