There are some top exchange-traded funds (ETFs) that could be worth a spot in a portfolio, like Betashares Nasdaq 100 ETF (ASX:NDQ).
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There are some top exchange-traded funds (ETFs) that are producing top returns and may be worth considering.
One of the benefits of ETFs is that they can provide diversification across a large number businesses or assets in a single investment.
Here are two ETFs that may be worthy considerations:
VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)
This particular ETF isn’t talking about castles and moats with water. It’s about finding businesses that research firm Morningstar believes possess sustainable competitive advantages, or ‘wide economic moats’.
For Morningstar, and the ETF, to make into the ETF’s portfolio, the target companies must be trading at attractive prices relative to Morningstar’s estimate of fair value. Morningstar uses an extensive equity research process to come to that conclusion.
The businesses that are in this portfolio are entirely from the US, though the underlying earnings of those companies can come from many different countries.
However, there is diversification through the different sector weightings. At the end of January 2021, healthcare was 19.5% of the portfolio, information technology was 18.7% of the portfolio, financials was 17.3% of the portfolio, industrials was 11.7% of the portfolio, consumer staples was 10.6% of the portfolio and consumer discretionary was 7.4%. Other sectors with smaller allocations include communication services, materials, energy and utilities.
Looking at the largest holdings at the end of January 2021, they were: John Wiley & Sons, Charles Schwab, Corteva, Cheniere Energy, Wells Fargo, Blackbaud, Intel, Bank of America, Biogen and Constellation Brands.
In terms of the annual management fee, its yearly cost is 0.49%.
After those fees, VanEck Vectors Morningstar Wide Moat ETF’s net fees have been an average of almost 15% per annum over the last three years and an average of 17.1% per annum over the last five years.
Betashares Nasdaq 100 ETF (ASX: NDQ)
This ETF is about giving investors exposure to 100 of the biggest non-financial businesses listed on the NASDAQ, which is a stock exchange in the US.
You’ll find many of the world’s biggest technology companies within the holdings of this ETF. On 4 February 2021, the biggest ten positions in the portfolio were: Apple, Microsoft, Amazon, Tesla, Alphabet, Facebook, Nvidia, PayPal, Netflix and Intel.
But there are many other businesses in the ETF’s holdings which are among the global leaders in their category such as Adobe, Cisco Systems, Broadcom, PepsiCo, Qualcomm, Costco, Starbucks, Advanced Micro Devices, Booking Holdings, Intuitive Surgical, Activision Blizzard, Mondelez International, Zoom, Modern and Docusign.
Looking at the sector allocation of the portfolio, just under half is invested in IT shares, then there’s 19.2% allocated to consumer discretionary and 18.6% is invested in communication services. Other sectors in the portfolio include healthcare, consumer staples, industrials and utilities.
The ETF has an annual management fee of 0.48% per annum, which is lower than many active fund managers.
The net returns of the ETF have been better than the ASX. Over the last year the net return has been 25.8%, over the last three years it has produced average returns per annum of 25.7% and since inception the ETF has returned an average of 21.25% per annum.
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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 BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended 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.