If I were going to buy one ASX share this week it would be exchange-traded fund (ETF) Betashares Ftse 100 ETF (ASX:F100).
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If I were going to buy one ASX share this week it would be the exchange-traded fund (ETF) Betashares Ftse 100 ETF (ASX: F100).
What is Betashares Ftse 100 ETF?
This ETF is about giving investors exposure to the UK share market. As the name may suggest, it is invested in 100 of the biggest businesses on the London Stock Exchange.
The UK doesn’t have the large tech giants that the US does. But I like the diversification that the UK share market offers. Plus, plenty of its underlying holdings generate global earnings from many countries – they just happen to be listed in London.
It’s offered by BetaShares, one of the largest providers of passive investing options in Australia with a diverse array of ETFs.
How much is the annual management fee?
A key part of passively investing in ETFs is the management fee. The lower the annual fees the more of the net returns are left in the hands of the investors, which is obviously preferable.
Betashares Ftse 100 ETF has an annual cost of 0.45% per annum. That’s certainly not the cheapest fee out there available to ASX investors, but it’s a fair bit cheaper than many Australian active fund managers.
What shares does it own?
An ETF’s return will be entirely decided by its underlying holdings. So obviously it’s important to know what UK shares you’re actually invested in when you pick this investment option.
Betashares Ftse 100 ETF’s top 10 holdings are: AstraZeneca, GlaxoSmithKline, British American Tobacco, Diegeo, HSBC, Unilever, Rio Tinto, Reckitt Benckiser, BP and Royal Dutch Shell.
But there are plenty of interesting businesses outside of the top 10 such as: BHP Group, National Grid, Relx, London Stock Exchange, Prudential, Vodafone, Experian, Tesco, Ferguson, BAE Systems, Flutter Entertainment, Scottish Mortgage Investment Trust, Ocado, Just Eat, Smith & Nephew and Severn Trent.
I like the sector allocation of Betashares Ftse 100 ETF. Consumer staples has a 17.8% allocation, financials has a 17.4% allocation, healthcare has a 13.5% allocation, materials has a 11.2% allocation, industrials has a 11% allocation, energy has a 9.3% allocation, consumer discretionary has a 8.3% allocation, communication services has a 4.8% allocation, utilities has a 4% allocation and ‘other’ has a 2.8% allocation.
Whilst the lack of investment in ‘tech’ may be disappointing, there are plenty of other exciting and quality sectors to get exposure to. There isn’t too much of a focus on one industry.
Why buy this week?
Good Australian ASX shares are trading strongly, so I’m not seeing too many opportunities here.
It can be a bit complicated when it comes to overseas investing. The investment needs to make sense both of the value of the underlying shares and a good exchange rate for the Australian dollar.
I think it makes a lot of sense to consider UK shares at the moment. There is a lot of uncertainty because of Brexit and COVID-19. The Betashares Ftse 100 ETF share price is still 27% lower than the pre-COVID-19 price.
Sometimes it’s a good time to buy shares whilst fear is elevated. Sometimes a share market can be under pressure for more than just a few months, but I don’t think the UK share market is going to be permanently impaired by the current issues.
The oil shares may be hurt for a while – but there are oil businesses in every major share market. I believe most of the shares in Betashares Ftse 100 ETF have a solid long-term future.
Earnings and dividends are being heavily affected at the moment because of COVID-19. But in the longer-term I think Betashares Ftse 100 ETF can return to having a solid dividend yield. At the moment the Australian dollar is close to a 52-week high again, so it’s a good time to buy GBP earnings.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.