Here’s why I’ve recently purchased shares of the BetaShares FTSE 100 ETF (ASX: F100) for my ASX share portfolio, including cheap income
The post Why I just bought shares of this ASX ETF appeared first on Motley Fool Australia. –
I haven’t been personally buying shares for a while now. Since the S&P/ASX 200 Index (ASX: XJO) share market crash back in March prompted me to unload most of my cash position in the markets, I have been watching the ASX 200 crawl higher since. I’ve enjoyed watching my existing and new positions recover over the past 6 months, but I haven’t been spending any new funds, instead accumulating my dividends and stacking cash.
Why? Well, not because I think another crash is imminent (no one really knows that kind of thing). Rather, it’s because, given the current economic and geopolitical environment, I thought there was a fair chance of more turmoil and volatility in 2020. Thus, I thought having a decent cash position was prudent. Now, I have my cash position restored, and with the spate of recent market volatility, I’ve decided it’s about time to get back in the buyer’s seat.
From zero to F100
My new position is in the BetaShares FTSE 100 ETF (ASX: F100). This ETF tracks the largest 100 shares on the FTSE Index, which is the United Kingdom’s equivalent to our own ASX 200. So why this ETF?
Firstly, this ETF brings a lot of diversification to the table for me. ASX shares are fantastic, don’t get me wrong. But our ASX 200 index isn’t the most diversified in the world. Of the top 10 shares in the ASX 200 Index, 5 are banks. Out of the top 20, we also have 5 mining/drilling companies. Of the entire ASX 200 Index, financials make up 25.13% of the index’s weighting and materials 20.23%.
In contrast, the top 5 companies in the FTSE 100 are pharma giants AstraZeneca plc (LSE: AZN) and GlaxoSmithKline plc (LSE: GSK), followed by British American Tobacco PLC (LSE: BATS), HSBC Holdings plc (LSE: HSBA) and Diageo plc (LSE: DGE).
Following that, we have Unilever plc (LSE: ULVR), Rio Tinto plc (LSE: RIO) (yes, Rio Tinto Limited (ASX: RIO) is dual-listed in London), Reckitt Benckiser Group plc (LSE: RB), BP plc (LSE: BP) and Royal Dutch Shell Plc (LSE: RDSA).
The FTSE 100’s largest sector weighting is to Consumer Staples (17.8%). That brings a lot of diversification to an ASX-dominated portfolio in my view.
Secondly, I think it’s cheap right now. Ongoing ructions in Brexit negotiations, as well as a new outbreak of coronavirus cases in the UK (leading to more restrictions), has recently pushed both the FTSE index and the British Pound Sterling lower. Today, F100 units have a 52-week range of $7.20-$11.50. Yet today, they’re asking just $8.04. That looks pretty good to me.
I was very happy to add this ETF to my portfolio recently. I don’t expect it to be the best performer in my portfolio (although I’m happy to be pleasantly surprised on that front). But it adds ballast in the form of some valuable diversification as well as a healthy stream of dividend income.
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Sebastian Bowen owns shares of Betashares FTSE 100 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Diageo, GlaxoSmithKline, HSBC Holdings, and Unilever. 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.