If I had $1,000 to invest into an ETF, I would pick VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO).
Unless you’re going to go for a quality diversified international ETF like iShares S&P 500 (ASX: IVV) then I think it makes the most sense to go for a sector that you think has good long term growth prospects.
What’s VanEck Vectors Video Gaming and eSports ETF?
You can probably guess by the name, it gives exposure to a diversified portfolio of the largest and most liquid companies involved in video game development, eSports and related hardware and software globally.
Gaming has been a growing industry for many years. It has been accelerating across the world as more people get access to gaming platforms and the technology to play with people around the globe improves. There’s a rising trend of e-competitions where gamers compete in regional or global tournaments. And there’s also just a growing fan base of people watching high profile gamers playing regularly.
What shares is VanEck Vectors Video Gaming and eSports ETF invested in?
Whilst some of these businesses aren’t completely about e-sports, the portfolio is targeted at companies that derive a significant portion of their revenues from the video gaming and eSports industry, driving transformation in the sector.
At the end of October 2020, its biggest 10 positions were: Tencent, Nvidia, Sea, Nintendo, Advanced Micro Devices, Bandai Namco, Nexon, Activision Blizzard, Netease and Zynga.
Whilst some of these names are US-based businesses, it’s pleasing to see there are actually quite a few Japanese businesses, which provides our portfolios with diversification away from Western names. Nintendo and Bandai Namco are two of the biggest in Japan.
Around a third of the portfolio is invested in the US, almost 24% is invested in Japan and 20% is allocated to China.
Annual management fee cost
Fees can be a big part of the return, it can really eat into the net returns. VanEck Vectors Video Gaming and eSports ETF has an annual management fee of 0.55%.
That’s not bad at all, though of course there are ETFs with lower fees. I’m not put off by this fee.
Is now a good time to buy?
The VanEck Vectors Video Gaming and eSports ETF is only a few months old, but the index it’s tracking has done very well. Over the past five years the MVIS Global Video Gaming & eSports (AUD) Price Index has returned an average of 35.75% per annum.
I wouldn’t expect that to continue over the next five years, but I do think this ETF has a very promising future as more people get involved in playing and watching games and e-sports.
Whilst you wouldn’t make it a large part of your portfolio, I think this ETF could be part of a solid diversified portfolio. It would work well with other ASX growth shares like Pushpay Holdings Ltd (ASX: PPH) and EML Payments Ltd (ASX: EML).