In part two of my top 10 Australian ASX ETFs for 2021, here are my remaining top ASX ETF picks for the year ahead (and beyond).
If you haven’t already, check out part one.
ASIA ETF
The BetaShares Asia Technology Tigers ETF (ASX: ASIA) has been one of the top-performing ASX ETFs in 2020, returning more than 61% over the last 12 months (this comes with the usual warning that this ETF has a short track record and shouldn’t really be judged on past performance).
ASIA holds a portfolio of approximately 50 technology companies from China, South Korea, Taiwan and India, including some big names like Samsung Electronics Co Ltd and Tencent Holdings Ltd.
The ASIA ETF provides exposure to a range of technology sub-sectors including electronic manufacturing, IT consulting, interactive home entertainment, and semiconductors. In an ETF portfolio, ASIA can provide growth potential while diversifying away from the usual US tech shares investors look to for growth. The management fee for this ETF is currently 0.67% per year.
HACK ETF
The BetaShares Global Cybersecurity ETF (ASX: HACK) is one of my top ASX sector ETF picks for 2021 and beyond. Cybersecurity is a rapidly-growing industry and with the adoption of cloud computing, e-commerce, and the Internet of Things (IoT), the security market looks set to continue growing steadily for many years to come.
For a management fee of 0.67% per year, HACK provides exposure to a portfolio of around 40 companies covering subsectors including systems software, communications equipment, and aerospace and defence. This has been a successful strategy so far, generating returns of more than 21% per year over the last three years.
I think HACK would make a good tactical exposure in a diversified portfolio and, because most of its holdings aren’t huge companies, it has very minimal cross over with the iShares S&P 500 ETF (ASX: IVV) or the BetaShares NASDAQ 100 ETF (ASX: NDQ) and could comfortably be held in conjunction with one of these ETFs.
MVW ETF
Australian investors, unfortunately, have to deal with a very top-heavy and concentrated domestic market, with more than 50% of the SPDR S&P/ASX 200 ETF (ASX: STW) invested in financials and materials. The VanEck Vectors Australian Equal Weight ETF (ASX: MVW) could be a solution with its unique approach to the ASX 200.
Instead of using a market-cap-weighted strategy and concentrating investments in the largest Australian companies, MVW uses an equal weight strategy and allocates funds evenly across the top 200 companies. This greatly reduces the allocation to financials and materials to just over 30% of the portfolio, while increasing allocations to sectors like information technology, real estate, and consumer discretionary.
MVW does charge a higher management fee of 0.35% per year, but after fees, MVW has returned 10.74% per year over the last five years compared to 8.85% per year from STW. 2021 might be the year to rethink how you invest in Australian equities, and MVW could be the way to do it.
DZZF ETF
Like VDHG, the BetaShares Ethical Diversified High Growth ETF (ASX: DZZF) is a diversified ETF, meaning it invests in other ETFs rather than individual shares or bonds. BetaShares, in this brand new ETF launched in mid-December 2020, is combining its market-leading ethical ETFs into one convenient portfolio which you can own for 0.39% per year.
The BetaShares Australian Sustainability Leaders ETF (ASX: FAIR), the BetaShares Global Sustainability Leaders ETF (ASX: ETHI) and its currency-hedged version HETH, as well as the BetaShares Sustainability Leaders Diversified Bond ETF (ASX: GBND), will all be part of this new diversified ETF.
This is the first diversified ethical ETF to come to market in Australia and it’s certainly worth considering for any environmentally-conscious investors who are just starting on their investing journey, as well as more experienced investors who are looking for a guilt-free way to expand the core of an existing portfolio.
IXJ ETF
Moving to healthcare, the iShares Global Healthcare ETF (ASX: IXJ) holds approximately 120 companies across the biotech, healthcare, medical equipment, and pharmaceuticals industries. Around 65% of the companies are US-based, but IXJ also provides exposure to Switzerland, Japan, the UK, Germany, Denmark, and Australia. This global ETF has strong long term growth potential as populations age, emerging economies adopt medical technology, and new methods, processes, and equipment come to market.
Over the last 10 years, IXJ has returned more than 16.5% per year, so it’s no surprise it’s the largest ASX-listed healthcare ETF. IXJ charges a 0.46% annual management fee and would make a good tactical growth allocation in a diversified ETF portfolio, in my eyes.
Summary
So, those are my top 10 ASX ETFs for 2021: VDHG, ACDC, ATEC, ETHI, HBRD, DZZF, IXJ, ASIA, HACK, and MVW. These might not be the absolute top-performing ETFs next year but there’s a good mix of diversified funds, ethical ETFs, high growth tech exposure and more defensive assets; ETFs can offer something for everyone.
Whether you’re new to investing or an experienced investor looking to expand your portfolio, I hope this list has given you some ideas on where to look in 2021.