The ETF in this article could be an effective way to diversify your ASX share portfolio. It’s called BetaShares Australian Ex-20 Portfolio Diversifier ETF (ASX: EX20).
What’s an exchange traded fund (ETF)?
If you don’t know what an ETF is then it could be a smart idea to look at Rask’s free beginner ETF investor course.
An ETF basically lets you invest in a whole bunch of different businesses with a single investment. Very handy if you want to get good diversification, but you don’t want to buy 50, or 100 or 1,000 businesses yourself. In-fact, I’d say buying 1,000 different companies yourself would be a very poor choice for all the brokerage costs alone.
What’s BetaShares Australian Ex-20 Portfolio Diversifier ETF?
Many ASX-focused ETFs and retiree portfolios have a focus on a few big businesses in the ASX 20 like Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac Banking Corp
(ASX: WBC), Telstra Corporation Ltd (ASX: TLS) and BHP Group Ltd (ASX: BHP).
However, many of those businesses have delivered underperformance over the past decade. But not every business in the ASX 200 has limited growth prospects.
BetaShares Australian Ex-20 Portfolio Diversifier ETF invests in the next 180 ASX shares after the ASX 20. I think this group of 180 offers much more capital growth potential than the ASX 20.
The biggest 10 positions in the ETF’s portfolio includes Fortescue Metals Group Ltd (ASX: FMG), Afterpay Ltd (ASX: APT), Fisher & Paykel Healthcare Ltd (ASX: FPH), Sonic Healthcare Ltd (ASX: SHL), Xero Limited (ASX: XRO), James Hardie Industries Plc (ASX: JHX), Brambles Limited (ASX: BXB), Santos Ltd (ASX: STO), Cochlear Limited (ASX: COH) and Sydney Airport Holdings Pty Ltd (ASX: SYD).
This ETF has an annual management fee of 0.25% per year.
Why it could be a good one to consider
If your portfolio does have a large weighting to those ASX 20 shares, then this can be a good way to diversify the portfolio.
However, it’s not as though this area of the market is utterly firing on all cylinders either. Businesses like Sydney Airport Holdings Pty Ltd (ASX: SYD), Ramsay Health Care Limited (ASX: RHC) and Scentre Group (ASX: SCG) have been struggling.
Since inception in October 2016, this ETF has only delivered average returns per year of 8.8%.
There could be better ways to diversify with more growth from your ASX shares.
