It’s almost October 2021. I’ve got a couple of high-quality exchange-traded funds (ETFs) in mind that could be good options to consider next month.
I love ETFs as a way of investing in shares. It takes a lot of the hassle and guesswork out of the equation. There are plenty of options to choose from, such as Vanguard Msci Index International Shares ETF (ASX: VGS) and iShares S&P 500 ETF (ASX: IVV).
But I think these two investments could be very effective for the long-term:
Betashares Global Quality Leaders ETF (ASX: QLTY)
This ETF is all about investing in business that tick multiple quality boxes, resulting in a high-quality portfolio. Return on equity, debt-to-capital, cash flow generation ability and earnings stability are the four main metrics. They essentially mean that the business is reliable, makes real cash profit, has little debt and makes good money for what shareholders have put into the business. If a business does well in those four areas, then it’s not surprising that it can do well.
There are around 150 businesses in the portfolio. At the moment, some of the biggest holdings include: Texas Instruments, Applied Materials, Intel, Intuit, Novo Nordisk, Visa, Keyence, Accenture, Advanced Micro Devices and Cisco Systems. It’s a global portfolio, ‘only’ 62% of it is invested in US businesses, with the rest allocated to other countries like Japan and Switzerland.
Betashares Global Quality Leaders ETF has done very well since it launched in November 2018, returning an average of 23.76% per year. However, past performance is not a reliable indicator of future performance.
This portfolio comes with annual costs of just 0.35%.
A quality, diversified portfolio, at a relatively low fee, with good returns. It’s a good option in my opinion.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This ETF is a bit different to the BetaShares one. It’s looking for businesses that have a wide economic moat, or a strong competitive advantage.
The shares are chosen for the portfolio by analysts at Morningstar who are looking for these wide businesses in the US that are valued at attractive value compared to their estimate of fair value. In other words, it is believed the portfolio of businesses are nicely priced.
At 23 September 2021, it had 50 holdings including Wells Fargo, Salesforce.com, Cheniere Energy, Alphabet, Microsoft, Tyler Technologies, Gilead Sciences and Guidewire Software.
The analysts at Morningstar have been very effective at choosing the right shares at the right prices, though past performance is not a reliable indicator of future performance. Over the last five years, VanEck Morningstar Wide Moat ETF has delivered an average return per year of 19.4%. That has beaten the S&P 500’s return of 18% per year over the same time period.
It has an annual management cost of 0.49%.
Summary thoughts
I really like both of these ETFs for the quality and diversification they can provide. Investing is all about returns and these two have been very good at that. It’s hard to pick a winner between the two, I think I would choose to invest in both.
