If I were going invest $2,000 into two exchange-traded funds (ETFs) that could create good long-term returns, then I’d happily choose the two in this article.
I don’t think there’s anything wrong with going for diversified, cheap ETFs like Vanguard MSCI Index International Shares ETF (ASX: VGS).
But I do think there are some investments that may be able to generate stronger returns and/or provide exposure to compelling investment themes you can feel very good about.
Betashares Climate Change Innovation ETF (ASX: ERTH)
The first potential ETF investment is about a group of businesses that provide products or services that are delivering very useful decarbonisation activities.
For a business to make it into this portfolio, they must make at least half of their revenues from products and services that help to address climate change and other environmental problems through the reduction or avoiding CO2 emissions.
This covers various industries within the ‘improve the world’ sector: clean energy providers, along with leading companies tackling green transport, waste management, sustainable product development, and improved energy efficiency and storage.
There are a total of 100 businesses within this portfolio. These are the biggest ten positions: Tesla, Infineon Technologies, Ecolab, Eaton, Trane Technologies, Nio, Docusign, American Water Works, Enphase Energy and Cie De Saint-Gobain.
I’m sure you’ve heard of Tesla’s electric vehicles, so let’s mention Infineon – a semiconductor business that enables various industrial uses for increasing energy efficiency and reducing energy losses.
It’s widely believed the world will need to invest trillions of dollars into becoming more energy efficient and changing to greener options, so many of the businesses in this portfolio will be essential.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This ETF is about businesses that are expected to maintain their current strong competitive advantages for many years into the future. That’s according to some of the best analysts at Morningstar, a research outfit, looking at US shares.
But not only are the shares in this ETF expected to remain strong for a long time, but they are also supposedly at good value compared to what the analysts believe is a fair value for that business.
In summary, this is a portfolio of US shares that are expected to be strong for a long time and nicely priced to buy today. This ETF comes with an annual management fee of 0.49%, which is pretty cheap for the active management decisions and quality evaluation work that is going on.
Over the last three years, the ETF has delivered an average return per year of 19.3%. I wouldn’t expect it to be as strong over the next three years, but I do think it’s capable of attractive outperformance.
At 19 November 2021, some of the names in the portfolio included: Amazon.com, Boeing, Berkshire Hathaway, Salesforce, Alphabet, McDonalds, Servicenow, Pfizer, Constellation Brands and Western Union.
