These two exchange-traded funds (ETFs) are high-quality picks that could achieve strong returns and give diversification.
Aussies that focus on the ASX share market may be too concentrated on ASX bank shares and ASX mining shares because of the weight of those industries in the market. The international share market is more balanced, so that’s where I’m looking.
Betashares Global Quality Leaders ETF (ASX: QLTY)
This ETF has 150 global companies in the portfolio, which are only included if they rank well on four key factors: return on equity (ROE), debt to capital, cashflow generation ability and earnings stability. These businesses make good profits and have good balance sheets.
The current biggest five positions in the portfolio include Alphabet, Nvidia, Texas Instruments, Coca Cola and Costco. None of the weightings are large though, Alphabet only has a 2.6% position.
This is a fairly cheap ETF, considering the work done to create it, with an annual management fee of 0.35%.
For Aussies, I think it’s good to see which industries have the biggest weightings within the ETF. At the end of April, these were the biggest sector positions: IT (34.8%), industrials (18.4%) and healthcare (15%).
Since it started in November 2018, the QLTY ETF has delivered an average return per year of 14.7%.
VanEck Morningstar Wide Moat AUD ETF (ASX: MOAT)
This ETF invest in US companies, though the underlying earnings of those businesses is adequately global.
It focuses on quality companies that Morningstar possesses sustainable competitive advantages, or wide economic moats. Brand power can be one of those advantages. Think of the benefits that Disney, Nike and Alphabet (Google) have with their core products and how difficult it would be for a competitor to challenge them.
At the moment, the biggest five positions are: Teradyne, Alphabet, International Flavors & Fragrances, Rtx and Tyler Technologies.
I think this investment method creates a portfolio of quality businesses.
But, the MOAT ETF only invests in these names when they’re cheaper than what Morningstar analysts think they’re worth.
Since the ETF’s inception in June 2015, it has delivered an average return per annum of 15.6%.
