2021: the 5 best ASX ETFs for a diversified portfolio

A well-diversified Australian ETF portfolio provides investors with multiple avenues to benefit from rising markets, in addition to reducing overall portfolio risk. Here are some of the best ASX ETFs for a diversified portfolio in 2021.

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ETF #1 –  iShares S&P 500 ETF (ASX: IVV)

The IVV ETF provides investors with low-cost, passive exposure to the 500 largest companies located in the United States weighted by market capitalisation. Notable holdings include Apple Inc. (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), and Amazon.com Inc. (NASDAQ: AMZN). Given the stock holdings are in the United States, the IVV fund has exposure to currency risk (i.e. changes between AUD and USD). For investors looking to remove this risk, there is an identical ETF that is hedged – iShares S&P 500 AUD Hedged ETF (ASX: IHVV).

The IVV ETF has achieved a 17.09% ten-year return, with a trailing dividend yield of 1.66%, making it a great option for investors looking for potential capital and income growth. With a management fee of 0.04%, IVV is one of the most affordable ETFs for a diversified portfolio.

View our IVV ETF report.

ETF #2 – iShares Core S&P/ASX 200 ETF (ASX: IOZ)

True to label, IOZ comprises of the 200 largest Australian listed companies based on market capitalisation. The three largest holdings are Commonwealth Bank of Australia (ASX: CBA), CSL Ltd (ASX: CSL), and BHP Group Ltd (ASX: BHP). The top sector weightings are Financials (27.94%), Materials (19.88%), and Health Care (10.98%).

The IOZ ETF has a five-year return of 8.90% and a 7.61% return since inception. IOZ management fee of 0.09% is the lowest amongst broad-based Australian Index funds, with the Vanguard Australian Shares Index ETF (ASX: VAS) management fee 0.10% and SPDR S&P/ASX 200 Fund (ASX: STW) management fee 0.13%. For investors looking for exposure to the local market, IOZ is the one for you.

View our IOZ ETF Report.

ETF #3 – BetaShares NASDAQ 100 ETF (ASX: NDQ)

NDQ offers exposure to the 100 largest companies ex-financials listed on the NASDAQ stock exchange located in the United States. The exchange has built a reputation for being the number one destination for tech companies with holdings including Tesla Inc (NASDAQ: TSLA) and Netflix Inc (NASDAQ: NFLX). For currency-hedged exposure, investors can opt BetaShares NASDAQ 100 ETF-Currency Hedged (ASX: HNDQ).

The NDQ fund has returned 21.64% over the past five-years. As alluded to earlier, Information Technology (47.5%) is the largest sector allocation, with smaller weightings to Communication Services (19.7%) and Consumer Discretionary (19.6%). One downside of NDQ is the management fee of 0.48%, which is significantly greater than IOZ and IVV. However, combined with a diversified portfolio, NDQ offers good exposure to shares in the tech giants of tomorrow.

View our NDQ ETF Report.

ETF #4 – Vanguard All-World ex-U.S. Shares Index ETF (ASX: VEU)

VEU is a great ETF for investors who want to diversify into international markets but may already have significant exposure in the United States. With a management fee of 0.08%, the fund offers low-cost exposure to the world’s largest companies listed in major developed and emerging countries outside the United States.

The VEU ETF is well-diversified, with the largest geographic allocations to Japan (17.4%), China (13.0%), United Kingdom (8.5%), France (6.1%), Switzerland (6.0%), Germany (5.6%), and Canada (5.3%). Notable holdings include food and drink conglomerate Nestle SA (SWX: NESN) and WeChat owner Tencent Holdings Ltd (HKG: 0700). The VEU fund has returned 7.18% over five years, 8.23% over ten years, and 7.68% since inception, inferring a relatively steady return over multiple time periods.

View our VEU ETF Report.

ETF #5 – Vanguard MSCI Index International Shares ETF (ASX: VGS)

VGS includes over 1,500 of the world’s largest companies outside of Australia in developed markets. It’s a great alternative to VEU for investors who are looking to gain international exposure including the United States or only want exposure to developed markets.

VGS’ three largest sector weightings are Information Technology (22.0%), Health Care (13.5%), and Consumer Discretionary (12.0%) with the majority of holdings domiciled in the United States (68.2%). The VGS fund has returned around 10.54% over five years and 12.16% since inception.

VGS is more expensive than IVV and VEU, with a management fee of 0.18%, however, I think it is well-suited to form a core part of a diversified portfolio.

View our VGS ETF Report.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

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This ETF makes investing in ETFs "Super-Easy".

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From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

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At the time of publishing, Lachlan owns shares in NDQ.

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The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

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