Diversified ETFs can provide an easy way to gain exposure to a diverse range of asset classes, sectors, or investment styles.
Greater diversification can smooth out portfolio investment returns, provided that the underlying holdings do not rise/fall at the exact same time or rate. Below is a list of my top 3 diversified equity ETFs for 2021.
Pick #1 – Vanguard U.S Total Market Shares Index ETF AUD VTS ETF (ASX: VTS)
The Vanguard U.S. Total Market Shares Index ETF (VTS) is one of the most diversified US equity ETFs that can be bought on the ASX.
VTS currently has holdings in a whopping 3,586 US-listed companies, with the median company having a market capitalisation $108.92 billion. The VHY management fee payable to own shares in VTS is an extremely low 0.03% per year (p.a.). VTS has generated a health total return of 13.57% p.a over the last 5 years.
VTS’ top 5 holdings include some of the most widely recognised companies in the world: Microsoft Corp (NASDAQ: MSFT), Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN) Facebook, Inc. Common Stock (NASDAQ: FB) and Alphabet Inc. Class A Common Stock (NASDAQ: GOOGL).
Check out our VTS ETF report.
Pick #2 – Vanguard All-World ex-U.S. Shares Index ETF (ASX: VEU)
The Vanguard All-World ex-U.S. Shares Index ETF (VEU) could be a great choice for those who already have holdings in US stocks or ETFs and would like to get exposure to more international markets. VEU seeks to track the FTSE All-World ex-US Index (before account fees, expenses and taxes).
VEU’s portfolio is primarily allocated across three regions: 39.3% Europe, 28.7% Pacific, and 25.6% Emerging Markets. VEU also has one of the lowest management fees around, at just 0.08% per year. VEU has generated a 5-year total return of 7.18% p.a.
At the end of November, VEU’s 5 largest holdings were Alibaba Group Holding Ltd (NYSE: BABA), Taiwan Semiconductor Manufacturing Co. Ltd., Tencent Holdings Ltd., Samsung Electronics Co. Ltd. and Nestle SA.
View our VEU ETF report.
Pick #3 – BetaShares Ethical Diversified Growth ETF (ASX: DGGF)
The BetaShares Ethical Diversified Growth ETF (DGGF) provides exposure to a selection of ethical Australian and global shares and bonds. The DGGF ETF builds this exposure through holdings in BetaShares ethical ETFs, which in turn only hold shares and bonds which pass positive climate leadership screens and meet a range of ESG criteria.
As of 16 December 2020, DGGF’s asset allocation consists of:
- Australian and International Bonds 30.1%
- International equities 42%, and
- Australian Equities 27.9%.
DGGF has a management fee of 0.39% p.a., which is materially higher than that charged by VTS and VEU.
Check out our DGGF ETF report.