Exchange-traded funds (ETFs) can be a really great way for people to invest into shares and find diversification.
Each ETF has an underlying portfolio of businesses. An ETF can only perform as well as the underlying holdings do.
I like the look of these two ETFs for the long-term:
Betashares Global Quality Leaders ETF (ASX: QLTY)
This investment is all about giving investors exposure to a portfolio of 150 businesses that are deemed to be some of the highest-quality across the world. The fact that the portfolio is spread across many different countries is an attractive feature for diversification.
There are four things that a business must rank well on to get into the ETF: return on equity, debt-to-capital, cash flow generation ability and earnings stability. When you combine those four things together, it means that business has a strong financial position.
You’ve probably heard of a few of the top 10 holdings: Nvidia, Facebook, L’Oreal, Adobe, Alphabet, Intuit, 3M, Novo Nordisk, UnitedHealth and Keyence.
It’s invested across multiple sectors, which is helpful for diversification, but it means it hasn’t performed quite as strongly as some tech-focused ETFs. Betashares Global Quality Leaders ETF has returned an average of 19% since the ETF’s start in November 2018. But remember, past performance is no guarantee of future performance.
Vanguard Diversified High Growth Index ETF (ASX: VDHG)
This ETF is an all-in-one type of investment where it’s invested in multiple asset classes in the single portfolio.
It’s invested across ASX shares, international shares, small international shares, emerging market shares, global bonds and Australian bonds.
The VDHG ETF does the rebalancing itself. It’s a very diversified option with it invested in multiple Vanguard funds.
All of this diversification doesn’t cost very much – the annual management fee is just 0.27% per annum.
The returns since inception in November 2017 have been satisfactory, though not spectacular, at 10% per annum. Past performance is not an indicator of future performance though.