I believe that VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT) would make a good addition to almost any portfolio.
What is the MOAT ETF?
It’s an exchange-traded fund (ETF) that currently has 48 positions in the portfolio.
The holdings are chosen by Morningstar analysts after a thorough share research process, but it only comes at a management fee price of 0.49% per year, which is pretty cheap compared to most active investment strategies.
VanEck explains that there are two main factors that decide whether a business makes it into the portfolio.
First, it is about investing with a high conviction ‘wide moat’ US equity strategy. That’s where there is a focus on quality US companies Morningstar believes possess sustainable competitive advantages, or “wide economic moats”.
The second is that the shares must be at attractive valuations. VanEck says the ETF targets companies trading at attractive prices relative to Morningstar’s estimate of fair value.
At the end of FY21, it had a portfolio of 48 names including ones like Servicenow, Facebook, Microsoft, Alphabet, Salesforce and Amazon.
Why it’s a good investment for most portfolios
Past performance is not a reliable indicator of future performance. However, the MOAT has performed very well with its investment strategy.
Since VanEck Vectors Morningstar Wide Moat ETF’s inception, it has produced an average return per year of 20.7%. That’s almost 2% per year better than the S&P 500 return. The fact that the portfolio is constantly readjusting to good value, strong businesses is an attractive feature.
But the portfolio is full of names that are expected to maintain (or grow) their competitive positions for a number of years. These aren’t just cheap trading opportunities.
There is a very nice weighting to both healthcare and IT in the portfolio, which are two sectors where the world is being changed in (mostly) positive ways. Those two sectors alone make up more than 45% of the portfolio.
Summary thoughts about the MOAT ETF
I really like the MOAT ETF as a growth and defensive option. It offers good diversification and strong portfolio performance. I’d happily have it in my portfolio.
