If you want to diversify your investments without the hefty brokerage fees of buying many individual shares, ASX ETFs can be a great option.
ETFs allow you to buy shares in many companies, sometimes hundreds, at the same time. They tend to have lower management fees than actively managed funds and many ETFs are designed to track an index (hence the name “index fund”).
Often it can be a good idea to use ETFs as a base for your portfolio – for example, you may put most of your funds into good ETFs and then use the small portion of the remaining funds to buy shares in individual companies that you are very knowledgeable about.
For more information on the benefits of ASX ETFs, check out www.bestetfs.com.au.
If you want to get started with ETF investing in 2019, here are three ideas to get you started.
Vanguard U.S. Total Market Shares Index ETF
Vanguard U.S. Total Market Shares Index ETF (ASX: VTS) is an ETF designed to track the performance of the CRSP US Total Market Index.
At present, the VTS ETF allows you to invest in 3,514 different US companies with one purchase of the ETF. Best of all, you can do this for a management fee as low as 0.04% per annum.
I think this is a great ETF to start with as it gives you exposure to the largest share market in the world for a very small fee. Keep in mind past performance is not a great indicator of predicting future performance; however, over the last five years, VTS has returned 15.31%, compared to the benchmark performance of 15.32%, according to Vanguard.
BetaShares Australia 200 ETF
Bringing it back home, the BetaShares Australia 200 ETF (ASX: A200) gives you exposure to the 200 largest companies on the ASX for a management fee of 0.07%.
This includes all of the popular blue-chip companies like Woolworths Group Ltd (ASX: WOW), BHP Group Ltd (ASX: BHP) and CSL Ltd (ASX: CSL).
The A200 ETF only started in May 2018 so it doesn’t have a long track record like the Vanguard ETF. However, since inception, it has returned 5.36%, compared to 5.44% from the benchmark.
The A200 ETF that could make up part of the core of your investment portfolio. Consider it a long position on the Australian economy and business conditions.
BetaShares Australian Investment Grade Corporate Bond ETF
To add some variety, you may consider the BetaShares Australian Investment Grade Corporate Bond ETF (ASX: CRED) for your portfolio.
Part of the appeal of ETFs is diversification, so why not diversify outside of shares?
This ETF allows you to invest in Australian corporate bonds. Typically, this type of investing would be considered too risky or complex for a mum-and-dad investor. An ETF takes away some of the complexity by allowing you to buy the corporate bonds of many companies selected by professional investors.
The CRED ETF attracts a slightly higher management fee of 0.25%. Its return since inception in May last year has been 5.53% compared to the benchmark return of 5.74%, according to a recent factsheet. The fund has monthly distributions.
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Disclaimer: At the time of writing, Max does not own units/shares in any of the ETFs mentioned.
