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2 Australian ETFs I would buy in December

In my opinion, the recent rally of value shares in November, in addition to the ballooning valuations for ASX growth shares, has left investors with few investments offering acceptable risk-reward.

2 ASX ETFs I would consider buying in December

Despite limited options, below are two ETF’s I have added to my watchlist and looking to buy in December.

Both should prove resilient if markets retreat while also maintaining return upside if the market moves higher.

VanEck Vectors MSCI World ex Australia Quality ETF (ASX: QUAL)

QUAL offers investors a diversified portfolio of 300 large capitalisation companies on exchanges around the world, excluding Australia.

The QUAL ETF screens for companies with high-quality ratings based on three fundamental factors:

  1. High returns on equity (ROE)
  2. Stable year-on-year earnings/profit, and
  3. Low financial leverage

I like companies with the three aforementioned characteristics as they provide downside protection due to strong earnings stability and balance sheet position. Furthermore, if the market rises, high return on equity businesses should outperform their peers.

Inside QUAL, a majority of the holdings are domiciled in the United States (70.8%), with smaller weightings in the United Kingdom (5.9%) and Switzerland (5.6%). Some holdings you may recognise include Apple Inc (NASDAQ: AAPL)Nike Inc (NYSE: NKE) and Mastercard Inc (NYSE: MA).

The QUAL ETF has performed strongly over multiple time horizons, recording a 12.23% one-year return, 16.12% three-year return and 13.90% five-year return. Moreover, the underlying index has a ten-year return of 16.92%.

With a modest management fee of 0.40%, QUAL offers exposure to some of the world’s largest and most resilient businesses. Investors should note the ETF is unhedged, and therefore subject to foreign currency movements. 

iShares MSCI Emerging Markets ETF (ASX: IEM)

Bank of America recently released their monthly report of fund managers, who collectively hold $526 billion in assets. Over 50% of interviewees indicated emerging markets as their favourite trade for 2021.

The IEM ETF offers investors access to these emerging companies by following the MSCI Emerging Market Index, which consists of over 800 large and medium capitalisation stocks in developing markets.

The ETF has recorded a 7.54% one-year return, 9.48% five-year return, and a 5.61% ten year-return.

IEM currently has a P/E ratio of 17.43, compared to the broader iShares S&P 500 ETF (ASX: IVV) of 24.74 and the iShares Core S&P/ASX 200 ETF (ASX: IOZ) of 22.35, illustrating the potential value in emerging markets for investors.

The IEM fund’s largest geographic exposure is China (39.74%), South Korea (12.88%) and Taiwan (12.40%). Prominent holdings include e-commerce giant Alibaba Group Holding Ltd (HKG: 9988), WeChat owner Tencent Holdings Ltd (HKG: 0700) and electronic producer Samsung Electronics Co Ltd (KRX: 005930).

With a management fee of 0.67%, I think IEM should be used within the satellite component of a portfolio. Given its undervaluation relative to more established markets, there is potential upside return moving from December into 2021.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

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Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. 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. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, Lachlan does not have a financial or commercial interest in any of the companies or funds mentioned.
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