If I had $1,000 to invest then I’d definitely consider putting it into a good exchange-traded fund (ETF).
What’s a good ETF? Well I’d want to find something that has fees comfortably less than 1% per annum, a high proportion of its holdings are quality and it gives diversification away from Australia.
That’s why I’d pick an international option, where Aussies can currently utilise the strong Australian dollar to buy global shares.
Betashares Global Quality Leaders ETF (ASX: QLTY)
This ETF is offered by BetaShares, one of the biggest ETF providers in the country. It has been designed to select quality global companies based on high return on equity and profitability, low leverage and earnings stability.
The fund’s focus on quality aims to produce superior long-term performance compared to benchmark global equities indices.
Costs
The annual management fee is just 0.35%, which is much cheaper than what you’d pay if an active fund manager constructed a ‘quality’ global portfolio on behalf of investors.
Holdings
It has 150 holdings spread across the world.
Its biggest ten weightings are: AIA, Keyence, SAP, Accenture, Johnson & Johnson, L’Oreal, Visa, Nvidia, Adobe and Intuit.
There are plenty of other holdings you’ve probably heard of like Facebook, Alphabet, 3M, Nintendo, Activision Blizzards, Regeneron (with its COVID treatment) and Monster Beverage.
In terms of diversification, more than half of the portfolio is invested in tech businesses (33%) and healthcare (25.6%). These two sectors are capable of producing consistent growth, they are generally not cyclical.
One of the main reasons I’m attracted to Betashares Global Quality Leaders ETF is that its portfolio is global, it will invest in whatever are the highest quality businesses across the world, not just in the US. Whilst the US companies make up almost two thirds of the ETF, countries with more than a 1% weighting include Japan, Switzerland, France, Denmark, Hong Kong, Spain, the UK and Finland.
Returns
Past performance is no guarantee of future performance, but I think it shows the level of returns that the holdings may be able to generate.
Since inception in November 2018, the ETF has generated net returns per year of around 20%. The index that Betashares Global Quality Leaders ETF tracks has made returns of 15.6% per year over the last five years.
Summary thoughts
This hasn’t been a high flying ETF like some tech ones in the last couple of years, but it seems like this one that deliver solid double digit returns over the long term whilst still giving really good global diversification.
Other ETFs that I like include BetaShares Global Sustainability Leaders ETF (ASX: ETHI) and VanEck Vectors Video Gaming and eSports ETF (ASX: EPSO).
