There are lots of ETFs that could be worth an investment with $1,000 or $2,000.
What’s an exchange traded fund (ETF)?
If you don’t know what an ETF is then it could be a smart idea to look at Rask’s free beginner ETF investor course.
An ETF basically lets you invest in a whole bunch of different businesses with a single investment. Very handy if you want to get good diversification, but you don’t want to buy 50, or 100 or 1,000 businesses yourself. In-fact, I’d say buying 1,000 different companies yourself would be a very poor choice for all the brokerage costs alone.
I’m a fan of low-cost ETFs like iShares S&P 500 ETF (ASX: IVV), which could form almost the entire investing strategy of an investor if they wanted to make things simple. But the one concern I have with IVV is that it’s entirely based on shares listed in the US, which could uniformly suffer a capital decline in the event of higher US taxes or other US-centric news. And then the broader global ETFs such as Vanguard Msci Index International Shares ETF (ASX: VGS) give exposure to quite a few ‘ordinary’ businesses, lowering returns.
I think the first ETF could solve that dilemma:
Betashares Global Quality Leaders ETF (ASX: QLTY)
This ETF invests in a diversified portfolio of 150 of the world’s highest quality companies, not just the US.
Just looking at its top 10 holdings, you’ll see that its biggest positions are from across the world: AIA, Keyence, Intel, Accenture, Alphabet, Intuit, Johnson & Johnson, Novo Nordisk, Nvidia and Roche Holding.
Whilst the US gets a large allocation, it’s only around 60%, there are plenty of other countries that are represented such as Japan, Switzerland, Hong Kong, Denmark and France which all have a weighting of 3% or more.
In terms of sector allocation, IT has the biggest weighting with 35%, healthcare has a 25% position, communication services has a 10.8% allocation and industrials makes up 10%.
Considering the global nature of the ETF, its annual management cost of 0.35% is very reasonable in my opinion.
Since inception in November 2018, Betashares Global Quality Leaders ETF has made net returns of almost 19% per annum.
It can also be worthwhile considering ETFs giving exposure to a certain industry:
VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)
This ETF option has businesses related to various parts of the gaming world: video game development, eSports and related hardware and software globally.
There are only a total of 25 holdings in this ETF, the top 10 are: Nvidia, Tencent, Advanced Micro Devices, Nintendo, Sea, Activision Blizzard, Netease, Bilibili, Take-Two Interactive Software and Nexon.
The US is the country with the biggest exposure here – around 38% – but other countries also feature with 20.7% from Japan, 19.2% from China, 6.1% from Singapore, 5.9% from South Korea and so on.
Considering the ETF is only $67.5 million in size, its annual management fee of 0.55% seems very reasonable to me.
With the effects of the pandemic, e-gaming has boomed even stronger than before. The index that the ETF tracks has returned 67.4% over the past year and 36.7% per annum over the last five years.