I think there are some really good exchange-traded funds (ETFs) out there that investors should know about.
ETFs can be a great way to invest in a bunch of businesses with just one purchase. But I want more than just diversification. I’d like to find potential investments that might be able to produce better returns than the ASX 200 (ASX: XJO).
VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)
This might be one of the most attractive ETFs. It has been doing really well for a long time.
Over the last three years the ETF has produced an average return per annum of 20.8%. Looking at the index the ETF tracks, the index has produced an average return per annum of 20.2% over the last decade.
How has it managed this? It only invests in businesses that Morningstar analysts have rated as having strong competitive positions and it’s likely to stay that way for a number of years.
But it’s not a fixed index with the same businesses. It only owns businesses that Morningstar analysts think are good value, below their view of fair value.
It’s that constant shifting to attractively priced, high quality businesses that has led to long-term outperformance.
Not only that, but you’re getting active management at a price that’s very reasonable of just 0.49% per year.
It has 49 positions spread across multiple sectors. Some of the main holdings right now are Wells Fargo, Cheniere Energy and Alphabet.
I think it’s a great ETF for long-term compounding.
Betashares Climate Change Innovation ETF (ASX: ERTH)
This ETF gives exposure to one of the most interesting and widespread trends. The shift towards products and services that address climate change and other environmental problems by reducing or avoiding CO2 emissions could be attractive to have an allocation to.
What types of things are we talking about? Obviously there are renewable energy providers in there. There are also companies tackling green transport, waste management, sustainable product development, and improved energy efficiency and storage. Sustainable food, water efficiency and pollution control businesses are also in there.
Some of the businesses in portfolio include Trane Technologies, Cie De Saint-Gobain, Infineon Technologies, Zoom Video Communications, Docusign, Tesla, Vestas Wind Systems and East Japan Railway.
To make it into the portfolio, at least 50% of the revenue from their products and services must address climate change or something similar.
It’s a megatrend that could have plenty of growth potential over the long-term.
For an annual cost of 0.65%, for what it does it’s not too expensive at all in my opinion.
The index that it tracks has down very well, which has returned an average of 34.3% per annum over the last three years.
Of course, with both of these ETFs, past performance is no guarantee of future performance. But these two ASX growth shares could be really good ones to think about for the long-term.
