Exchange traded funds (ETFs) could be the way to go in July 2021 if investors are looking for ideas.
I think that ETFs are an effective way to get diversification to good businesses, if you choose a decent investment.
There are quite a lot to choose from. I like the idea of global ones that own businesses that are among the best at what they do.
Here are two I’m interested in:
BetaShares Global Sustainability Leaders ETF (ASX: ETHI)
This ETF is about investing in businesses that are operating with a similar sort of ethics that investors are looking for.
The portfolio is looking for businesses that are climate leaders in their industry.
It starts off with a list of the large global businesses. ETHI ETF then excludes businesses for various factors. For example, if they are involved in fossil fuel, weapons, alcohol, gambling, junk food and so on – those businesses are excluded from the portfolio.
What’s left is a quality portfolio of businesses that are trying to do the right thing. Coincidence or not, this ‘ethical’ group of businesses is doing very well. Since inception in January 2017, after management fees of 0.59% per annum, it has produced an average return per annum of 21.6%.
What businesses are the biggest weightings in the ETHI portfolio?
The latest disclosure shows that the biggest positions were: Apple, Visa, Home Depot, PayPal, MasterCard, Adobe, Toyota, ASML and Cisco Systems.
With around 200 holdings, it provides plenty of global diversification.
Betashares Global Quality Leaders ETF (ASX: QLTY)
I believe that it will be quality businesses that perform better than speculative businesses over the next period for the share market.
Low interest rates have driven investors up the risk curve. That includes some assets that don’t seem like they’ll make any underlying cashflow for investors.
Businesses that are resilient, make good profit, good cashflow and have healthy balance sheets could be the answer.
That’s the type of businesses that the QLTY ETF invests in across the world – it owns a total of 150 names. Some of its biggest holdings are: Nvidia, Advanced Micro Devices, Accenture, Adobe, Facebook, AIA, Applied Materials, Alphabet, Intuit and Johnson & Johnson.
I like that this ETF isn’t just focused on one country or sector.
It’s those diversified, quality holdings that have led to net returns of 19% per annum since the ETF’s inception in November 2018.
Those historical returns, which are not guarantees of future returns, are after the annual management fee of 0.35%.
