I think there are some great exchange-traded funds (ETFs) that are available for investors to buy.
Yes, there are some low-cost, simple ETFs like Vanguard Australian Shares Index ETF (ASX: VAS). But the lack of diversification with the ASX share market puts me off. It’s mostly invested in resources and financials.
But I think the following two ETFs give investors the potential for good returns, growth, as well as defensive earnings:
VanEck Video Gaming and Esports ETF (ASX: ESPO)
This is an ETF about giving exposure to some of the world’s biggest businesses involved in the video gaming and e-sports world.
A business has to generate a significant portion of its revenue from video-gaming related activities to get included in this investment.
At the moment, there are 26 holdings in the ESPO ETF. Some of the biggest are: Nvidia, Tencent, Advanced Micro Devices, Sea, Nintendo, Activision Blizzard and Electronic Arts.
Video gaming continues to see global growth. More people are gaming in places like Africa and Asia, adding to the total addressable market for the gaming companies.
Since 2015, the video gaming revenue has grown at an average annual rate of 12%.
E-sports is ramping up in popularity across the world. E-sports revenue has grown by an average of 28% per year since 2015. It’s creating new revenue opportunities like advertising with such large audiences, which now rivals the Olympics and the soccer World Cup.
ASX ESPO has an annual management fee of just 0.55% per year.
Betashares Global Cybersecurity ETF (ASX: HACK)
Cybersecurity is another area of continuing growth, regardless of what the global economy is doing.
Between 2017 and 2023, the global cybersecurity market is expected to show growth of 79% if it reaches revenue of $248 billion. That growth comes from the fact that cybersecurity spending is increasing every year.
Cybercriminals continue to attempt to come up with new ways of attacking systems, so the security has to always stay one step ahead. And people, government and organisations need to pay for that development.
There are a total of 36 positions in the ASX HACK portfolio, with names like Palo Alto Networks, Crowdstrike, Okta, Cloudflare, Tenable, CyberArk, Splunk and VMWare.
The HACK ETF has an annual management fee of 0.67%.
Summary thoughts
The index benchmarks that both of these ETFs follow have done very well over the last few years, though it’s a good idea not to think that past performance will be replicated into the future.
I’d be happy to have both the ESPO and HACK ETFs in my portfolio.
