I think that there are a lot of positives in building a portfolio that is diversified, but also picking businesses that seem as though they have good futures. We can use exchange-traded funds (ETFs).
Building a portfolio of individual businesses can take a lot of time and research to construct. Instead, it could be possible to invest in an ETF that is diversified in a number of different ways and has a strong group of holdings.
While the two ETFs I’m about to tell you about don’t tick every single box (such as having attractive dividend yields), I think they pass enough tests that it would be possible for them to be the only position in my portfolio.
BetaShares Global Sustainability Leaders ETF (ASX: ETHI)
When looking for a good ETF, I want to see at least two things – that it offers diversification and that the fees are low.
The ETHI ETF is invested in around 200 businesses from across the world. While the US gets the biggest allocation, many other countries are represented such as Japan, Switzerland, Netherlands, Germany and Britain.
I also like the sector allocation within the portfolio. IT/technology gets the biggest weighting at close to 38%, while healthcare is the second biggest.
It has an annual management fee of 0.59%.
One thing that sets it apart is the ethical screenings that this ETF does. It invests in the 200 biggest global companies that pass various tests such as no fossil fuels, no gambling, no alcohol, no junk food, no companies with human rights or supply chain issues, no companies that lack gender diversity on the board, and so on.
What remains is a strong portfolio of businesses that are generally trying to do the right thing. Its holdings include Apple, Home Depot, Visa, Mastercard, Cisco Systems, Nvidia and Adobe.
I think this is one of the best ETFs around for growth and diversification.
Betashares Global Quality Leaders ETF (ASX: QLTY)
The QLTY ETF is another good investment focused on the global share market.
It’s invested in 150 businesses from across the world. Again, the US has the largest country allocation, but Japan, Switzerland, Netherlands, France, Hong Kong and Denmark get a weighting of at least 2.5%.
IT and healthcare make up almost 60% of the portfolio, which are two of my favourite industries to look for long-term opportunities.
The management costs are reasonable in my opinion, at just 0.35% per year.
There are four things that a business needs to possess to be considered for this portfolio: a high return on equity (makes good money on invested shareholder money), high profitability, low levels of debt and stable earnings.
After suffering a big sell-off in 2022, I think that this looks like a great time to start investing in this ETF’s portfolio of quality businesses.
There isn’t much weighting difference between the ETF’s holdings, but nonetheless, these are the largest holdings: Johnson & Johnson, Novo Nordisk, Regeneron Pharmaceuticals, UnitedHealth and Automatic Data Processing.
