Exchange-traded funds (ETFs) can be great to use for investing because of the access to various shares they can provide.
I’d imagine most Aussie share investors already have a lot of exposure to ASX shares in their portfolios, either through director ownership of ETFs focused on ASX shares like the Vanguard Australian Shares Index ETF (ASX: VAS) or the BetaShares Australia 200 ETF (ASX: A200).
There are some excellent ETFs out there for international exposure such as iShares S&P 500 ETF (ASX: IVV). However, the IVV ETF only invests in US-listed businesses and it’s becoming increasingly focused on just a few large US tech giants. The strong run of those tech giants may not last forever.
For diversification, I’d call these two ETFs good buys in October.
Betashares Global Quality Leaders ETF (ASX: QLTY)
This fund owns 150 quality businesses from across the world, which I think is a very satisfactory level of diversification.
The index that this ETF tracks has been designed to select quality global companies based on a high return of equity and profitability, low leverage and earnings stability.
If you had to list certain attributes that you’d want a group of businesses to have, this ETF provides access to some of the best factors, in my eyes.
Some of the businesses that rank highly on all of those attributes include Applied Materials, Meta Platforms, Texas Instruments, Cisco Systems, ASML, Roche, Nvidia and Netflix. These positions are largely the same size, with a weighting of approximately 2% each.
It has the largest allocations to the most attractive sectors, in my opinion, with a 34.5% allocation to IT, a 15.7% allocation to healthcare and a 15.7% allocation to industrials.
We shouldn’t expect that past performance will be the same as future returns, but over the past five years the QLTY ETF has returned an average of 14.1% per year.
Betashares Global Cash Flow Kings ETF (ASX: CLFO)
Another way to look at businesses is how much cashflow they’re producing, which is an important sign of profit making and ‘real’ money being made. That cashflow can be used for reinvesting for more growth, paying dividends, fund share buybacks, strengthening the balance sheets and/or making acquisitions.
The global businesses in this portfolio are ones that have demonstrated strong and consistent free cashflow generation, growth of free cashflow and relatively low levels of debt.
It’s invested in 200 businesses, which is a good amount of diversification. Some of the businesses in the portfolio include Costco, Berkshire Hathaway, Alphabet, Adobe, Accenture, Cisco Systems, United Health, Procter & Gamble and ServiceNow.
Over the past five years, the index this relatively new ETF tracks has delivered an average return per year of 14.3%. If we accounted for the CFLO ETF’s annual fee of 0.40%, its return would have been very similar to the QLTY ETF over the past five years, and strong. Again, future returns may not be as good.
