ETFs could be a great investment choice in 2025 because of the potential uncertainty and volatility there could be.
With the incoming new administration in the US, there may be plenty of decisions that unsettle markets and change investor’s thoughts about the outlook. In the shorter-term, currency values could also change.
Taking that into account, I believe high-quality global ETFs could be well-placed to outperform the ASX. That’s why I like the below two ETFs for 2025.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This ETF is all about investing in great US businesses at good prices, which I think is a good combination.
What counts as a great business? It’s one where analysts from the investment research outfit Morningstar believe that company’s competitive advantages (also called an economic moat) will almost certainly help the company make large profits for the next 10 years and more likely than not for the next 20 years.
These are the sorts of businesses that we can have confidence in owning for a long time, though the MOAT ETF won’t necessarily own that business for decades.
The fund aims to outperform by investing in these great businesses when the valuation is attractive. It currently has 51 positions in the portfolio, so it’s quite well-diversified.
In the last three years it has returned an average of 14.4% per year, outperforming the S&P 500, though I’m not expecting the next three years to be as good as that.
Betashares Global Quality Leaders ETF (ASX: QLTY)
This ETF offers a bit more diversification than my first idea because it takes ideas from the global share market, rather than just the US share market.
QLTY is looking for businesses with a high return on equity (ROE), stable profits, good cashflow and low debt levels. Putting all that together, you’re going to get a good business.
The QLTY ETF takes more of a numerical approach to deciding the quality of a business, and this is still a very effective investment approach.
It’s invested in a total of 150 names, which means it offers a good amount of diversification with countries like the US, Japan, the Netherlands, the UK, France and Denmark represented.
In the last five years, the QLTY ETF has delivered a return of an average of 13.5% per year, which is a very satisfactory return, in my opinion.
