There are a few exchange-traded funds (ETFs) that I really like as ETF ideas for growth.
It’s nice to get a lot of diversification with each investment rather than just having to pick one individual company.
I really like these two investments:
Betashares Global Quality Leaders ETF (ASX: QLTY)
This is my preferred ETF of the two I’m going to talk about in this article. It’s an investment that only goes for businesses that rank highly on a number of metrics. Those factors are: return on equity, debt-to-capital, cash flow generation ability and earnings stability.
Essentially, the businesses in the portfolio make consistent profit, generate good cashflow, don’t have much debt and don’t need tons of shareholder money to keep operating & growing.
Those aren’t secret metrics and they don’t guarantee success. But if you combine them together, investors should find a quality portfolio of businesses that can produce good returns over time.
The index that this ETF tracks has done well – over five years it has returned an average of 19% per year.
Currently, its biggest 10 positions are: Advanced Micro Devices, Adobe, Intuit, Nvidia, Accenture, Novo Nordisk, Keyence, Alphabet, Facebook and Visa.
It’s a portfolio of 150 names spread across many countries any most sectors. However, more than 60% of the portfolio is invested in IT and healthcare, which are two good industries to be in.
Betashares Cloud Computing ETF (ASX: CLDD)
As the name may suggest, this ETF option is about companies that specialise in products or services delivered through cloud computing.
BetaShares has the following statement as a reason to consider this investment: “Cloud computing has been one of the strongest-growing segments of the technology sector, and given much of the world’s digital data and software applications are still maintained outside the cloud, continued strong growth has been forecast.”
Not only that, but many cloud businesses have high gross profit margins because it’s relatively cheap to offer new clients that same product. Software or digital products are inexpensive to deliver.
At the latest disclosure, these were the largest positions in the portfolio (out of a total of 36): Zscaler, Shopify, Zoom Video Communications, Dropbox, Twilio, Paycom Software, Paylocity, Salesforce.com, Akamai Technologies and Workiva.
To get into the portfolio, a company’s share of revenue from cloud computing services must meet a minimum threshold. Companies that generate most of their revenue from cloud-based services are prioritised. That’s why Microsoft, Amazon.com, Alphabet and Alibaba are all part of the portfolio but are only small positions.
