There are some really good exchange-traded funds (ETFs) out there on the ASX. This article is about two of them I wish I had in my portfolio.
Broad, index-based ETFs have advantages like really low costs. Two examples are ones from Vanguard such as Vanguard MSCI Index International Shares ETF (ASX: VGS) and Vanguard Australian Shares Index ETF (ASX: VAS).
But these two are ones I really admire, but aren’t like the two I just mentioned:
Betashares Climate Change Innovation ETF (ASX: ERTH)
This investment represents a portfolio of 100 businesses that are leading the charge against climate change.
This means there are businesses in the portfolio that operate across a broad range of solutions, including clean energy, electric vehicles, energy efficiency technologies, sustainable food, water efficiency and pollution control. Companies with direct involvement in the fossil fuels industry (coal, oil and natural gas), and certain other “negative” activities are excluded.
In terms of the business in the top holdings, you’ve probably heard of some of the names in the top 10: Ecolab, Tesla, Trane Technologies, Infineon Technologies, Docusign, Vestas Wind Systems, Cie De Saint-Gobain, Zoom Video Communications and American Water Works.
As BetaShares says, demand for products and services to tackle the world’s growing climate and environment-related problems is anticipated to rise strongly over the long term. I like the idea of being invested in businesses that are trying to make a positive difference.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This ticks a lot of the boxes that I’d want from an ETF. It gives global diversification away from the ASX, with all of the holdings being quality businesses. That’s where the ‘wide moat’ part of the name comes from – it only invests in businesses that have strong competitive positions which are expected to stay competitively strong for a very long time.
The ETF only owns those wide moat businesses if they are valued at a good price compared to Morningstar’s estimate of fair value.
So, it’s always a portfolio of high-quality businesses at a good price. That’s a very attractive feature to me.
Its current portfolio has these holdings as the biggest positions: Pfizer, ServiceNow, Alphabet, Microsoft, Facebook, Salesforce.com, Tyler Technologies and Wells Fargo. The portfolio is regularly changing, so its exposure and diversification is always changing too.
This investment comes with an annual management fee cost of just 0.49%. It’s not the cheapest ETF around, but its net returns have been solid (but it’s not guaranteed to be good in the future).
Over the last five years the net returns of VanEck Morningstar Wide Moat ETF have been an average of 19.35% per year.
