I’ve always got my eyes on some quality exchange-traded funds (ETFs) for my portfolio for the long-term. I believe that there are some ETFs that would make excellent long-term investments, starting this month.
I love ETFs because of how easy it makes investing. You don’t have to worry about what shares to buy, when to sell, how much of each share to own and so.
But I only want to go for ETFs that have good portfolios and/or have very low costs – like an index fund.
I think these two fit the bill:
Betashares Global Quality Leaders ETF (ASX: QLTY)
This is an ETF all about quality, as it says on the tin.
The idea is that the businesses in the portfolio have to rank well on four important metrics: return on equity, debt-to-capital, cash flow generation ability and earnings stability. It’s not guaranteed that those four metrics will lead to good returns for an individual company, but you’d think that a portfolio of those businesses would do pretty well.
It’s like finding a student at school that’s kind, smart, hard working and comes from a good family. There’s a very good chance that student is going to do well in school.
The Betashares Global Quality Leaders ETF portfolio has 150 names, but there isn’t a large weighting to any particularly name. The biggest nine positions have an allocation of more than 2% but less than 2.5%: Nvidia, Adobe, Keyence, Accenture, Intuit, Novo Nordisk, Facebook and Alphabet.
It’s a global portfolio. Whilst the US gets a 62,5% allocation, the underlying earnings are globally diversified and almost 40% of the portfolio not being from the US is pretty good. Tech and healthcare make up the two biggest allocations when it comes to sectors.
This quality portfolio only has an annual management cost of 0.35%. Over the last five years, the index this ETF tracks has returned an average of 20.4%. Time will tell what the next five years of returns looks like.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
The idea of this ETF is a little similar to the BetaShares quality one.
Morningstar analysts research and decide what US shares they believe have wide economic moats, or strong competitive positions. That means they’re looking for businesses that are expected to be strong for at least ten years and probably longer.
But, a business will only make it into the portfolio if the Morningstar analysts believe that the potential investment is valued attractively compared to their estimate of fair value.
In theory, this is a quality portfolio that’s always good value. A few days ago in early September, its largest positions were: Gilead Sciences, Alphabet, Guidewire Software, Intercontinental Exchange, Intel, Kellogg, Coca Cola and Lockheed Martin.
It has an annual management fee of just 0.49%, which is cheap for the amount of behind-the-scenes work that this ETF is doing.
Past performance is no guarantee of future returns, but over the last five years VanEck Morningstar Wide Moat ETF has returned an average of 19.4% per year.
