I think that there are a few exchange-traded funds (ETFs) that could be good investments for the long-term.
Whilst I really like the low-cost ETFs that are based on diversified baskets of shares, like Vanguard MSCI Index International Shares ETF (ASX: VGS) and BetaShares Australia 200 ETF (ASX: A200), I am looking for possible investments that may be able to produce stronger returns. Or offer different types of investment exposure.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
I think this ETF gives investors a good chance of producing solid returns, though nothing is guaranteed in the share market.
This is investment is a portfolio of shares that have been picked by analysts from the high-quality team at Morningstar. The investment team are looking for businesses that are expected to remain competitively advantaged for many years into the future. Having a strong competitive advantage is one of the main things that can be described as a wide ‘economic moat’.
But the shares only make it into this portfolio if they are good value. They have to be priced attractively compared to the analysts’ estimate of fair value for each of those businesses. At the moment, some of the biggest positions include: Aspen Technology, Cheniere Energy, Compass Minerals, Salesforce.com, Microsoft, Tyler Technologies, Alphabet and Wells Fargo.
This portfolio offers good diversification in my opinion, with five sectors getting more than 10% of the total allocation: healthcare, IT, industrials, financials and consumer staples.
But this attractive portfolio of 50 names comes with an annual management cost of 0.49% per year. I think that’s cheap for such effective investing.
Over the last three years, the MOAT ETF has delivered an average return per annum of 17.9%.
Betashares Climate Change Innovation ETF (ASX: ERTH)
This ETF aims to give investors exposure to leading global companies where at least half of their revenue comes from products or services that that help tackle climate change and other environmental problems with the reduction or avoidance of CO2 emissions.
Some of the areas the ETF is invested in includes clean energy providers, along with leading companies tackling green transport, waste management, sustainable product development, and improved energy efficiency and storage.
In terms of the actual names it’s invested in, readers may have heard of some of the biggest positions: Tesla, Infineon Technologies, Eaton, Ecolab, Vestas Wind Systems, Trane Technologies, Docusign, Cie De Saint-Gobain, Nio and American Water Works. In total, there are 100 businesses in the portfolio.
In terms of sectors, there are various industries represented: car manufacturers, building products, electrical components and equipment, semiconductors, specialty chemicals, heavy electrical equipment and so on.
The index that this ETF tracks has done very well over the last three years, with an average return per year of 36.4%. But past performance is not a guarantee of future performance. There is a huge push for things to be greener, which could benefit this group of businesses’ profit as a whole. There is a growing trend of ‘impact investing’ as well.
