BetaShares FTSE 100 ETF (ASX: F100) is an interesting exchange-traded fund (ETF) option to consider for diversification.
What is F100?
The idea of this ETF is that it gives investors access to a portfolio of 100 blue chip companies on the London Stock Exchange.
They are they are biggest 100 companies by market capitalisation that are listed in London.
What shares does it own?
Readers may have heard of many of the largest 10 positions, or at least the products that they sell.
Here they are: AstraZeneca, Unilever, HSBC, Diageo, BP, Royal Dutch Shell, GlaxoSmithKline, British American Tobacco, Rio Tinto and Glencore.
There are a few other names you’ve probably heard of like BHP, Reckitt Benckiser, Barclays and Vodafone.
Possible pros and cons?
Pros
There are plenty of quality blue chips in this portfolio. I think they offer more growth and more diversification than the ASX 200 (ASX: XJO).
The ASX is dominated by the resources and financial sector. But the FTSE 100 has six sectors with an allocation of more than 10%: consumer staples (17.9%), financials (17%), materials (13.4%), healthcare (11.8%), industrials (11.3%) and energy (10.4%).
Brexit has certainly caused a lot of uncertainty about the UK share market in recent years. But that could be about to change as the country operates with more independence.
It could actually be good value. BetaShares says that the forward price/earnings ratio – the multiple that the price is valued at compared to the profit – was just over 12 at the end of September 2021. That’s pretty low in today’s world.
As profits return to normal in the UK, I also believe that the distributions and dividends will normalise as well. The low valuation and the nature of the blue chips in the portfolio could mean a very nice dividend yield from BetaShares FTSE 100 ETF over the next 12 months.
Cons
In terms of cons, there aren’t too many in my opinion.
The annual management fee of 0.45% is not as cheap as it could be be. There isn’t much tech representation in the portfolio, so the margins and profit growth within the ETF aren’t likely to be as strong as some US companies. Currency volatility is also something to keep in mind.
