It isn’t hard to see why exchange traded funds (ETFs) are becoming increasingly popular with Australian investors.
These funds give investors the opportunity to invest in a large number of shares through just a single investment.
Not only does this make diversification so much easier, it also means investors can gain exposure to markets or themes that would have been near impossible to do so 10 years ago.
Two popular ETFs that ASX investors might want to get better acquainted with are listed below:
BetaShares Asia Technology Tigers ETF (ASX: ASIA)
The first ETF to look at is the BetaShares Asia Technology Tigers ETF. It gives investors exposure to a portfolio of technology shares in the Asia market that are revolutionising the lives of billions of people in the region. Among the fund’s largest holdings you will find giants such as Alibaba, Baidu, JD.com, Samsung, and Tencent.
Today I am going to focus on Baidu and Tencent. Baidu is often referred to as the Chinese version of Google due to its dominant search engine business. But like Google, there is far more to Baidu than just a search engine.
The company has a focus on artificial intelligence (AI) and is aiming to become an autonomous vehicle powerhouse in the future. In respect to AI, in 2019 the company ranked number one in the amount of AI-related patent applications in China for the second consecutive year.
Tencent is another key holding in the portfolio. It is one of the world’s largest tech companies and has a focus on video games and social media. The company is best known for its WeChat app, which is used by over 1.2 billion people for messaging, e-commerce, digital payments, and entertainment.
VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)
Another ETF that is proving popular with investors is the VanEck Vectors Morningstar Wide Moat ETF. It gives investors a piece of 48 US-based stocks which have sustainable competitive advantages or “moats”.
Moat is a term that Warren Buffett often talks about. The legendary investor likes to invest in companies with moats, as these sustainable competitive advantages support strong pricing power, which in turn underpins solid long-term earnings growth and returns for investors.
Among the VanEck Vectors Morningstar Wide Moat ETF’s holdings are the likes of Amazon, American Express, Boeing, Coca-Cola, Microsoft, Pfizer, and Yum! Brands. Over the last five years the ETF has outperformed the ASX 200 index with a net return of ~16% per annum for investors.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
