The largest businesses on the ASX are perhaps some of the slowest growing.
Telstra Corporation Ltd (ASX: TLS) isn't going anywhere quickly. The big banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) face a number of growth issues, including the huge costs and refunds from the Royal Commission.
Sadly, that means that diversified ASX index options like Vanguard Australian Share ETF (ASX: VAS) don't actually offer much growth because of how large those slow-growing businesses are in the index. I suppose the dividend income isn't too bad.
Over the long run I think growth-orientated exchange-traded funds (ETFs) will create stronger total returns, like these two ideas:
iShares Asia 50 ETF (ASX: IAA)
Asia has been growing at a faster rate than Western countries for a long time. China in-particular has been a powerhouse of economic growth. The growth rate is slowing, which is understandable considering the problem of size. But, just because the GDP growth is slowing doesn't mean businesses aren't picking up the growth pace.
The Asian middle class continues to grow and get wealthier every year, which should lead to more revenue and profit for Asian-based businesses like Tencent, Samsung, China Construction Bank and China Mobile – some of this ETF's largest holdings.
Risks are higher with this ETF than many others – trade wars, Government and regulations could all be disruptive. So, I wouldn't put more than a few percent of my portfolio to this ETF. But, I think the diversified growth opportunity is too big to ignore.
Betashares Global Cybersecurity ETF (ASX: HACK)
Another trend that keeps on going is the continued importance of data, intellectual property and connectivity.
You don't have to physically rob a business to steal things from it any more. Tax & health information must be protected by Governments. Credit information must be protected by Visa, MasterCard and so on.
Cybersecurity is increasingly important. The most recent example was where Facebook details were hacked from millions of users.
You can imagine why this Betashares Cybersecurity ETF has gone up 41% over the past year. Some of its top holdings include Symantec, Raytheon, Cisco Systems, Palo Alto Networks and Splunk.
Foolish takeaway
Whilst both of these ETFs have been solid performers, I think the upcoming few years could show a particular level of outperformance compared to the ASX, which is why I'd rather have them in my portfolio.
