2 ETFs for easy investing and good returns

Here are 2 exchange-traded funds (ETFs) that could be key for producing good returns through easy investing.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The rise of passive index investing has been one of the best developments for regular investors in recent times.

Exchange-traded funds (ETFs) are a way to access those index funds through our normal brokerage account rather than investing directly with the provider which takes filling out forms and so on.

But even if you commit to just owning ETFs you still need to decide which ETF(s) to invest in. There are lots of choices. There are some that charge very high management fees and may not be worthwhile.

Here are two I think are good ideas for any portfolio:

iShares S&P 500 ETF (ASX: IVV

Warren Buffett is the world's greatest investor and he advocates that every regular (American) person should just invest in the S&P 500, which is an index of 500 businesses listed in the US.

There are certain elements that make the S&P 500 higher-quality than a typical index. For example, one requirement to be in the S&P 500 is that a business must generally have reported positive earnings in the most recent quarter as well as over the four most recent quarters. This automatically excludes some of the riskier businesses.

What's left is 500 good businesses with the biggest allocations of the ETF to some of the most promising businesses in the world (despite their size) like Microsoft, Alphabet, Apple, Berkshire Hathaway and Amazon.

A good proportion of the underlying earnings of this index comes from outside of the US. Facebook, Microsoft and so on generate earnings from almost every country in the world, it's kind of a global share ETF. This provides great diversification and the ETF has an extremely low management fee of just 0.04% per annum.

Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE)

There aren't many investments on the ASX that can give significant exposure to Asian economies, so why not pick an investment that does?

This ETF invests in around 1,200 Asian businesses with major allocations to some of the region's leading companies like Tencent, Alibaba, Samsung, Taiwan Semiconductor Manufacturing and Ping An Insurance.

The Asian economy is growing quickly in terms of wealth and spending, which should flow through to many of the businesses there like banks, insurance and consumer discretionary companies. 

The Vanguard Asian ETF has delivered an average return of 10.3% per annum since inception in December 2015.

As a whole index, I think it looks fundamentally good value with a return on equity (ROE) ratio of 15.8%, a current earnings growth rate of 11% and a price/earnings ratio of 13x. Its annual management fee is higher at 0.40%, but that may fall as the ETF grows larger. 

Foolish takeaway

I think both of these ETFs would be really good long-term buy-and-hold options. The Asian ETF is probably a bit higher risk due to the China factor, but it's also a lot cheaper than the S&P 500 today which is why it's in my portfolio.

Motley Fool contributor Tristan Harrison owns shares of VANGUARD FTSE ASIA EX JAPAN SHARES INDEX ETF. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Index investing

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Share Market News

What is the Dow Jones Index and which 30 companies make the grade?

Here is a brief history of the world's oldest share market index.

Read more »

Young boy in business suit punches the air as he finishes ahead of another boy in a box car race.
Index investing

Want to outperform 82% of professional fund managers? Buy these ASX ETFs

It's easier than you'd think to beat most ASX fund managers.

Read more »

Man smiling at a laptop because of a rising share price.
Index investing

The ultimate guide to investing in the Vanguard Australian Shares Index ETF (VAS) for maximum returns

This strategy should get you the best bang for your buck with VAS.

Read more »

A little girl holds on to her piggy bank, giving it a really big hug.
Index investing

If I could only buy and hold a single ASX stock right now, this would be it

This ETF would be my first buy in today's market.

Read more »

Ten smiling business people wave to the camera after receiving some winning company news.
ETFs

Vanguard Australian Shares Index ETF has lifted 20% in a year. Which stocks have contributed most to its rise?

This popular ASX ETF seeks to track the performance of the S&P/ASX 300 Index before fees.

Read more »

Happy young woman saving money in a piggy bank.
ETFs

Did you know these ASX stocks are in the Vanguard Australian Shares Index ETF (VAS)?

The VAS ETF is an index fund that tracks the 300 biggest listed companies by market capitalisation.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Bank Shares

Should I dump my holding in CBA shares and buy an ASX S&P 500 tracker instead?

Deciding between CBA and an S&P 500 tracker is a no-brainer for me.

Read more »

Three young people in business attire sit around a desk and discuss.
Opinions

Want to start investing? These 3 ETFs can be a great first step

The first step can be the most important, but it doesn't need to the hardest.

Read more »