2 high-quality ETFs to buy for any portfolio

These 2 quality exchange-traded funds (ETFs) would be good to buy for a portfolio including Betashares Global Quality Leaders ETF (ASX:QLTY).

| More on:

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

I think there are some high-quality exchange traded funds (ETFs) that could make good investments for any portfolio.

There are plenty of ETFs out there. But I think country-specific ones like Vanguard Australian Shares Index ETF (ASX: VAS) miss out on other great global businesses. The industry-specific ones like Betashares Global Cybersecurity ETF (ASX: HACK) are good if you find ones that give exposure to the right industry.

But the below two ETFs offer almost everything you could want in my opinion:

Betashares Global Quality Leaders ETF (ASX: QLTY)

As the name may suggest, this ETF looks to give Aussies exposure to global, quality businesses.

What does 'quality' mean? To make it into this ETF's holdings it has to rank on return on equity (ROE), debt to capital, cashflow generation ability and earnings stability.

This combination of useful factors combines into a very strong portfolio in my opinion.

It owns 150 quality businesses from across the world. Just under a third of them are IT businesses, with just over a quarter being healthcare. Other investments are in the sectors of industrials, communication services, consumer discretionary, financials and consumer staples.

Whilst almost two thirds are headquartered in the US, it's important to remember that many of those American companies generate earnings from right across the world. Other countries with an allocation of more than 2.5% are: Japan, Switzerland, Denmark and France.

I'm sure you want to know what some of the biggest positions are, here are the largest 10: Keyence, Nvidia, Intel, Nike, Novo Nordisk, Texas Instruments, Apple, Adobe, Intuit and Intuitive Surgical.

This ETF has an annual management fee of 0.35% per annum. It has performed really well for investors since inception in November 2018, returning 19.6% per annum after fees.

BetaShares Global Sustainability Leaders ETF (ASX: ETHI)

Many investors may think that investing in 'ethical' businesses may mean that you're sacrificing returns. But that isn't the case with this ETF.

Since inception in January 2017, BetaShares Global Sustainability Leaders ETF has delivered returns of 20.9% per annum. That's after the annual management fees of 0.59% per annum, which is very cheap compared to active managers who give access to an 'ethical' investment style.

The problem with investing ethically is that everyone has different thoughts of what counts as ethical. Some people may be fine with junk food but not gambling. Alcohol may be okay for some investors, but not oil or coal companies.

I think this ETF provides a strong level of ethical screening, whilst providing it for an attractively low price.

BetaShares Global Sustainability Leaders ETF excludes things like gambling, tobacco, armaments, uranium and nuclear energy, alcohol, junk food, pornography, human rights and supply chain concerns and so on.

It particularly aims to invest in businesses that are 'climate leaders', meaning ones that are carbon efficient. That means they're in the top third of their respective industry or are otherwise good performers in relation to scope 4 carbon emissions.

Which businesses pass this pretty stringent list of criteria? These are the top 10 holdings: Apple, Nvidia, Mastercard, Home Depot, Visa, Adobe, Tesla, PayPal, Netflix and Toyota.

Almost 40% of the ETF is invested in IT businesses, so it has a high allocation to a high-growth, high-margin sector. Healthcare is the second biggest allocation with a 15% position.

About 28% of the ETF isn't invested in US-listed businesses, so it offers substantial global diversification for Aussies. It owns 200 businesses overall. 

I think this shows that ethical investing can generate really strong investment returns if you're invested in really good businesses.

Foolish takeaway

I'd be happy to buy both of these ETFs for my portfolio. I think both of them can keep performing over the long-term.

But I'm also looking at other ASX share opportunities at the moment.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS. 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

a business person in a suit and tie directs a pointed finger upwards with a graphic of a rising bar graph and an arrow heading upwards in line with the person's finger.
Index investing

BetaShares Nasdaq 100 ETF (NDQ) surges 7%: a reminder not to delay a good buying opportunity

Waiting for a bigger dip could cost you...

Read more »

ETF written on wooden blocks with a magnifying glass.
Index investing

Australian equities ASX ETFs set for record quarter

International turmoil has caused a surge in popularity for domestic equities ASX ETFs this quarter.

Read more »

Cubes placed on a Notebook with the letters "ETF" which stands for "Exchange traded funds".
ETFs

If I could only buy 1 ASX ETF, it would be this one

This ETF simply covers all bases...

Read more »

ETF written on wooden blocks with a magnifying glass.
ETFs

VAS vs VHY: Which is the better Vanguard ETF?

A higher yield isn't always the best choice.

Read more »

A woman looks questioning as she puts a coin into a piggy bank.
Index investing

The Vanguard US Total Market ETF (VTS) is down 8% from its peak. Is it time to buy?

Like many index funds, VTS is looking cheap right now.

Read more »

ETF written on wooden blocks with a magnifying glass.
ETFs

Meet the 2 new Vanguard ETFs that just hit the ASX

Vanguard has something for everyone with these new funds...

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.
Index investing

Vanguard Australian Shares ETF (VAS): Should we be worried about CBA?

Has CBA grown too big for VAS' boots?

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Index investing

Is the Vanguard Australian Shares Index ETF (VAS) a buy at $105?

It can still be a good idea to buy index funds when they look expensive...

Read more »