The ASX could be a confusing place to start for beginner investors because of its myriad options. That said, I think that ASX exchange-traded funds (ETFs) could be a great place to start investing.
If we started investing by buying shares of a single business, that could be a good move, depending on the business. However, it doesn't come with much diversification. An investor may need at least 10 businesses in their portfolio to be properly diversified.
But ETFs can enable investors to get substantial diversification through a single investment. One ETF can own dozens, hundreds, or even thousands of businesses.
With that in mind, these two ASX ETFs could fit the bill.
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Betashares Global Quality Leaders ETF (ASX: QLTY)
This ETF is based on looking at the global share market to create a portfolio of some of the highest-quality businesses there are.
To get into the Quality Leaders portfolio, the 150 businesses must rank the highest based on the following factors combined: return on equity (ROE), debt-to-capital, cash flow generation ability, and earnings stability.
What those factors mean is that the businesses have to make considerable profits for how much shareholder money is invested in the business, have a low amount of debt for the size of the business, generate good cash flow, and typically have stable earnings.
A majority of the portfolio is invested in IT and healthcare businesses, which shows that these two sectors can often house strong, consistent businesses.
Of course, past performance is not a reliable indicator of future performance but despite the high interest rates, this ASX ETF has returned an average of 10.7% per annum since it was started in November 2018. Certainly, I think this ASX ETF could be a great start for a beginner investor.
Betashares Global Cybersecurity ETF (ASX: HACK)
This ETF is focused on one particular industry – the global cybersecurity sector.
Sadly, cybercriminals are regularly attacking individuals and organisations. Just look at what recently happened to Optus and Medibank Private Limited (ASX: MPL). This is leading to more demand for cyber defences.
According to BetaShares sources, the global cybersecurity market is expected to rise from US$223.7 billion to US$478.7 billion by 2030. This could be a very useful boost for earnings and, therefore, the underlying share prices as well.
I think cybersecurity is both a defensive sector and a growth area. Organisations still need to maintain good protections, even in a downturn.
Over the last five years, the Betashares Global Cybersecurity ETF has returned an average of 14.5% per annum, though, again, past performance is not a reliable indicator of future performance.
