There are more than 250 ASX exchange-traded products (such as exchange-traded funds (ETFs) or listed managed funds) listed on the Australian share market that are based on global equities.
By comparison, there are almost 100 fewer ETFs or funds based on Australian equities (156 in total).
There has been an explosion in the number of ASX ETFs on the market in recent years as investors embrace the opportunity to buy into a fund online via their usual trading platform.
In one trade, you can gain exposure to a basket of shares for just one brokerage fee. Easy.
But what type of ETF do you want to buy?
In this article, we're going to narrow our focus to sector-based ASX ETFs that invest in global shares.
The pros and cons of sector-based investing
The benefit of sector-based investing is you can invest in one type of industry that you understand well, or perhaps one that is serving an emerging long-term need in the economy, like cybersecurity.
The risk is you may encounter sector-specific headwinds that can affect your portfolio's performance. (Imagine owning an ETF full of travel shares in early 2020.)
You can spread your risk by investing in global equities ASX ETFs instead of just ASX shares ETFs.
This way, you'll gain exposure to more companies and achieve some geographical diversification. This is very handy because it reduces the impact of government decisions on your investment portfolio.
An example is new taxes, such as the Minerals Resource Rent Tax introduced in Australia in 2012.
So, which global sectors are attractive options?
This is what we seek to uncover in this article by showing you the best-performing sector-based global equities ASX ETFs over the past five years.
The top 6 global sector ASX ETFs over 5 years
Of course, past performance is no guarantee of future performance. But this data gives us an insight into the sectors that are hot right now and delivering consistently higher returns than other sectors.
This data has been published by the ASX this month and incorporates the five years to 31 August 2023.
Here are the top six sector-based global equities ASX ETFs over the past five years:
Global X Battery Tech & Lithium ETF (ASX: ACDC) returned an average of 17.66% per annum. This includes reinvested dividends, which have historically averaged a yield of 3.53%.
Global X Morningstar Global Technology ETF (ASX: TECH) returned an average of 13.63% per annum. This includes reinvested dividends, which have historically averaged 0.48%.
Betashares Global Cybersecurity ETF (ASX: HACK) returned an average of 13.25% per annum. This ASX ETF does not pay dividends.
VanEck Gold Miners ETF AUD (ASX: GDX) returned an average of 12.96% per annum. This includes reinvested dividends, which have historically averaged 2.03%.
Betashares Global Gold Miners ETF-Currency Hedged (ASX: MNRS) returned an average of 12.88% per annum. This includes reinvested dividends, which have historically averaged 1.01%.
iShares Global Healthcare ETF AUD (ASX: IXJ) returned an average of 10.73% per annum. This includes reinvested dividends, which have historically averaged 1.28%.
Can you see the trends?
As you can see from our list, the best-performing sector-based ASX ETFs are those reflecting current trends and macroeconomics.
Let's review.
At the top of the list, we have a battery technology and lithium ETF. This reflects the world's transition to clean energy and the creation of a brand-new industry in electric vehicles powered by lithium batteries.
Tech stocks are strong performers because of the world's continuous technological advancement.
Cybersecurity risk has been a challenge that has come along with it, raising demand for security systems.
Investing in gold is a traditional safe haven strategy during times of economic upheaval.
Healthcare stocks are seen as defensive shares, which historically have performed better than other shares during high inflation and cost of living challenges.
More about the No. 1 ETF
The ACDC ETF provides an opportunity to invest in the global economic thematic of energy transition.
It holds 32 Australian and international shares representing the entire lithium cycle. That means it's not just full of lithium mining shares; it's also got electric car manufacturers and battery makers in the mix.
The top five holdings are Tesla Inc 6.02%, Nissan Motor Co Ltd 4.51%, Panasonic Holdings Corp 4.36%, EnerSys 4.25%, and Renault SA 4.21%.
Examples of Australian mining shares held within the ACDC ASX ETF are Allkem Ltd (ASX: AKE), Pilbara Minerals Ltd (ASX: PLS), Mineral Resources Ltd (ASX: MIN), and Core Lithium Ltd (ASX: CXO).
ACDC ASX ETF is an actively managed fund with an annual management fee of 0.69%.
