2 excellent ASX ETFs I'd buy for diversification and growth

Most portfolios could benefit from the addition of these two names.

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Investing in exchange-traded funds (ETFs) can make a lot of sense. Excellent ASX ETFs can provide both diversification and growth for Aussies.

When we consider some of the most popular ASX-focused ETFs like Vanguard Australian Shares Index ETF (ASX: VAS) and BetaShares Australia 200 ETF (ASX: A200), they are obviously focused on ASX shares with largely domestic earnings. ASX financial and mining shares make up a big part of those portfolios.

Here's why I think Aussies can benefit by getting exposure to investments that generate earnings largely from the global economy.

BetaShares Global Sustainability Leaders ETF (ASX: ETHI)

This investment comprises around 200 businesses that have made it through a number of ethical screenings.

It starts with the global share market, then excludes businesses involved in fossil fuels, gambling, alcohol, tobacco and so on. Stocks in the portfolio have been identified as climate leaders or are helping the world decarbonise. They must also have gender diversity on their boards and be free of human rights concerns about the supply chain.

It turns out that the 200 biggest ethical businesses that made it into the portfolio have been good performers for investors. Since January 2017, the ETHI ETF has delivered an average return per annum of 16.6%. Remember, though, there's no guarantee good returns will continue.

Information technology makes up around a third of the portfolio. I think it's an attractive sector to invest in because of the margins and growth that tech companies seem capable of producing.

The United States makes up 71% of the country allocation, but plenty of other countries have sizeable weightings, including Japan, Germany and the Netherlands.

Betashares Global Cybersecurity ETF (ASX: HACK)

Some ASX ETFs can provide us with very targeted diversification. In my opinion, one of the most important sectors these days is cybersecurity because of how much data is online. We conduct banking and e-commerce transactions online, and connect with government services.

I think cybersecurity earnings have a strong outlook. There could be more people going online more often around the world in five or ten years from now.

According to Statista, the global cybersecurity market is expected to grow from US$184.2 billion in 2020 to US$478.7 billion in 2030.

I think the HACK ETF's portfolio gives Aussies exposure to a mixture of global leaders and emerging players in this appealing industry. There are very few ASX options for investing in cybersecurity.

Past performance shouldn't be used as a reliable indicator of future performance with this, but since it listed in August 2016, the ETF has delivered an average return of 16.6%.

I like the financials of cybersecurity, because it seems to have good operating leverage. Once a business has developed the software, it just needs to sell to more customers. And that should lead to rising profitability and helpful shareholder returns.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended BetaShares Global Cybersecurity ETF. The Motley Fool Australia has positions in and has recommended BetaShares Global Cybersecurity ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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