Here are my 2 favourite ASX ETFs for 2025

These funds could offer investors the right mixture of diversification and quality.

| More on:
Happy couple enjoying ice cream in retirement.

Image source: Getty Images

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

A few ASX-listed exchange-traded funds (ETFs) really appeal to me because of how their portfolios are created and the types of businesses they're focused on.

I appreciate the exposure to broad share markets that Vanguard Australian Shares Index ETF (ASX: VAS), Vanguard All-World ex-US Shares Index ETF (ASX: VEU) and BetaShares Diversified All Growth ETF (ASX: DHHF). But there are a few specific investments I'd prefer.

It seems 2025 could be a year of elevated volatility amid political change in the United States, with possible tariffs, an uncertain inflation picture and a reduction of expected interest rate cuts.

Which sorts of investments could be good in this environment during 2025 and the long term? I have a few ideas, including the two ASX ETFs below.

VanEck MSCI International Quality ETF (ASX: QUAL)

It's hard to say which countries or sectors will outperform in 2025, so this fund, with its diversified portfolio of 300 businesses, could be effective.

Let's look at the country allocation to demonstrate its geographic diversification. The QUAL ETF has at least 0.5% invested in several countries, including the US, Switzerland, the United Kingdom, Japan, the Netherlands, Denmark, France, Sweden, Ireland, Canada, and Germany.

How are companies chosen for the portfolio?

There are a few fundamentals that make these businesses in the portfolio among the highest-quality companies in the world.

First, they must have a high return on equity (ROE). That means the companies must generate a high level of profit for the amount of shareholder money that is kept within the business.  

Second, these companies must have demonstrated earnings stability. That suggests they rarely see profit decline, so earnings usually are heading upward in the right direction.

Third, the shares within the ASX ETF should have low financial leverage. That means little debt for their size, implying little interest costs and strong balance sheets.

When you put all of these elements together, the ASX ETF offers a strong, quality portfolio that could outperform the broader market, particularly in a downturn.

In the last ten years, it has delivered an average annual return of 15.6%. Past performance is not a guarantee of future performance, but that shows what this ASX ETF is capable of.

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

I also believe that the MOAT ETF could be a good investment for 2025 and beyond. It invests in US businesses with strong economic moats.

An economic moat refers to the company's competitive advantage. What advantages or capabilities does a particular business have to stay ahead of the competition?

Morningstar analysts look to see whether the companies have competitive advantages, such as cost advantages, a leading brand, network effects, patents, licenses, switching costs, or efficient scale.

The analysts decide the business has a wide moat if they believe the competitive advantage will almost certainly last at least 10 years and probably extend to 20 years.

Businesses are only added to the MOAT ETF portfolio if the Morningstar analysts believe the target share is trading at an attractive price to what they believe it's actually worth.

Therefore, the MOAT ETF (currently with 51 holdings) has a high-quality portfolio full of good-value businesses. I think that's a winning combination.  

Since its inception in June 2015, this ASX ETF has returned an average of 16.2% per annum. Time will tell what level of return it can achieve this year and over the next ten years.

Should you invest $1,000 in Macquarie Group Limited right now?

Before you buy Macquarie Group Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Macquarie Group Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

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

More on ETFs

Cheerful boyfriend showing mobile phone to girlfriend in dining room. They are spending leisure time together at home and planning their financial future.
ETFs

3 strong ASX ETFs I would buy and hold forever

Let's see why these funds could be great options for investors looking to make long term investments.

Read more »

Gold spelt out in gold block letters.
Gold

Should I buy gold ETFs or ASX 200 gold stocks in this environment?

What’s the best way to make money from a fast-rising gold price, ASX gold stocks or ETFs?

Read more »

A man sees some good news on his phone and gives a little cheer.
ETFs

Up 40% in 2025, why this ASX ETF may just be getting started

This ASX ETF has consistently beaten the market.

Read more »

The letters ETF with a man pointing at it.
ETFs

The pros and cons of buying iShares S&P 500 ETF (IVV) this month

Is this leading fund a good buy today?

Read more »

ETF written on wooden blocks with a magnifying glass.
ETFs

2 amazing ASX ETFs I'd buy for market-beating returns

These funds have a lot of potential, in my view.

Read more »

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

$10,000 invested in the ASX 200 5 years ago is now worth…

Guess how much $10,000 invested in the ASX 200 five years ago is worth today!

Read more »

ETF written in yellow with a yellow underline and the full word spelt out in white underneath.
ETFs

10 ASX ETFs to buy in May with $10,000

These funds offer investors access to many of the best companies in the world.

Read more »

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
ETFs

MOAT ETF is up 10% in 2 weeks. Is this ASX ETF still good value?

Let's see if it is too late to buy this popular fund.

Read more »