3 top ASX ETFs I'd buy for instant diversification

I believe these funds can offer Aussie investors a lot.

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ASX-listed exchange-traded funds (ETFs) can offer investors a lot of benefits if their portfolios are too heavily weighted towards ASX shares.

The ASX share market is a great market, but it only represents a small portion of the global share market. If we don't get exposure to the global share market in some way, we're missing out on a vast array of opportunities.

There are only a handful of sizeable businesses on the ASX that have successfully expanded internationally to unlock significant earnings growth potential from new markets. There are plenty more great companies listed elsewhere.

But, we don't have to try to find all those individual opportunities ourselves. Instead, we could go with an ASX ETF to do the work for us of investing in numerous international shares.

Excellent options

The three funds I'll mention in this article – though there are plenty of compelling ones to choose from – are Vanguard MSCI Index International Shares ETF (ASX: VGS), Betashares Global Quality Leaders ETF (ASX: QLTY), and VanEck MSCI International Small Cos Quality ETF (ASX: QSML).

I think owning any of these ASX ETFs would be a useful addition.

The VGS ETF owns over 1,000 holdings, including blue chips from various countries, including the US, the UK, Canada, Germany, France, Switzerland, Denmark, Singapore, the Netherlands, and so on. It offers significant diversification because it's a simple way to invest in a large portion of the global share market's market capitalisation into names like AppleAlphabetMicrosoftAmazon, and Meta Platforms.

The QLTY ETF has a more refined approach. It owns 150 businesses worldwide. It only invests in businesses that have a high return on equity (ROE), stable (and usually growing) profits, good cash flow, and a low level of debt. By just focusing on great businesses, I think this ASX ETF gives itself a better chance of producing good returns.

Turning to the QSML ETF, it's invested in 150 smaller businesses, which are viewed as quality due to their high ROE, earnings stability, and low financial leverage. Small businesses can be exciting because they usually have a long growth journey ahead until they become large businesses. This gives them the potential to deliver good returns.

Foolish takeaway

Each of these ASX ETFs offers something quite different to the S&P/ASX 300 Index (ASX: XKO), starting with the international earnings exposure. I also believe the ASX ETFs have the ability to outperform the ASX 300 over the longer term, particularly the QSML ETF and the QLTY ETF, because of their quality focus.

If anything, it could be wise to diversify some of our investment money away from the Australian economy because we already (probably) rely on Australia for our earnings from work.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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 Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Vanguard Msci Index International Shares 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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