Hoping for market-beating returns? I'd buy these 2 top ASX ETFs

I'm backing both of these funds to deliver good returns over the long term.

| More on:
ETF written on cubes sitting on piles of coins.

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

sdf

ASX-listed exchange-traded funds (ETFs) can be a great investment option, and I think there are a few ideas out there that could beat the S&P/ASX 200 Index (ASX: XJO) in the coming years.

I believe the ASX 200 can deliver satisfactory returns over the long term, but there could be ASX ETFs that can deliver stronger returns because of the businesses they're invested in.

ASX companies like BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA) have demonstrated their ability to achieve industry-leading performance. However, banking and mining aren't exactly known for delivering rapid and consistent earnings growth.

I'm going to talk about two ASX ETFs that I think could outperform the ASX 200.

VanEck MSCI International Quality ETF (ASX: QUAL)

This fund aims to put together a portfolio of the best global businesses. It has tried to do this in a quantifiable way, so it's not based on opinions.

To enter this portfolio, businesses must rank well on three key fundamentals: a high return on equity (ROE), a high level of earnings stability, and low financial leverage.

In other words, these companies make a lot of profit based on how much shareholder money is in the business. Their profits rarely drop, and their balance sheets don't have much debt.

When you put those factors together, that's a strong combination for a business. The portfolio has 300 of these great businesses from across the world. That's a pleasing level of diversification, in my view.

I think these are the sorts of businesses that are capable of beating the ASX 200 over time.

While past performance is not a guarantee of future returns, this ASX ETF has been remarkably consistent. It has delivered an average return per annum of 15.5% over both the last three years and ten years to 31 January 2025. Volatility will happen, but I think this is a great ASX ETF to own.

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

This ASX ETF is constructed quite differently to the QUAL ETF, but it's still very compelling to me.

The Morningstar analysts in charge of this portfolio look for businesses with strong competitive advantages (called economic moats) that are expected to almost certainly endure for the next decade and more and enable good profits.

Morningstar analysts are looking for several different competitive advantages, such as cost advantages, intangible assets, switching costs, network effects, and efficient scale.

With a watchlist of these great businesses, the MOAT ETF only invests in one when the valuation is attractively below what they think is a fair value price.

Therefore, this ASX ETF owns a portfolio of around 50 US shares which have great competitive advantages and are trading at a good price.

Impressively, the MOAT ETF has returned an average of 16.3% per annum since its inception in June 2015. Again, I'm not expecting future returns to be as good as that, but I think the ASX ETF has a high potential to beat the ASX 200 in the coming five years.

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 BHP Group and 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

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

The best ASX ETFs to buy and hold for 10 years

Here are three funds that could be worth holding tightly to until 2035.

Read more »

Two people work with a digital map of the world, planning their logistics on a global scale.
ETFs

This 1 ASX ETF could be all you need for global growth

Here's one easy (and great) way to invest across the globe.

Read more »

Smiling elderly couple looking at their superannuation account, symbolising retirement.
ETFs

This high-yield ASX ETF could be perfect for retirees

This fund lets you own a slice of BHP, CBA, Telstra and more.

Read more »

The letters ETF with a man pointing at it.
ETFs

I think these are two of the best ASX ETFs to buy in 2025

I think these ETFs are among the best of the best.

Read more »

A silhouette of a soldier flying a drone at sunset.
ETFs

$10,000 invested in DFND ETF a year ago is now worth…

US pressure on Western nations to boost defence spending has alerted investors to new opportunities.

Read more »

A panel of four judges hold up cards all showing the perfect score of ten out of ten
ETFs

Top 3 ASX ETFs to buy in the second half of 2025

Let's see why these funds could be worth considering for the second half of the year.

Read more »

A man with a wide, eager smile on his face holds up three fingers.
ETFs

3 reasons why the iShares S&P 500 ETF (IVV) is a great long-term buy

I think this fund offers lots of what investors should look for.

Read more »

green etf represented by letters E,T and F sitting on green grass
ETFs

How have these thematic ASX ETFs performed in 2025?

Has thematic investing been a viable strategy this year?

Read more »