AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Highlights
- Exchange-traded funds (ETFs) provide diverse investment options for Australian share investors.
- Betashares Global Quality Leaders ETF offers exposure to 150 high-quality global companies.
- Betashares Global Cash Flow Kings ETF focuses on businesses with strong cash flow generation.
Exchange-traded funds (ETFs) present a compelling avenue for investment, offering access to a broad spectrum of shares. Many Australian investors may already have substantial exposure to ASX shares through popular ETFs like Vanguard Australian Shares Index ETF (ASX:VAS) and BetaShares Australia 200 ETF (ASX:A200). However, diversifying with international ETFs can also enhance portfolios, especially in the current market landscape.
The Importance of Diversification
International exposure can be crucial for investors looking to mitigate risk and capitalize on growth opportunities beyond the local market. While the iShares S&P 500 ETF (ASX:IVV) provides access to US-listed businesses, it has increasingly concentrated its investments among a few dominant technology companies. As the performance of these tech giants can be volatile, diversifying into different sectors and regions can offer a more balanced approach.
Betashares Global Quality Leaders ETF (ASX:QLTY)
One notable option for global diversification is the Betashares Global Quality Leaders ETF (ASX:QLTY). This fund includes 150 high-quality businesses worldwide, reflecting a satisfactory level of diversification. The index tracked by this ETF selects global companies based on criteria such as high return on equity, strong profitability, low leverage, and earnings stability.
Some of the prominent companies within the QLTY ETF include Applied Materials, Meta Platforms, Texas Instruments, Cisco Systems, ASML, Roche, Nvidia, and Netflix, each holding approximately 2% of the portfolio. The ETF also has significant allocations in attractive sectors, including 34.5% in Information Technology, along with 15.7% in both Healthcare and Industrials.
Over the past five years, the QLTY ETF has delivered an average annual return of 14.1%. While past performance may not necessarily predict future results, this ETF provides access to companies that exemplify desirable investment attributes.
Betashares Global Cash Flow Kings ETF (ASX:CLFO)
Another appealing option is the Betashares Global Cash Flow Kings ETF (ASX:CLFO), which focuses on businesses known for strong cash flow generation. Cash flow is a critical indicator of profitability, as it enables companies to reinvest for growth, pay dividends, fund share buybacks, strengthen balance sheets, and pursue acquisitions.
The CLFO ETF includes a portfolio of 200 global companies, ensuring a good level of diversification. Some notable names in this ETF are Costco, Berkshire Hathaway, Alphabet, Adobe, Accenture, Cisco Systems, United Health, Procter & Gamble, and ServiceNow.
The index tracked by CLFO has achieved an average annual return of 14.3% over the past five years. After accounting for an annual fee of 0.40%, the returns remain competitive, similar to those of the QLTY ETF.
Investing in ETFs like Betashares Global Quality Leaders ETF and Betashares Global Cash Flow Kings ETF can provide Australian investors with valuable international exposure and diversification. These funds focus on high-quality companies and strong cash flow generation, aligning with prudent investment strategies for enhancing long-term portfolio performance.
