3 ETFs that could smash the FTSE 100 over the next decade

Long-term returns from the FTSE 100 (INDEXFTSE: UKX) haven’t been that flash. Here are three ETFs that could outperform the index over the next decade.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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.

FTSE 100 exchange-traded funds (ETFs) are popular among UK investors. Yet, over the long term, returns from the UK’s large-cap index have not been outstanding. Many of the largest companies in the footsie have struggled for growth in recent years, resulting in rather lacklustre returns for investors. For example, for the five years to the end of May, the index delivered total returns of around 7.1% per year. Sure, that’s not a bad return, but is it high enough to compensate for the risks of investing in the stock market?

If you’re aiming to generate high returns over the next decade, it could pay to diversify your portfolio outside the FTSE 100. Here’s a look at three ETFs that could potentially generate strong returns over the next 10 years.

Technology

If you’re looking to capitalise on advances in technology, take a look at the ROBO Global Robotics and Automation GO UCITS ETF (LSE: ROBG). This ETF tracks an index of companies that are involved in the robotics industry. Over the last three years, it’s returned nearly 80%. 

Robotics is not a new field, but robot technology has advanced significantly in recent years and looking ahead, the industry has the potential to grow at an exponential rate. Robots are now significantly more intelligent than they were in the recent past and today’s robots can perform sophisticated tasks across a wide range of industries.

Already, many companies are employing the technology to enhance productivity. Amazon, for example, uses a large number of bots in its warehouses. By 2030, up to a third of UK jobs could be done by robots, according to consultancy firm PricewaterhouseCoopers. As such, now could be a good time to invest in the sector, while it’s still in its infancy.

But do note that an ETF of this kind is higher risk than a FTSE 100 ETF. Therefore, it may not be suitable for all investors.

Emerging markets

One ETF that looks to offer excellent exposure to fast-growing economies is the Vanguard FTSE Emerging Markets UCITS Fund (LSE: VFEM).

It specialises in a high-growth area that really could be worth considering if you’re looking for strong long-term returns: the world’s emerging markets. They are home to 80% of the world’s population and are growing at around twice the pace of developed markets. From a long-term investment perspective, there’s significant appeal.

Vanguard tracks an index of large and mid-cap companies in countries across Asia, Africa, Latin America and Europe. It currently holds over 1,000 stocks with strong exposure to China, Taiwan and India. It could be a rewarding investment for those with a long-term mindset.

Mid-caps

Lastly, if the ETFs listed above are too adventurous for you, consider the Vanguard FTSE 250 UCITS ETF (LSE: VMID). This ETF is UK-focused, but instead of tracking large-cap companies, it tracks the largest 250 stocks outside the FTSE 100.

The FTSE 250 is home to many fast-growing companies, and as a result, the index has historically generated excellent long-term returns for investors. For example, for the five years to the end of May, investors enjoyed returns of 10.7% per year. That’s a 50% higher return than the FTSE 100 each year. 

For those who prefer to invest in the UK, yet would like a little more growth over the long term, VMID could be a good UK-focused play.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has no position in any stocks mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

1 Warren Buffett stock I’m buying now

Coca-Cola is the fourth-largest holding in Warren Buffett’s Berkshire Hathaway. I’ll explain why I’m following Buffett and buying more.

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

I bought 4,403 Lloyds shares in June and 4,856 in September. Here’s what they’re worth now

Harvey Jones thought he was bagging a FTSE 100 bargain when he bought Lloyds shares on two occasions last year.…

Read more »

Young woman holding up three fingers
Investing Articles

I’m itching to buy these 3 hidden FTSE gems in a Stocks and Shares ISA

Harvey Jones is keen to add these three FTSE 100 companies to his Stocks and Shares ISA before April. Only…

Read more »

Close up of a group of friends enjoying a movie in the cinema
Investing Articles

How I’d try and turn just £1 a day into a fabulous £54,485 passive income for life

By investing small, regular sums in FTSE 100 shares I can potentially generate a huge passive income stream. It won't…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’d aim for a million buying under a dozen shares

Christopher Ruane explains why less could be more when it comes to building a share portfolio if he wants to…

Read more »

Investing Articles

Rolls-Royce shares are up over 1,000% since 2020! Am I too late to buy?

Rolls-Royce shares now cost over tenfold what they did in the firm's 2020 rights issue. Our writer thinks they may…

Read more »

Investing Articles

1 top UK growth stock for my tech portfolio in 2024

Up 30% in just one year, this growth stock looks positioned to continue on the path of substantial gains, according…

Read more »

Buffett at the BRK AGM
Investing Articles

I’d follow Warren Buffett to target effortless passive income

Warren Buffett knows a thing or two about building passive income streams. By learning from the Sage of Omaha, so…

Read more »