A FTSE 100 ETF isn’t the only passive fund I’d buy in 2019

Invested in a FTSE 100 (INDEXFTSE: UKX) ETF? Consider adding some other ETFs to your portfolio for diversification, says Edward Sheldon.

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.

Gold medal

Image source: Getty Images.

Exchange-traded funds (ETFs) can serve as excellent core holdings within an investment portfolio. For a start, they offer excellent diversification benefits, as you can get exposure to a whole index, or a large portfolio of stocks, through just one ticker. They’re also dirt-cheap, which is another huge plus, as they’re not managed by portfolio managers. Furthermore, there are so many different ETFs available now that it’s easy to get exposure to almost any asset class, geographic region, or segment of the market within minutes.


In the UK, many investors prefer to keep things simple and invest in ETFs that track the FTSE 100, such as the Legal & General UK 100 Index ETF. That’s not necessarily a bad thing, as a FTSE 100 tracker fund will get you exposure to the largest 100 companies listed here in the UK, including names such as Royal Dutch Shell, HSBC Bank, Unilever, and Lloyds Bank.

That said, the FTSE 100 is a little limited in its scope, in my opinion. For example, it doesn’t have the same kind of exposure to the technology sector that the US’s S&P 500 index has (it contains stocks such as Apple and Google). As such, I think it’s a sensible idea to own a selection of more internationally-focused ETFs, alongside a FTSE 100 ETF, in order to boost total portfolio diversification. With that in mind, here are two international ETFs I like the look of.

iShares Edge MSCI USA Quality Factor

If you’re a fan of Warren Buffett, this could be the ETF for you. It’s US-focused and invests on a ‘quality’ basis. Essentially, it looks for stocks that have experienced ‘strong and stable’ earnings, which is similar to Buffett’s investment style.

Top holdings in this ETF currently include names such as Johnson & Johnson, Apple, Facebook, Mastercard, Exxon Mobil Corp and Visa which, to my mind, looks like a fantastic selection of high-quality stocks. Buffett himself owns four out of these six stocks, according to this Berkshire Hathaway portfolio tracker.

This ETF is available on the London Stock Exchange under ticker IUQF (this is the version that trades in GBP) and its fee is just 0.2% per year, which is very low. As such, I think it could be an excellent holding for those looking for exposure to the US.

WisdomTree Global Quality Dividend Growth

If you’re looking for an ETF that invests across the whole world, I’d check out this ‘smart-beta’ fund from ETF specialist WisdomTree. It focuses on high-quality companies that are likely to grow their dividends in the future, and selects companies based on metrics such as return on equity, return on assets, and expected earnings growth.

Currently, the top six holdings in this ETF are Roche, Microsoft, Apple, British American Tobacco, Intel, and Abbvie. So you can see that there are a number of European giants in the mix, although around half the fund is allocated to the US.

This ETF is listed on the London Stock Exchange under ticker GGRP (this is the version that also trades in GBP) and its fee is 0.38% per year, which seems reasonable. To my mind, it could be an excellent global ETF for those who like to focus on dividends.

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 considered so you should consider taking independent financial advice.

Edward Sheldon owns shares in Royal Dutch Shell, Unilever, Lloyds Banking Group, Apple and Google. Edward Sheldon also works as a freelance writer for WisdomTree Europe. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (C shares), Apple, Facebook, Mastercard, and Unilever. The Motley Fool UK owns shares of Johnson & Johnson, Microsoft, and Visa and has the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and short January 2019 $140 calls on Johnson & Johnson. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group. 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

Man changing battery on electric bicycle
Investing Articles

Stock market recovery: my top 2 FTSE 100 shares to buy this month!

The UK index might be trading above 7,500, but many FTSE 100 shares still haven't recovered. In fact, plenty trade…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

4 of my best shares to buy for an autumn stock market bounce

Jon Smith explains which are his best shares to buy depending on different scenarios behind a potential market rally.

Read more »

Risk reward ratio / risk management concept
Investing Articles

Is the GSK share price good value after the 13% fall last week?

Jon Smith considers the reason behind the sharp fall in the GSK share price last week, and wonders if now…

Read more »

Young black woman in a wheelchair working online from home
Investing Articles

At under 5p, are Woodbois shares a no-brainer buy now?

I didn't buy Woodbois shares when they were up over 8p. Now they've fallen back, I'm wondering if I'm seeing…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

Are we about to see a raging bull market for shares?

Investor sentiment looks like it's changing and we could be in the early stages of a bull market for shares…

Read more »

Black father holding daughter in a field of cows
Investing Articles

I’m investing just £5 a day in income stock to aim for £8,000 a year in passive revenue!

Income stocks form the core part of my portfolio, offering me passive income with minimal effort. But I'm reinvesting my…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

3 dividend hero stocks for a monthly passive income

This Fool discusses the investment trusts capable of paying him a lifetime of growing passive income to supplement his portfolio…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

PayPal shares are rising again. Is now the time to buy?

After a massive fall, PayPal shares are starting to recover. Edward Sheldon looks at what's going on and discusses whether…

Read more »