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.
FTSE 100 ETF
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.
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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.