Providing protection against capital gains tax and dividend tax, it gives investors much more financial firepower to grow their wealth. And with a generous £20,000 annual contribution allowance, those who can max out their accounts have a great chance of achieving financial security

With a £20k ISA, how much could you expect to make over the next 10 years? And what sort of stocks should you consider for blowout returns?

Risk vs reward

Naturally, the shares, trusts, funds, and other securities an investor buys will have a direct impact upon the money they make over time.

The rule is generally the riskier the asset, the greater the potential return (or loss). Some ISA users prefer to put their excess cash in defensive assets like utilities and consumer staples stocks, perhaps bonds as well. These can be less volatile, but typically provide a lower long-term return.

The best blend of risk and reward will differ among investors. But history shows a balanced portfolio across asset classes, sectors, and regions can deliver an excellent return without exposing one’s money to unacceptable danger.

What could a balanced portfolio look like?

Here’s an example of a well-balanced Stocks and Shares ISA:

Growth:

• Nvidia
• BAE Systems
• Apple
• Games Workshop
• AstraZeneca

Value:

• Diageo
• Lion Finance
• Greggs
• Merck
• Xtrackers MSCI World Value ETF (LSE:XDEV)

Dividends:

• Legal & General
• Verizon Communications
• Tritax Big Box REIT
• SSE
• Global X SuperDividend ETF

What makes this portfolio so special? You’ll quickly see that it’s set up for growth, value, and dividends, which can provide a stable return across the cycle. The first two categories are included for capital growth, and the latter for reliable passive income.

You’ll also notice it covers a range of sectors from pharmaceuticals and defence, through to semiconductors, insurance, and retail. And it’s packed with multinational companies, which protects returns from weakness in one or two geographies.

Finally, thanks to the inclusion of two exchange-traded funds (ETFs), the portfolio provides exposure to a total of 530 global shares. Funds like these can supercharge an investor’s portfolio without meaning they have to compromise on returns.

A top fund

Take the Xtrackers MSCI World Value ETF, which holds shares in roughly 400 different companies. It’s delivered an average annual return of 13.4% over a five-year horizon.

The fund tracks the performance of “large and mid-cap companies from global developed markets” based on criteria like price-to-book (P/B) ratios and price-to-earnings (P/E) multiples.

Its strategy is built on the idea that the shares it holds will rise when the market wises up to their excellent value. It’s an approach that’s proved massively successful, as those returns since late 2020 show.

Like any stocks-based ETF, this Xtrackers product could fall when broader share markets drop. But on the plus side, a focus on cheap shares can limit any downside.

With the whole portfolio I’ve described, I think an annual return in line with the stock market average of 9% is possible. If so, this could turn a £20,000 ISA today into one worth almost £50k (£49,027) after 10 years.

The post How much could a £20k Stocks and Shares ISA earn in the next 10 years? appeared first on The Motley Fool UK.

With this in mind, here are three quality ETFs to consider for a hopefully five-star Stocks and Shares ISA.

AI fund

Nvidia‘s blockbuster interims last week underline the huge investment opportunity of artificial intelligence (AI). These showed revenues up a 56% in the three months to June, to a mammoth $46.7bn as demand for its high-power microchips surged.

The AI growth potential is huge, though investing in one company to capitalise on it carries significant concentration risk. This is why the iShares AI Innovation Active UCITS ETF (LSE:IART) — which holds 39 different tech shares — could be a balanced option to consider.

As well as holding Nvidia shares, the fund owns other AI pioneers including social media giant Meta, software developer Microsoft and cloud storage provider Snowflake.

This iShares product has only been in existence since January. Its performance has been turbulent as concerns over the economic outlook have depressed investor confidence. But I’m optimistic it will deliver big long-term returns as AI adoption gallops higher.

Value hero

Owning value shares in a portfolio can safeguard it from stock market volatility. The theory is that their cheapness can provide a cushion when everything else is falling.

Running with this idea, I believe the Xtrackers MSCI World Value ETF (LSE:XDEV) is worth serious attention. It holds roughly 400 shares in its portfolio, and bases its strategy around popular metrics like the price-to-earnings (P/E) and price-to-book (P/B) ratio.

Underlining its value credentials, some of its largest holdings include chipmakers Qualcomm and Intel. These also have substantial growth potential amid the AI boom. But they trade at a fraction of the price of some of Silicon Valley’s big beasts like Nvidia.

I also like this Xtrackers ETF because of its wide geographic footprint. Be aware however, that US shares represent its single largest weighting (38%), which may present a problem if investors rotate out of Wall Street equities.

Dividend ETF

A portfolio with dividend shares can help investors make a decent return when stock market weakness limits the potential for capital gains. I believe the Global X SuperDividend ETF (LSE:SDIP) is one such fund to look at for a long-term passive income.

This ETF tracks the performance of 100 of the highest-yielding dividend shares on the planet. As a consequence, it has one of the largest forward dividend yields of any London-listed ETF, at 9.7%.

What I also like is its strategy of paying dividends out monthly (it’s done this consistently for 13 years). This gives investors regular access to cash rewards, and therefore the chance to reinvest them sooner to boost the wealth compounding effect.

Despite its high weighting of cyclical and energy shares — these account for more than 50% of the entire fund — I think it’s a top passive income source to consider.

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With this in mind, here are three top funds I think savvy share pickers should consider.

Growth

At 8.1%, the Global X Silver Miners ETF (LSE:SILG) has enjoyed average annual price growth since its launch in mid-2022. That’s better than both the FTSE 100 and FTSE 250, and has been driven by a sharp rise in the silver price.

As the name implies, this fund invests in silver producers like Wheaton Precious Metals, Fresnillo, and Pan American Silver. This approach involves greater risk than investing in a price-tracking fund. However, it also opens the door to supersized returns, as miner profits typically grow at a faster rate than metal prices in bull markets.

Can silver continue climbing, though? I think it can, as a multitude of macroeconomic worries (from government deficits and sticky inflation, to thumping trade tariffs) drive demand for safe-haven assets. Silver prices reached new 14-year peaks near $39.20 an ounce just today (14 July).

Dividends

The iShares UK Dividend UCITS ETF (LSE: IUKD) provides targeted investment to 50 of the highest-yielding shares across the Footsie and FTSE 250. Its 12-month trailing yield is 5.4%, a good distance higher than the 3.4% for UK blue-chip shares.

Since the summer of 2020, it’s provided — through a combination of capital gains and passive income — a average annual return of 13.9%. While its narrow focus on British stocks involves greater geographical risk, this hasn’t impacted its ability to generate exceptional shareholder profits in recent years.

In fact, if the recent shift from US to European equities continues, its emphasis on London-listed companies could give returns an extra boost.

Significant holdings here include British American Tobacco, Legal & General, BP, and National Grid shares.

Value

The Xtrackers MSCI World Value ETF (LSE:XDEV) tracks a basket of large and mid-cap companies from across the world. As well as providing solid geographic diversification, it provides exposure to rock-solid blue chips alongside smaller shares that can deliver better-than-average growth.

And as the name implies, it does so with value characteristics in mind. More specifically, it selects shares based on factors including “price-to-book-value (P/B), price-to-forward earnings (P/E), and enterprise value-to-cash flow from operations (EV/CFO)“.

Taking a value approach can deliver market-beating capital gains over time, as high-quality shares with depressed valuations can rebound strongly when market sentiment changes. During the past five years, this ETF has delivered an average annual return of 13.6%.

Major holdings include Cisco Systems, Intel, Pfizer, and HSBC. Be mindful, however, that its high weighting of cyclical shares may cause underperformance during broader economic downturns.

The post Looking for growth, dividends, or value? These 3 ETFs could be smart ideas to consider appeared first on The Motley Fool UK.

By comparison, putting aside a fiver a day seems like too simple of a solution. In fairness, it’s not the same as it won’t bring in any immediate income. Rather, this strategy focuses on reducing today’s expenses to secure a more comfortable future.

Set and forget

A core tenet of this strategy is ‘set-and-forget’. Once it’s set up, it can be left to do its thing without further action. All it requires is saving £5 a day and investing it into the portfolio. With certain accounts, this can be automated to occur monthly.

This is considered a good strategy for beginner investors because it avoids the risk of panic-selling. Investors lacking market experience are more likely to make mistakes by trying to actively manage a portfolio. Often, a portfolio has a better chance of growing if left to its own devices.

That is, assuming the right stocks are chosen. Volatile growth stocks in emerging industries are not the way to go here, as their futures are uncertain. A better option could be an investment trust or index fund with a long history of solid performance.

The aim’s to compound the investment exponentially until the desired amount’s reached. At that point, it can be rebalanced into a portfolio of high-yield dividend stocks. The regular payments from the dividend portfolio could deliver a steady second income.

A stock to consider

When considering a set-and-forget strategy, the usual mix of 10 stocks won’t do. Even the most well-diversified portfolio needs the occasional rebalancing. For experienced investors willing to put in the time and effort, it can be more successful. But for the aim of this exercise, an index tracker like Xtrackers MSCI World Value ETF (LSE: XDEV) may be the best option to consider.

The ETF’s enjoyed annualised growth of 8.7% over the past 10 years. Since it’s highly diversified across almost all markets in the world, it’s resilient against a downturn in any individual region or industry. Even though past performance isn’t indicative of future results, I believe its growth trajectory’s fairly reliable.

The fund aims at high-value stocks using proven metrics like the forward price-to-earnings (P/E) ratio, price-to-book (P/B) value and enterprise value (EV) ratios. However, it still has around 40% of its allocation in North America, putting it at risk if this specific region’s dips. It also incurs a total expense ratio (TER) of 0.25% which is deducted from the returns.

An investment of £5 a day could grow to around £13,600 in five years. Even with a decent dividend yield, that would only return around £100 a month of income. That’s why it’s best to start as soon as possible and think long-term. Investing in the stock for 20 years could grow the pot to £100,000. Shifting that much capital into a portfolio of high-yield dividend stocks could pay out around £670 a month.

While that may not sound like much, it requires a small investment, little effort and minimal risk. A fiver a day seems like a small price to consider. 

The post My £5-a-day starter plan to build a regular second income by 2030 and beyond appeared first on The Motley Fool UK.

Fortunately, the growth of the exchange-traded fund (ETF) has made diversifying much easier. Individuals now have thousands of these products — which spreads an investor’s capital across a basket of assets — to choose from.

Buying individual shares is still an important part of a winning portfolio, in my opinion. But ETFs are an effective weapon in building wealth and balancing risk, and especially for new investors.

2 top funds

With this in mind, here are two ETFs that new Stocks and Shares ISA or Lifetime ISA investors might want to consider today.

1. Xtrackers MSCI World Value ETF

The Xtrackers MSCI World Value ETF (LSE:XDEV) invests in shares using a value strategy. More specifically, it takes into account well-used metrics including the forward price-to-earnings (P/E) ratio, price-to-book (P/B) value, and enterprise value-to-cash-flow from operations (EV/CFO) ratio.

Investing in value shares can leave for significant capital appreciation. The theory is that they can rocket in price once the market wises up to their cheapness.

This isn’t the only advantage of investing in value stocks. Such a strategy can also provide investors with a margin of error, as their low valuations often limit the risk of price falls if the company encounters trouble.

The fund helps investors to manage risk in other ways too. It invests in large- and mid-cap companies from developed markets only (like the US, Japan and Britain). In total, it has holdings in more than 400 business spanning a multitude of sectors. These include Cisco Systems, IBM, Toyota and Shell.

With around 40% of earnings sourced from the US, it may be more vulnerable to a Stateside downturn than some other ETFs. But it’s still worth a very close look, in my opinion.

2. L&G Quality Equity Dividends ESG Exclusions UK ETF

Dividends are never, ever guaranteed. And especially during economic downturns when earnings can fall and companies’ financial foundations erode.

The snappily-titled L&G Quality Equity Dividends ESG Exclusions UK ETF (LSE:LDUK) is designed to circumvent these dangers and deliver a solid and reliable passive income over time. In its own words, the fund “seeks to invest in companies distributing income consistently and with the potential to sustain their dividend payouts.”

In doing so, it actively steers clear of firms with weak balance sheets and poor income statements. Major names here include Games Workshop, Barclays, Anglo American and Legal & General.

With a dividend yield of 4.5%, it has the potential to provide a larger passive income than the FTSE 100, whose average yield’s back at 3.6%.

On the downside, this fund invests in a relatively modest 38 companies. So it provides less diversification than ETFs that hold hundreds (or even thousands) of different shares. Still, I believe it could be a good potential buy for dividend-seeking ISA investors to research further.

The post 2 top ETFs to consider for kickstarting an Individual Savings Account (ISA)! appeared first on The Motley Fool UK.

Here are three top funds I’ll buy for my ISA when I next have spare cash to invest.

Value

Full disclosure. I opened a position in my first fund, the Xtrackers MSCI World Value ETF (LSE:XDEV), over the summer. I’m looking to increase my stake even further.

The fund’s delivered an average yearly return of 6% since it began a decade ago. This is a decent figure, although I think it could deliver a better return looking ahead given that demand for value stocks is gaining momentum.

In total, Xtrackers ETF is invested in 400 large- and mid-cap companies based on a variety of classic value metrics. These include forward price-to-earnings (P/E) and price-to-book (P/B) ratios. Major holdings here include tech shares Cisco, IBM and Intel.

Around 40% of the fund’s tied up in US equities, which leaves it vulnerable to a potential Stateside recession. But exposure to other territories like Japan and the UK helps to reduce this danger.

Growth

Since its creation in 2010, the iShares NASDAQ 100 ETF (LSE:CNDX) has produced a tasty 18.5% average annual return. That’s better than what the S&P 500 and FTSE 100 have both delivered in that time.

The fund’s star performance reflects its high exposure to fast-growth tech shares. Computer hardware and software, telecommunications, and e-commerce shares have risen sharply in value as our lives have been increasingly digitalised.

There seems to be a lot more scope for growth too, thanks to phenomena like artificial intelligence (AI), autonomous driving and quantum computing. This iShares fund has holdings in major players in these fields including Apple, Nvidia and Microsoft.

I am concerned about ETF’s high valuation however. A meaty P/E ratio of 37.8 times leaves it vulnerable to a price correction if market confidence sours. That said, I still believe the potential long-term benefits still makes it worth a very close look.

Dividends

The SPDR S&P Euro Dividend Aristocrats ETF‘s (LSE:EUDV) designed for those seeking reliable and growing dividends over time. And today, its dividend yield’s 3.5%, which is broadly in line with the FTSE 100 average.

This fund focuses on high-yield European companies that’ve raised or held payouts for 10 successive years or more. Through a combination of steady passive income and share price gains, it’s delivered a solid average annual return of 8.1% since its inception in 2012.

In total, this SPDR fund holds 39 different stocks, of which its largest holdings are financial services providers Ageas, Generali and Allianz. However, a large exposure to defensive industries like utilities and consumer staples helps it deliver decent returns even during economic downturns.

I think it’s a great fund to consider, even if its denomination in euros leaves my returns vulnerable to exchange rate movements versus the pound.

The post Value, growth and dividends! 3 ETFs I’d buy in a Stocks and Shares ISA appeared first on The Motley Fool UK.

Barclays

What it does: Barclays moves, lends, invests and protects money for customers and clients in over 40 countries.

By James Beard. Barclays (LSE:BARC) isn’t the best performing UK bank at the moment but I think it’s the one with the biggest potential. That’s why I bought some of its shares last month.

With a price-to-book ratio of 0.45, and a 12-month trailing price-to-earnings ratio of 7.1, the stock appears to offer good value. By 2026, analysts are expecting earnings per share to grow by nearly 60%, compared to their anticipated 2024 level. That’s because the bank’s seeking to improve its poor return on capital which lags behind that of its FTSE 100 peers.

However, there are risks. There’s no guarantee that the turnaround plan will work and banking stocks can be volatile. Bad debts could also be a problem if the global economic recovery stalls.

But I have confidence in the bank’s chief executive who plans to reduce costs by £2bn – and return at least £10bn to shareholders – over the next three years.

James Beard owns shares in Barclays.

First Solar

What it does: First Solar is one of America’s leading solar energy companies, known for thin-film solar panels.

By Oliver Rodzianko. I bought First Solar (NASDAQ:FSLR) recently after its valuation improved.

Management is expanding its manufacturing capacity through two new facilities set to be operational by late 2025. This is crucial to meeting the continued high demand for solar power. It also positions it as a key competitor against Chinese solar companies.

Analysts expect the company to achieve year-on-year revenue growth of 35.5% in 2024 and 26% in 2025. If its valuation also expands, then the returns over the next two years could be very large indeed.

However, China controls over 80% of the global solar supply chain. These businesses could put pricing pressure on First Solar, inhibiting its share price growth.

That being said, I’m bullish on Western green energy. First Solar is one of the strongest US solar investments I know.

Oliver Rodzianko owns shares in First Solar.

Five Below

What it does: Five Below runs a chain of retail outlets selling on-trend items to teenagers priced (mostly) at $5 or less.

By Stephen Wright. Shares in US retailer Five Below (NASDAQ:FIVE) have fallen 57% over the last 12 months. And they’ve reached a point where I think they look like terrific value. 

The company is heavily exposed to households with an income below $50,000 per year. That makes the risk of an economic downturn significant for the business. 

Despite this, Five Below has some impressive growth prospects. It’s looking to expand its store count at a rate of 12% per year for the next few years. 

Normally, this would involve taking on debt. But with new outlets breaking even by the end of the year, the company shouldn’t need to expose its balance sheet to danger in order to achieve its goals.

With the stock falling to a price-to-earnings (P/E) ratio of 15, I saw my chance and went for it. It’s started to rally already, though, so I’m on the lookout for another opportunity.

Stephen Wright owns shares in Five Below.

Taylor Wimpey

What it does: One of the UK’s largest home construction companies, building everything from apartments to six-bedroom homes. 

By Mark David Hartley. With the new Labour government coming into power, I’ve noticed renewed enthusiasm about building low-cost housing. Affordable housing accounted for 21% of builds performed by Taylor Wimpey (LSE: TW.) in 2022, so it’s in good stead to benefit from this surge. 

Falling interest rates could also help but for now, the UK’s economic outlook remains unclear. Housing is particularly sensitive to this, so that presents a risk to the stock. Delays and unexpected costs are another concern, as the Middle Eastern conflict threatens material deliveries via the Suez Canal.

With earnings forecast to grow, the stock’s price-to-earnings (P/E) ratio could drop from 24 to 18 in the next 12 months. But that’s still above the industry average, so growth may be slow this year. Fortunately,  it has an attractive 5.8% yield, so it makes a great addition to my dividend portfolio either way.

Mark David Hartley owns shares in Taylor Wimpey.

Xtrackers MSCI World Value UCITS ETF

What it does: Xtrackers MSCI World Value UCITS ETF invests in hundreds of global shares using a value strategy.

By Royston Wild. Buying value shares can have significant benefits for investors. I’ve chose to increase my own exposure to this category by recently opening a position in the Xtrackers MSCI World Value UCITS ETF (LSE:XDEV).

Value stocks can deliver market-beating capital appreciation over time as investors wake up to their cheapness. These shares can also be more stable during economic downturns as their low valuations already reflect potential profit risks.

This particular ETF tracks the performance of the MSCI World Enhanced Value Index, which comprises 400 large- and mid-cap companies across 23 developed markets. Major holdings include US tech stocks Cisco Systems, Qualcomm and IBM.

With a price-to-earnings (P/E) ratio of 9.6 times and 5.19% dividend yield, the fund offers excellent all-round value for money.

On the downside, this Xtrackers product may underperform during a sustained bull market. During these periods, investors tend to favour growth shares over value stocks. But over the long term I’m confident it will prove a valuable addition.

Royston Wild owns Xtrackers MSCI World Value UCITS ETF.

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The UK’s second-most-prestigious index has consequently risen around 7% in value in the year to date, pushing valuations higher. But don’t be mistaken, there are still many great bargains for investors to go hunting for.

Buying cheap shares has two significant advantages. Undervalued stocks can deliver stunning capital appreciation over time as the market wises up to their cheapness and share prices soar.

Value shares also provide investors with a margin of safety. If a company suddenly experiences adverse conditions, the scale of share price losses can be far more limited.

With this in mind, here are two cheap FTSE 250 shares to consider buying today. I’ve also taken a look at a value-focused exchange-traded fund (ETF), which could be an effective way for investors to manage risk.

Solar star

The threat of higher-than-normal interest rates means property and infrastructure companies like NextEnergy Solar Fund (LSE:NESF) remain ultra cheap.

This particular investment fund — which owns more than 100 renewable energy assets mainly in the UK — trades at a 20.2% discount to the estimated value of its assets.

With it also carrying a huge 10.5% forward dividend yield, I think it’s too cheap to ignore.

While they’re not without risk, renewable energy stocks like this have terrific long-term potential. As the climate emergency worsens, demand for their power should rapidly increase. This makes NextEnergy worth serious consideration, and especially at current prices.

Bank on great value

Bank of Georgia Group (LSE:BGEO) offers an excellent blend of low earnings multiples and bulging dividend yields.

For 2024, the emerging markets bank has a price-to-earnings (P/E) ratio that sits at 3.6 times. Its price-to-earnings growth (PEG) ratio of 0.1 sits comfortably inside the value benchmark of 1 and under. Finally, its forward dividend yield’s 6.5%.

Bank of Georgia shares carry more risk than usual as civil unrest in the country picks up. But I think the potential benefits of owning the FTSE 250 share may well outweigh the dangers.

This was underlined by recent financials that showed adjusted pre-tax profit up 11% in the second quarter. Banking product demand continues to soar as Georgia’s economy rapidly grows.

A top ETF

Investing in a value-focused ETF can carry fewer risks than buying individual stocks like those above. I’ve opened a position in the Xtrackers MSCI World Value UCITS ETF (LSE:XDEV) in recent sessions.

This fund — which tracks the performance of the MSCI World Enhanced Value Index — provides exposure to 400 large-to-mid-cap companies in 23 developed countries. As the graphic below shows, it gives investors a high level of diversification.

With an annual fee of 0.25%, this Xtracker fund’s one of the cheapest of its kind too.

Exposure to tech stocks like Cisco Systems and Intel could see it outperform during tough economic times. But, on balance, I think this will prove to be a top stock to own over the long term.

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A ‘set and forget’ ETF

This fund tracks the MSCI World Enhanced Value Index. The index follows medium- and large-sized firms in the developed world. The companies are selected based on three variables: price-to-book value, price-to-forward earnings, and enterprise value-to-cash flow from operations.

I like ETFs as they offer me diversification through owning a single share and this is no exception. Rather than pick individual shares on an ongoing basis, this fund covers a wider variety of countries, firms, and sectors. It also rebalances twice a year meaning that it’s constantly updated. In that respect, the ETF does the heavy lifting for me in terms of buying and selling single stocks.

What’s included?

This ETF is well diversified across sectors and countries. The US accounts for the largest percentage of companies at over 40% of Xtrackers MSCI World Value Factor UCITS ETF. Japan represents the second-largest proportion at just under 25%. Firms from the UK constitute about 10% of the fund. Sectors covered include technology, financial services, and healthcare to name but a few. Companies in the fund include well-known names like Intel, Toyota, and International Business Machines (IBM).

Performance

The performance has been mixed. Year-to-date, the ETF’s share price is down by almost 4%. Also at the time of writing, it’s about 6% off its high this year. However, over the last 12 months it has increased by over 15%.

One drawback of a ‘set it and forget it’ ETF is that I do not get to choose the individual companies myself. Nor when to buy and sell the individual firm’s shares. At the back of my mind, I think that perhaps if I bought and sold the stocks myself, I might outperform this fund.

For example, I’ve been looking at oil and gas stocks for some time now. It’s possible that if I had invested in companies from that sector at the beginning of the year, I would already have a healthy return.

That said, nothing is certain in investing and even if I could time the buying and selling of individual stocks to perfection, there are the transaction costs, which would have chipped away at any return.

All things considered, I think that this really is a ‘set and forget’ ETF. This year seems to be full of uncertainty so far and in such an environment I’m not so confident about timing the market myself. Therefore, for my own holdings, I would be happy to include Xtrackers MSCI World Value Factor UCITS ETF as part of a balanced portfolio.

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This would usually require meticulous research and careful calculations. However, I’ve been looking into the idea of value investing through ETFs (exchange-traded funds) for my own portfolio. An ETF is a fund that tracks an index or sector and can be bought and sold like a share through most online brokers.

The ETF

I’ve been looking at Xtrackers MSCI World Value Factor UCITS ETF (LSE: XDEV), which tracks the MSCI World Enhanced Value Index. The index follows medium and large-sized firms in the developed world, with the companies selected based on three variables: price-to-book value, price-to-forward earnings, and enterprise value-to-cash flow from operations.

I generally like ETFs as they offer me diversification through owning a single share. This ETF is well diversified across sectors and countries. The US accounts for the largest percentage of firms at over 40% of the fund. Japan represents the second-largest proportion at just under 25%. Firms from the UK constitute about 10% of the fund. Sectors covered include technology, financial services, and healthcare to name but a few. Companies in the fund include household names like Intel, Toyota, and International Business Machines (IBM).

Performance and outlook

It’s too early in the year to talk about year-to-date performance, but the fund has fared well over both the last 12 months and five years (up almost 30% and 40% respectively). That said, generally, the value sector has underperformed the wider market over the last few years. For example, over the last five years, the S&P 500 has increased by over 80%.

However, as we enter 2022 the economic backdrop is changing. Inflation is running high and there is a good chance that interest rates will trend upwards over the next coming years. In this scenario, it’s entirely possible that value stocks could do well.

For my portfolio

So, can I use this ETF as a hands-off approach to value investing? I think it’s possible.

Rather than pick individual shares on an ongoing basis, this ETF already covers a wider variety of firms and sectors. Moreover, the fact that the ETF is rebalanced twice a year means that the fund is constantly updated. In that respect, the ETF does the heavy lifting for me in terms of selecting companies.

Even so, there are limitations to this ETF. I can’t see how it takes into account the qualitative measures such as brand, business model, and competitive advantage. In the long run, factors like these are likely to be just as important to how the companies perform.

Despite the limitations of this ETF, as Warren Buffett said, “Price is what you pay. Value is what you get” and on balance I’m seriously considering adding this fund to my holdings as part of a balanced portfolio.

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