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If you’ve got $20,000 burning a hole in your pocket then I think it’s worth investing the money into exchange-traded funds (ETFs).
ETFs are a great way to invest into the share market because you get broad diversification with a single investment.
If I had $20,000 to invest in ETFs today, this is what I’d do:
iShares S&P 500 ETF (ASX: IVV) – $10,000
Warren Buffett has been a long-term supporter of regular people investing in a low-cost S&P 500 index fund and holding for the long-term. So, who am I to argue with that advice?
This particular S&P 500 ETF is offered by Blackrock, one of the world leaders in low-cost ETFs. It has an annual management fee of an amazingly-low 0.04%. Plus, many professional investors (particularly after fees) fail to beat this index, so you should do well with this ETF.
You get access to many of the world’s best global businesses through this investment such as Amazon, Microsoft, Alphabet, Apple, Berkshire Hathaway and JPMorgan Chase. The fact you get exposure to 500 holdings is excellent diversification.
The dividend yield isn’t very high, but that’s the result of US businesses re-investing for more growth, unlike Australia companies which pay out more of their profit each year.
Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE) – $5,000
The ongoing trade war between President Trump and China has damaged valuations of Asian shares, but there are still plenty of good businesses that are growing at a pleasing pace, that are exposed to growing Asian consumer wealth and their earnings have held up well.
This ETF is trading at a cheap valuation compared to most western ETFs on a price/earnings basis and the underlying businesses as a whole are generating double digit earnings growth. I wouldn’t want to put more than 10% of a total portfolio into it considering it might be risky due to Chinese risks, but I think it looks like a good opportunity.
Some of the top holdings include Tencent, Alibaba, Samsung and Taiwan Semiconductor, which are all good businesses.
Betashares Global Cybersecurity ETF (ASX: HACK) – $5,000
The ongoing threat of cyber crime for individuals, businesses and governments alike means that the businesses that are providing cybersecurity should be in growing demand year after year.
The returns for this ETF have been strong, at an average of 15.1% per annum since August 2016. It’s quite possible the returns of the underlying businesses will be non-cyclical because cybersecurity has to be strong at all times of economic cycles, not just in good times.
Some of its top holdings include Palo Alto, Splunk, Fortinet, Raytheon and Cisco Systems.
Foolish takeaway
These three ETFs could all continue to be long-term performers and I’d be happy to put a lot of money towards each of them over time.
As someone who likes a value pick, the Vanguard Asian ETF looks very interesting at the moment.
If you also want to add exciting growing ASX businesses to your portfolio then these top stocks should definitely be considerations.
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Motley Fool contributor Tristan Harrison owns shares of VANGUARD FTSE ASIA EX JAPAN SHARES INDEX ETF. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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