Exchange-traded funds (ETFs) could be a solid choice amid the market declines we’re seeing this year.
It can be difficult to choose which stocks to buy when so many are falling. But, buying ETFs means we can buy a whole bucket of stocks, so it doesn’t matter if it’s hard to choose individual companies.
With stock prices now well below where they were at the start of the year, I think I would like to focus on ETFs that are based on quality or give exposure to areas with attractive growth trends.
VanEck MSCI International Quality ETF (ASX: QUAL)
As you might guess, this is a portfolio invested in international stocks that are considered quality.
This is a portfolio of 300 names that rank well in terms of return on equity (i.e. they generate good profits for shareholders’ money in the company), earnings stability and low indebtedness. The ETF’s annual management fee is just 0.4%.
There are many recognizable names in the portfolio like Apple, Microsoft, Nvidia, Visa and Alphabet (Google).
While the US makes up around 75% of the portfolio, it’s good that a quarter of the portfolio offers diversification with stocks listed in places like Switzerland, Japan, the UK and the Netherlands.
Past performance is not a reliable indicator of future performance. However, the ETF’s total return of 13.8% per year over the past five years was better than the global equity market benchmark return of 11.1% per year over five years.
Betashares Global Cybersecurity ETF (ASX:HACK)
Prior to the 2022 declines, this ETF was one of the best performers over the long term.
He is invested in many of the world’s leading cybersecurity companies that lead the fight against cybercriminals.
We talk about names like Z-scale, Crowd, Palo Alto Networks, Cloudy, Cisco Systems etc
Betashares claims that this is a fast growing global industry and with the increase in cybercrime, the demand for cybersecurity services is expected to rise sharply in the foreseeable future.
As of August 31, 2022, the previous five years showed that the HACK ETF had achieved an average return per year of 18.7%.
I can’t imagine a time in the coming decades when cybersecurity won’t be an essential part of an increasingly digital world. So I think it’s both a defensive idea and a growth idea.