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Evaluating Top ASX ETFs Performance

General Report December 1, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Overview of ASX ETFs
  3. Key ASX ETFs Analyzed
  4. Performance Metrics of Selected ETFs
  5. Investment Philosophy and Influences
  6. Conclusion

1. Summary

  • The report delves into the evaluation of top-performing ASX ETFs, specifically spotlighting the VanEck Vectors Morningstar Wide Moat ETF and the BetaShares Diversified All Growth ETF. These ETFs are scrutinized based on their adherence to the investment principles championed by Warren Buffett, focusing on high-quality companies with sustainable competitive advantages, often referred to as 'moats'. Through examining factors such as historical returns and growth opportunities, the report offers insights into how these ETFs help investors make informed decisions. The VanEck Vectors ETF aligns closely with Buffett's philosophy by investing in firms with strong competitive positions, while the BetaShares ETF stands out by offering exposure to an extensive array of stocks across global markets, catering to different risk profiles.

2. Overview of ASX ETFs

  • 2-1. Definition and importance of ASX ETFs

  • ASX ETFs, or Exchange Traded Funds listed on the Australian Securities Exchange (ASX), are investment funds that are traded on stock exchanges, much like stocks. They hold a collection of assets, such as stocks or bonds, and aim to replicate the performance of a specific index. ASX ETFs are important for investors as they provide an easy and efficient way to gain exposure to a diversified portfolio of assets, allowing for lower costs, greater liquidity, and the potential for capital growth. Notably, ETFs like the VanEck Vectors Morningstar Wide Moat ETF invest in high-quality companies with sustainable competitive advantages, aligning with the investment principles of influential investors like Warren Buffett, thereby attracting investors seeking quality investments.

  • 2-2. Investment strategies employed by ASX ETFs

  • ASX ETFs employ various investment strategies to achieve their goals. For instance, the VanEck Vectors Morningstar Wide Moat ETF focuses on investing in companies that exhibit fair valuations and sustainable competitive advantages—traits often associated with the investment philosophy of Warren Buffett. This strategy aims to provide robust returns by investing in high-quality firms with a strong market position. In contrast, the BetaShares Diversified All Growth ETF offers a different approach by providing exposure to approximately 8,000 stocks across various capitalizations and regions, including Australia, the US, and emerging markets. This fund targets high growth potential and caters to investors with a higher risk tolerance. Overall, these strategies reflect a commitment to quality and diversification, which are critical for navigating the complexities of market investing.

3. Key ASX ETFs Analyzed

  • 3-1. VanEck Vectors Morningstar Wide Moat ETF

  • The VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT) is designed for investors who appreciate Warren Buffett's investment philosophy. This ETF provides access to a selection of companies that exhibit fair valuations and sustainable competitive advantages, often referred to as moats—qualities valued by Buffett when investing through his company, Berkshire Hathaway. Historically, the ETF has performed well, tracking a market-beating index over the past decade. Currently, the ETF comprises approximately 50 shares, including notable names such as Adobe, Nike, and Walt Disney. The portfolio is periodically adjusted to reflect changing valuations and shifts in competitive conditions within these companies.

  • 3-2. BetaShares Diversified All Growth ETF

  • The BetaShares Diversified All Growth ETF (ASX: DHHF) is structured to give investors exposure to around 8,000 stocks across various market caps from Australia, the US, and both developed and emerging markets. This ETF has been recognized for its significant growth potential, making it an appealing option for investors with a high risk tolerance. Since its inception in December 2020, it has averaged an annual return of 11%. The fund has been endorsed by BetaShares as a recommended purchase, reflecting confidence in its strategic approach to investment.

4. Performance Metrics of Selected ETFs

  • 4-1. Historical returns of VanEck Vectors Morningstar Wide Moat ETF

  • The VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT) is designed for investors who appreciate Warren Buffett's investment philosophy. This ETF focuses on companies that are characterized by sustainable competitive advantages, known as 'wide moats', along with fair valuations. Historically, this ETF has shown strong performance, outpacing the market over the past decade. Currently, the fund comprises approximately 50 shares, including well-known companies such as Adobe, Nike, and Walt Disney. The investment strategy aligns closely with Buffett's principles, emphasizing companies with high-quality metrics and long-term growth potential.

  • 4-2. Performance analysis of BetaShares Diversified All Growth ETF

  • The BetaShares Diversified All Growth ETF (ASX: DHHF) provides investors with exposure to a broad array of approximately 8,000 stocks across large, mid, and small-cap companies from various regions including Australia, the US, developed markets, and emerging markets. This ETF has averaged a return of 11% per annum since its inception in December 2020, indicating significant growth potential for investors with a higher risk tolerance. The fund's strategy focuses on high growth opportunities and is tailored for those looking to maximize returns in a diverse investment landscape.

5. Investment Philosophy and Influences

  • 5-1. Warren Buffett’s investment principles

  • Warren Buffett's investment philosophy emphasizes a focus on long-term value, selecting stocks of companies that have sustainable competitive advantages, often referred to as 'moats'. He prioritizes fair valuations and seeks out businesses that demonstrate strong fundamentals, such as high return on equity, manageable debt levels, consistent cash flow generation, and stability in earnings. This disciplined approach has historically provided substantial returns, as evidenced by Berkshire Hathaway's performance, which has significantly outpaced the market since 1965.

  • 5-2. Impact of Buffett's strategies on ETF selections

  • Buffett's investment strategies have influenced the selection criteria for certain ETFs, particularly those designed to mirror his investment style. The VanEck Vectors Morningstar Wide Moat ETF, for instance, aligns closely with Buffett's principles by investing in companies that offer fair valuations and possess sustainable competitive advantages. This ETF includes major companies like Nike and Walt Disney, reflecting Buffett's preference for strong, established businesses. The BetaShares Diversified All Growth ETF also embodies this influence, providing exposure to a broad range of companies with potential for high growth and aligning with investors who share Buffett's appetite for quality over speculation.

Conclusion

  • The assessment of both the VanEck Vectors Morningstar Wide Moat ETF and the BetaShares Diversified All Growth ETF highlights their viability as robust investment options in the current market. The VanEck Vectors ETF, with its focus on companies possessing sustainable competitive advantages, showcases strong historical performance aligned with Warren Buffett's value-centric investing philosophy. In contrast, the BetaShares ETF emphasizes diversification and high growth potential, appealing to investors with a higher risk appetite. Although these ETFs present significant opportunities, the report underscores the necessity for investors to tailor their choices based on personal investment goals and market conditions. While offering a solid analytical foundation, the report suggests that future developments in global markets could further shape the efficacy of these ETFs, encouraging ongoing evaluation and strategic adjustments by investors.

Glossary

  • VanEck Vectors Morningstar Wide Moat ETF [ETF]: This ETF focuses on companies with sustainable competitive advantages and fair valuations, aligning closely with Warren Buffett's investment philosophy. Its historical performance demonstrates strong returns, making it a compelling choice for investors seeking quality investments.
  • BetaShares Diversified All Growth ETF [ETF]: This ETF provides exposure to a diversified portfolio of large, mid, and small-cap stocks, catering to investors with a high-risk tolerance. Its performance and growth potential are highlighted as key reasons for its recommendation.
  • Warren Buffett [Investor]: A legendary investor known for his value investing strategies, Buffett's principles significantly influence ETF selections and investment decisions. His focus on quality companies has proven effective in generating substantial returns.

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