3 of The Best Aussie ETFs Tracking The US Market You Need To Know About.

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For Aussies wanting exposure to North America’s largest companies, it’s hard to look past the ETFs we’ll talk through in this article.

The total U.S. stock market is the largest in the world by a country mile. In 2018, The US Market was valued was at a whopping $30.4 Trillion (yes, Trillion) Dollars. By comparison, the next closest market is the Chinese market, which is valued at $6.3 Trillion (5 x smaller than the U.S market). And what about the Aussie Stock Market? Well, we come in at a respectable, but in no way sizeable $1.3 Trillion. Making up about 2% of the world’s stock exchanges.

The Australian Market is a small fish in comparison to other markets across the globe. For this reason, it’s well worth having some international exposure in your portfolio to garner the returns of some of the world’s largest global companies at the forefront of innovation. And where better to look for the world’s biggest and best companies than the U.S.

To capture the best exposure to U.S. companies from Australia, I’ve put together a list of my top three ASX listed Exchange Traded Funds (ETF’s) that predominantly track the US Markets. 

These ETFs seek to provide buy and hold investments for investors searching for long-term capital growth, income through dividends, and access to the biggest and best U.S. companies. 

1. Vanguard MSCI International Shares Index ETF (ASX:VGS)

Founded by John C. Bogle in 1975, Vanguard has morphed into one of the world’s leaders in providing low-cost ETFs for investors wanting to grab themselves a piece of the world’s best indexes and companies. 

The Vanguard MSCI International Index (VGS), is one of Vanguard’s most popular ETFs on the ASX. Instead of focusing on the ASX 200, which is mostly made up of Bank, Industrial, and Material Stocks, VGS provides excellent diversification across industries and nations. 

VGS  provides exposure to many of the world’s most prominent publically listed companies in major developed countries, with a whopping 68.9% of its region exposure being in North America and all 10 of its top 10 holdings being based there too. 

 When John C. Bogle founded Vanguard, he set out to provide low-cost access to a broadly diversified variety of investment securities providing investors with the opportunity to take part in the long-term growth potential of the stock market. VGS certainly fits that mold by providing Australians with low-cost access to a diversified list of global economies outside Australia.

VGS Key Facts (July 2020)

  • Management Fee: 0.18% P.A.
  • Dividend Reinvestment Plan: Yes
  • 5yr Gross Return: 9.33%
  • Dividend Yield: 2.4%
  • Currency Hedged: No
  • Currency Hedged Alternative: Yes, ASX: VGAD

Top 10 Holdings (July 2020) (16.9% Of VGS)

  1. Apple Inc 
  2. Microsoft Corp.
  3. Amazon.com Inc.
  4. Alphabet Inc.
  5. Facebook Inc.
  6. Johnson & Johnson
  7. Nestle SA
  8. Visa Inc.
  9. JP Morgan Chase & Co.
  10. Procter & Gamble Co.

For additional infomration on VGS, you can read more about it here. 

2. BetaShares NASDAQ 100 ETF (ASX:NDQ)

This ETF aims to track the results of the NASDAQ-100 Index. The NASDAQ-100 mostly consists of the biggest tech and health care companies in the U.S. To help you become a little more acquainted, the NASDAQ-100 is home to the insanely popular FAANG stocks, (Facebook, Apple, Amazon, Netflix & Google) which are amongst the Indexes larger holdings. 

The tech-heavy NASDAQ-100 contains companies that are literally sculpting the future of the modern world as we know it. The tech industry is a breeding ground for rapidly evolving industries like artificial intelligence (AI) and renewable energy sources, which I believe will dominate the next half-century and beyond. So, If you’ve got a long term investing horizon, it’s a great idea to get on board the NDQ tech train.

NDQ Key Facts (July 2020):

Management Fee: 0.38% P.A.

Dividend Reinvestment Plan: Yes.

5yr Return: 21.45%.

Dividend Yield: 1.9%.

Currency Hedged: No.

Currency Hedged Alternative: No.

Top 10 Holdings (July 2020) (54.5% Of NDQ):

  1. Microsoft Corp
  2. Apple Inc 
  3. Amazon.com Inc 
  4. Facebook Inc 
  5. Alphabet Inc (Class A)
  6. Alphabet Inc (Class C) 
  7. Intel Corp 
  8. NVIDA Corp 
  9. Adobe Inc
  10. PayPal Holdings Inc
FAANG Stocks Logos

For additional information on NDQ, you can read more about it here.

3. iShares S&P 500 ETF (ASX:IVV)

IVV aims to track the performance of the  S&P 500 Index, before fees and expenses. The S&P 500 or Standard and Poors 500 Index is one of the most well-known indexes globally. It Is a market capitalization weighted index comprising of the 500 largest U.S. publicly listed companies. The index is widely regarded as the most reliable indicator of the holistic performance of large-cap U.S. equities.

Historically, The S&P 500 has proven to steadily provide higher returns over the long term. Investopedia says the S&P 500 Index has achieved a return of roughly 10% per annum from 1926 – 2018. To illustrate the power of compound interest,  Over the 92 Year period between 1926-2018, $10,000 dollars invested into the S&P 500 at 10% per year would have turned a modest $10,000 dollars into roughly $64,000,000 (yes, that’s 64 million!).

Out of VGS, NDQ, and IVV, IVV has the lowest management fee, charging only 0.04% per year. For instance, should you invest $10,000, your annual fees would be just $4. 

IVV Key Facts (July 2020):

  • Management Fee: 0.04% P.A.
  • Dividend Reinvestment Plan: Yes
  • 5Yr Return: 12.95%
  • Trailing 12 Month Dividend Yield: 1.79%
  • Currency Hedged: No
  • Currency Hedged Alternative: Yes, ASX: IHVV.

Top Ten Holdings (July 2020) (26.91% of IVV):

  1. Microsoft Corp.
  2. Apple Inc.
  3. Amazon.com Inc.
  4. Facebook Inc.
  5. Berkshire Hathaway Inc Class B
  6. Johnson & Johnson
  7. Alphabet Inc (Class A)
  8. Alphabet Inc (Class C) 
  9. Procter & Gamble Co.
  10. Visa Inc.

For additional information on IVV, you can read more about it here.

The Money Pal Verdict

All three of these ETFs are relatively cost effective for what you get and are also extremely liquid due to their popularity. They also all have a large amount of funds under management, making them less likely to close down.

One of my favorite things about participating in the broader stock market through index-tracking ETFs is that I’m earning my portion of whatever returns businesses both local and international provide over the years to come. The ETFs listed above are a low-cost way to take part in the growth story of thousands of U.S. businesses while earning your share of their returns along the way. 

P.S. I’d love to meet you on Twitter: here.

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Disclaimer: This website (the “The Money Pal”) is published and provided for informational and entertainment purposes only.  The information in the Blog constitutes the Content Creator’s own opinions and it should not be regarded as financial advice. 

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