One of the biggest problems that we Aussies face in our investing portfolios or self-managed super funds (in my opinion) is a lack of international diversification. It’s all well and good to have some healthy patriotic bias, but the ASX only represents about 2% of what’s out there on offer. Another thing to consider is how top-heavy the ASX is – banks like Commonwealth Bank of Australia (ASX: CBA) and resource stocks like BHP Group Ltd (ASX: BHP) make up a massive chunk of the overall market.
Thus, I believe it would be beneficial to add some international ballast to your portfolio if you haven’t already. Here are two exotic exchange traded funds (ETFs) that can do just that – both are available on the ASX but track mostly international companies.
iShares Global Healthcare ETF (ASX: IXJ)
This ETF tracks the S&P Global 1200 healthcare index, which consists of a large basket of global healthcare stocks. Healthcare is one of those few industries that can boast a perpetual tailwind, so I think it is a good space to be looking into. IXJ is weighted 68.4% to United States (US) companies but also has 10.55% toward Switzerland and 5.57% to Japan, among others. Some of its top holdings include Johnson & Johnson, Novartis, Pfizer and our very own CSL Ltd (ASX: CSL). IXJ charges a management fee of 0.47% and has a trailing yield of 1.59%.
iShares Global Consumer Staples ETF (ASX: IXI)
One of the most commonly known ways to safeguard your capital in a down-market is consumer staples stocks – companies that sell everyday essentials that we can’t live without. IXI does just this – tracking the S&P Global 1200 Consumer Staples Index which invests in “companies that produce essential products, including food, tobacco, and household items.”
No matter the economic climate, we all need cereals, washing powder, shampoo and razors and so I think IXI would make a perfect candidate for some defensive portfolio ballast. This ETF is weighted 50.1% to the US, 11% to the United Kingdom and 10% to Switzerland, among others. Some of IXI’s top holdings include Walmart Inc., Nestlé, Coca-Cola, Proctor & Gamble and Phillip Morris International. IXI also charges a 0.47% management fee and offers a trailing 2.06% yield.
Both of these ETFs would be great long-term buys in my opinion. Both represent global industries that are fundamental to modern-day living and aren’t going away any time soon. I like the defensive nature of IXI, but I am also attracted to the long-term opportunities that the healthcare sector can give us.
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Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of iShares Global Consumer Staples ETF. 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.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019