Blame Canada! That's where exchange-traded funds (ETF) came from; the inaugural fund, known as Toronto Index Participation Shares (TIPS), listed in 1990 and tracked the country's biggest companies. In 1993 State Street replicated this idea for the S&P 500, and for a long time ETFs were spruiked as a low-cost, core investment.

While ETFs now track everything weird and wonderful, today James Whelan of VFS Group and Charlie Viola of Pitcher Partners go back to the basics and offer tips on ASX ETFs for core investments.

They include 1) Vanguard Australian Shares Index ETF – A widely-used ETF for broad Australian market exposure; 2) iShares S&P 500 ETF - A popular choice for access to U.S. stocks, and 3) ETF Securities Physical Gold ETF - A commodity product riding strong interest in the precious metal. They each also bring one ETF that they expect will generate solid returns for long-term investors.

Notes: Watch, read or listen to the discussion below. This episode was filmed on 9 September 2020.

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Edited transcript

Vishal Teckchandani: Welcome to Buy Hold Sell, brought to you by Livewire Markets. My name is Vishal Teckchandani. And today, we're going to talk about five ETFs that you can use to diversify your portfolio. So these are intended to be core long-term holdings. Joining me on the show is Charlie Viola from Pitcher Partners, and James Whelan from VFS group. James, let's kick off with you. Number one, the Vanguard Australian Shares Index ETF, the cheapest of the cheap, buy, hold, sell?

Vanguard Australian Shares Index ETF (ASX:VAS)

James Whelan (Hold): We see it as being a hold. The Australian market is fine. Everything is fine. Hold the economy, hold the market.

Vishal Teckchandani: Hold the economy, hold the market. Do you take the same view, Charlie? Buy, hold, sell on VAS?

Charlie Viola (Hold): We're absolutely hold for the moment. We're probably not buying more of it, just yet. We'll wait for the market to take a leg down, if it takes a leg down. But we're certainly a hold; good stock, good diversity, good core exposure.

iShares S&P 500 ETF (ASX:IVV)

Vishal Teckchandani: Okay. Another ETF that investors are using for core US exposure is IVV, the iShares S&P 500 ETF, buy, hold, sell?

Charlie Viola (Hold): We're still a hold there as well. We fundamentally believe in long-term, good quality market efficiency. So where you're taking that good long-term US exposure. For the moment, it's a hold.

Vishal Teckchandani: James, Warren Buffett says, "America is the future," in every one of his annual newsletters. But is this the ETF that you want to use to play that?

James Whelan (Hold): Warren says a lot of things. We're saying it's a hold. It's not hedged. So there's a bit of a thing about this, which means that if the US dollar appreciates, then this should appreciate too. So even if everything stays flat, we still think you're okay with this one.

ETF Securities Physical Gold ETF (ASX:GOLD)

Vishal Teckchandani: Okay. All right. Next up on the list is Gold. The ETF Securities' physical gold ETF. Do you want to be buying gold, buy, hold, sell?

James Whelan (Buy): It's a buy. I'd be a pretty big hypocrite for everything that I've said in the last year, if I said that it wasn't a buy. Buy this ETF, and if it does continue to come down, probably by a bit more.

Vishal Teckchandani: Okay. Charlie, are you a believer in gold or do you prefer to play it through equities? Do you want to be owning GOLD, buy, hold, sell?

Charlie Viola (Buy): Yes, we're a buyer as well. So we like it on a couple of fronts. It's a good store of value. It's a hedge to inflation. It's a hedge to low-interest rates. It's even a hedge to other risk assets. And we probably believe in the gold story. We believe it will go up over time. Let's go buy that one.

iShares Global 100 ETF (ASX:IOO)

Vishal Teckchandani: Okay. We did ask our guests to bring one ETF that could be a useful core long-term diversifier. Charlie, what's your choice for me today?

Charlie Viola (Buy): So ours is the iShares Global 100, so stock code IOO - exposure to the top 100 global companies, great exposures, well-diversified. You're getting from a thematic point of view, you're getting exposure to the best companies in the world, with all those normal key fundamentals. Buy that one, stick it in the bottom drawer, and watch it go up over the next 10 or 15.

BetaShares Commodities Basket ETF - Currency Hedged (synthetic) (ASX:QCB)

Vishal Teckchandani: What do you want to put on your bottom drawer? James, what's the ETF you brought for me today?

James Whelan (Buy): Myself as being a tragic stock picker, I'm terrible at it, I make it a lot easier for myself, and this one is just a commodities ETF. QCB is run by BetaShares. It's a way of just buying soybeans, cotton, silver, and gold. Also, it's got soft, hard commodities in there as well. It's just a simple commodities ETF, so you don't own any stocks. You would just own the futures underlying. But I believe that we're at the base camp of Everest for the commodity supercycle. So it's a good way of not owning any stocks and just owning and thinking about "will the price of those things go up?" There's also a drought coming in America. So the price of corn, for example, will go up, and you'll be leveraged to that to the upside.

Vishal Teckchandani: They say that diversification is the only free lunch in finance. And if you're a cheapskate like me, then you're going to love ETFs.

Enjoying ETF episodes of Buy Hold Sell?

Carlos Cobelas

Personally I prefer Betashares QAU gold ETF which is currency hedged, for a purer exposure to the gold price. Currency hedged gold price has outperformed the unhedged GOLD ETF over both short term and long term. Also for USA exposure the NASDAQ ETF ( Betashares ) is worth considering.

Michael Grasso

ETFs are great for investors, but commodity ETFs aren’t equities based and are subject to a futures roll. That means the price of the commodity can go up, but investors don’t capture that gain as it is often expected. See iShares GSG product with a whopping -78% return since inception. Or see the Oil Trust commodity fund that recently pushed prices negative when they couldn’t roll their future position. A commodity long is the right idea, we just need the right instrument.

Viral Panchal

@Vishal - Appreciate if you could please cover AT1, TNG, BPT QAN & WES in any of your upcoming episodes