I want to beat the FTSE 100. These 2 ETFs might help me do it!

Investing in FTSE 100 shares could make a good return over the time. But buying one of these ETFs could help me become a millionaire, based on past results.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100‘s one of the most followed and popular stock market indexes on the planet. Its diverse mix of large, stable companies, considerable international reach, and record of delivering impressive dividends make it very attractive to investors.

Whether I’m a growth, dividend or value investor, the Footsie offers a wealth of opportunities. And what’s more, the index enjoys high levels of liquidity, allowing investors to buy and sell shares cheaply and easily.

I hold several FTSE 100 stocks including Legal & General, Rio Tinto and Aviva. But more recently, I’ve been looking at exchange-traded funds (ETFs) to make a better return over time.

Past performance isn’t a guarantee of what I could make in the future. But if things continue the way they have been, a regular investment in one or both of these funds could make me a much better return than buying individual UK blue-chip shares.

Making millions

In recent months I’ve added the following ETFs to my Self-Invested Personal Pension (SIPP). As we can see, the returns they’ve delivered comfortably beat what a Footsie-tracking fund has delivered in recent years.

ETF5-year annualised performance10-year annualised performance
iShares Edge MSCI USA Quality Factor UCITS ETF (LSE:IUQA)15.64%N/A*
Xtrackers MSCI World Momentum UCITS ETF (LSE:XDEM)11.18%10.66%
HSBC FTSE 100 UCITS ETF5.74%6.04%
* The iShares Edge MSCI USA Quality Factor UCITS ETF was founded in 2016.

If their average annual performances over the past five years remain the same, a £300 monthly investment in the FTSE 100 tracker would make me £286,794 over 30 years.

That’s not bad. But it pales in comparison to the £875,078 I could have made with the Xtrackers MSCI World Momentum UCITS ETF. This fund tracks the performance of “large and mid-cap companies from global developed markets with high momentum scores“.

That Footsie fund would also make me a fraction of what the iShares Edge MSCI USA Quality Factor UCITS ETF would have. This product — which tracks “US companies that have historically experienced strong and stable earnings” — would have made me a multi-millionaire.

Over 30 years I’d have made a spectacular £2,412,608.

A top tech play

In recent days I’ve actually increased my stake in the latter fund.

One thing investors need to know before buying is it’s deep investment in technology stocks. Almost 30% of it is tied up in information technology businesses like Nvidia, Microsoft, Apple and Meta.

Sector concentration of the iShares Edge MSCI USA Quality Factor UCITS ETF.
Source: iShares

The danger here is that this leaves the fund particularly vulnerable to broader economic conditions. But on the plus side, this tech focus gives investors exposure to hot growth themes like artificial intelligence (AI), quantum computing, renewable energy and autonomous vehicles.

The ETF has produced explosive returns in the past five years thanks to themes such as these. And on balance, it’s looking good to continue delivering the goods as the digital revolution rolls on.

I’m optimistic too, that the fund’s other sectors will thrive as the US and global economies grow over time.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Royston Wild has positions in Aviva Plc, Legal & General Group Plc, Rio Tinto Group, Xtrackers (ie) Public - Xtrackers Msci World Momentum Ucits ETF, and iShares IV Public - iShares Edge Msci Usa Quality Factor Ucits ETF. The Motley Fool UK has recommended Apple, Meta Platforms, Microsoft, and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »