Over at Pearler, we’ve noticed that many investors keep two to three Exchange-traded Funds (ETFs) in their investment portfolios. That’s right: the Pearler community likes to keep things simple and boring.

Even so, deciding which ETFs to buy can feel overwhelming, which is where this general guide comes in.

In this episode, we are looking towards the most coupled ETFs among the Pearler community for some inspiration. We’ll explore not just the ETFs themselves, but also the providers behind them. So, we’ll cover major ETF providers like Vanguard, BetaShares, and iShares.

(Remember, no matter which ETF provider you choose, you'll still need to sign up through a share registry . The big three are Computershare, Link Market Services, and Boardroom. And we've got an episode in the works with a registry representative to unpack this further.)

You’ll notice that many in the Pearler community prefer ETF pairings that give them a balance of broad coverage and growth. However, community data doesn’t replace research. So, treat this as an educational piece only. Ultimately, it’s up to you to decide what feels right for your goals and investment journey.

Pair 1: VAS and VGS

One of the Pearler community’s top pairings are Vanguard Australian Shares Index ETF (ASX:VAS) and Vanguard MSCI Index International Shares ETF (ASX:VGS) .

This combination is popular because it covers both Australian and international markets without overlapping. This option allows you to spread your risk and diversify across different markets and sectors.

VAS: Vanguard Australian Shares Index ETF

VAS is an ETF that tracks the top 300 companies on the ASX, which includes big names like BHP and Commonwealth Bank. This ETF has a low management fee of 0.07% and aims for long-term growth.

Given its risk profile, though, VAS is meant for investors who can commit for seven years or more. This long-term focus helps smooth out the bumps from market ups and downs. On the other hand, staying invested longer means you may potentially benefit from regular dividends, which come with franking credits .

VGS: Vanguard MSCI Index International ETF

On the other hand, VGS offers a broad exposure by investing in 1,500 companies from developed countries outside Australia. This means you can own a piece of big global companies like Microsoft and Apple without buying shares directly.

The fee here is a bit higher, at 0.18%. However, it gets you access to sectors like tech and healthcare, which are generally less represented in the Australian sharemarket.

Pair 2: VAS and IVV

When it comes to investing, the saying “slow and steady wins the race” often holds true. Yet, we’ve noticed some folks in the Pearler community are spicing up their portfolios with a blend of Australian and U.S. markets ETFs. This strategy aims to balance the biggest Australian companies with the largest ones in the U.S. It's worth noting that the U.S. economy is much larger than Australia's, making IVV a popular choice due to its potentially higher (but more volatile) growth.

With that said, another popular couple ETFs is Vanguard Australian Shares Index ETF (ASX:VAS) and iShares S&P 500 ETF (ASX:IVV) . You're already familiar with VAS, so let's zero in on IVV…

IVV: iShares S&P 500 ETF

IVV is one of those ETFs that the Pearler community finds easy to get excited about. It’s an ETF that tracks the S&P 500, which includes the top 500 companies in the U.S. Hence, it’s a popular choice for those who want to invest in big names like Visa, Apple, and Netflix

IVV also stands out for its low management fee of just 0.04%. That means more of your money stays invested rather than going towards fees. Plus, a recent 15:1 share split made IVV even more accessible. For example, if it used to cost $596 to buy a single share, the fund would now be available for only $39.

For those holding IVV before the share split, this doesn’t change the value of what they own. But, for the beginner investor, it does make it easier to buy more shares with less money. That’s also fantastic news for folks opting for a dividend reinvestment plan. Now, they can reinvest their dividends more frequently instead of waiting longer just to afford a single share.

It’s worth noting, though, that IVV focuses exclusively on U.S. companies. In other words, it doesn’t invest in companies or sharemarkets from other countries. Generally speaking, economic and political shifts in one country could impact your investments in that country. So, if the U.S. faces economic downturns or policy changes, it might affect the performance of IVV.

Hence, it's important to consider how IVV (or any other ETF) fits with your broader investment goals and risk appetite.

Pair 3: FAIR and VESG

We often talk about ESG (Environmental, Sustainable Governance) investing because it’s gaining traction among investors over the past decade. Obviously, it’s a topic that sparks lively debates and endless conversations. Yet, one thing is clear: ESG ETFs have found a consistent place in our community’s portfolio.

FAIR: Betashares Australia Sustainability Leaders ETF

For instance, the BetaShares Australian Sustainability Leaders ETF (ASX:FAIR) is one of the community’s top five ESG-focused ETFs in 2023 .

FAIR screens out those with ties to fossil fuels and other sectors that don't align with its values, like major banks and large mining corporations. Hence, actively excluding these companies contribute to its slight expensive management fee at 0.49%. However, for many investors, this is a price worth paying for peace of mind.

The top five holdings in FAIR include Cochlear, SunCorp, Brambles, CSL, and Insurance Australia Group.

VESG: Vanguard Ethically Conscious International Shares Index ETF

FAIR is often paired with VESG – the Vanguard Ethically Conscious International Shares Index ETF (ASX:VESG). VESG complements FAIR by offering international diversification with 1600 stocks screened for ethical standards. Hence, it excludes companies involved in sectors like fossil fuels, tobacco, weapons, and adult entertainment.

At a glance, VESG's top holdings mirror those of other well-known ETFs like IVV and VGS. Interestingly, this includes Microsoft, Apple, Nvidia, Amazon, and Meta. Inevitably, anyone in the know would ask: is it ethical to invest in businesses like Amazon and Meta to begin with?

That’s a conversation we’ve had a lot here, and the answer isn’t always straightforward. In the end, it really depends on your perspective and what you value most in your investments. So, if some holdings in VESG bother you, it’s worth giving other ESG ETFs a look.

For example, we see some Pearler investors combine FAIR with BetaShares Global Sustainability Leader ETF (ASX:ETHI) . ETHI's top holdings are slightly different, which includes Nvidia, Visa, MasterCard, Toyota, and Home Depot. And unlike VESG, ETHI notably excludes Amazon based on its own ethical criteria.

Pair 4: A200 and NDQ

The fourth pair on our list is the BetaShares Australia 200 ETF (ASX:A200) and BetaShares Nasdaq 100 ETF (ASX:NDQ) . This pair is popular among members of our community who are on the moderately aggressive side of the risk appetite spectrum. These folks appreciate the steady charm of Australian shares while craving for the high-risk, high-reward U.S. tech sector.

A200: BetaShares Australia 200 ETF

Aside from VAS, BetaShares Australia 200 ETF (ASX:A200) is another popular choice by Pearler investors looking to tap into the Australian market. It covers the top 200 companies on the ASX. And it’s known for its low management fee of just 0.04 percent. Additionally, dividends are paid quarterly to give you a reliable income stream.

The top five holdings in A200 resemble those of VAS, including major corporations like BHP, Commonwealth, CSL, NAB, and Westpac. That said, the choice between A200 and VAS might come down to just a few details like the fees or the number of companies they hold.

Sometimes, though, overlaps do happen, especially if you’re actively expanding your portfolio. For instance, let’s s say you add Vanguard Diversified High Growth Index ETF (VDHG) to your portfolio. VDHG already includes 30 percent VAS, and adding more can push your Australian holdings up to 50 or 60 percent. This isn’t necessarily a problem if it fits your goals. But it’s worth checking your holdings to see how they balance out. (If you’re interested in how the two ETFs compare, this article could help: “ How do I choose between VAS and A200? ”)

It also might just be our home bias influencing our investment decisions. Being in Australia, there are benefits to investing locally, such as franking credits. But focusing solely on the Australian market can limit exposure to other growth opportunities globally.

So, for a balanced approach, some folks in the community blend local holdings with a specific sector of the U.S. market.

NDQ: BetaShares Nasdaq 100 ETF

The second half of our pairing is the BetaShares Nasdaq 100 ETF (ASX:NDQ) . This ETF tracks the performance of the Nasdaq 100 Index , comprising the 100 largest non-financial companies listed on the Nasdaq . NDQ leans heavily into the tech sector, with top holdings like Microsoft, Amazon, Nvidia, and Meta. Its management fee is higher at 0.48%, but it saves you the hassle of filing W-8BEN forms .

Now, some folks may get excited about this ETF, especially after its strong performance during COVID. Just remember, though: past performance isn’t an indication of future returns. There are a lot of variables to consider, and even then it’s hard to predict where things are going. In this case, your best defense is diversification.

Since NDQ is tech heavy, it’s not as diversified as, say, IVV, which covers different sectors within the U.S. market. This means technology ETFs carry more risk, as they are less diversified and more likely to be volatile.

Regardless, your financial context matters when reading about any general information on investing. So, consider how NDQ (or any other ETFs in this list) fits into your risk appetite, strategy and investment goals.

Some actionable steps this week

We haven't focused on actionable steps in our episodes for a while, but here are some really beneficial ones.

First, if you’re new to investing, or haven’t reviewed your portfolio in a while, now’s a good time for a check-in. Go to the websites of your ETFs, like Vanguard's for VAS, and check out which companies and countries they cover. You'll also find percentages for each region so you can see how your investments balance out.

Second, even if you’re not invested in ETFs, you can do this with your super fund as well. We like AustralianSuper website for this because it offers a clear breakdown of timeframes and what they're investing in. Just looking at these things might spark your interest in your own investing journey.

And that’s all for this week! If you found this article helpful, please rate us five stars, write a review, or share it with a friend. For more content, follow us at @getrichslowclub and connect with @tashinvests or @anakresina .

Happy investing!

Tash & Ana