Why I'm betting on this ASX ETF to help me become a millionaire

I've got a long way to go before becoming a millionaire, but there's an ASX-listed exchange-traded fund (ETF) I think that can help get me there faster.

I believe the best investments are ones that can deliver fairly consistent returns over time, which enable us to own them for the long-term.

There are a number of great businesses on the ASX, but there are even stronger businesses overseas with stronger competitive advantages than their peers, more impressive balance sheets and highly attractive returns on equity (ROE).

I'm not trying to invest in all of those businesses individually myself. Instead, I'm using the VanEck MSCI International Quality ETF (ASX: QUAL) as my way to access incredible companies. I'll run through what makes it so appealing.

High-quality businesses

The QUAL ETF is not just invested in a random group of international businesses. It is a curated portfolio of companies that have been selected for their quality credentials.

What makes 'quality' can be measured in many different ways.

The QUAL ETF strategy has decided on three aspects that decide on whether global stocks are worthy of being a holding.

The business must have a high return on equity. That means they make a lot of profit compared to how much shareholder money is retained within the business.

Second, the business must have earnings stability. If profits aren't going backwards, that suggests they're regularly increasing, which is very supportive for a rising share price over time.

Third, the business should have low financial leverage. That means their financials are in a healthy state and the high ROE has not been artificially boosted by the company using debt rather than shareholder money to fund the operations.

By putting those three elements together, investors are left with an ASX ETF portfolio of very high-quality names with growing earnings. It's these attributes that could help deliver strong returns to help me become a millionaire sooner.

Strong diversification

The QUAL ETF portfolio is not just a few large US tech names – it's invested in around 300 companies from a range of countries and sectors.

For example, at least 1% of the portfolio is invested in companies from Switzerland, the UK, Japan, the Netherlands, Germany and Denmark.

Software is 29% of the portfolio, it's a great sector to be invested in, but diversification is achieved with more than 9% of the portfolio is invested in the following sectors: healthcare, industrials, communication services, financials and consumer staples.

I like that I'm not heavily betting on one sector for success with this fund.

How the ASX ETF can help me become a millionaire faster

Past performance is certainly not a guarantee of future performance, but the QUAL ETF has returned an average of 14.7% per year over the last decade, outperforming the global share market by an average of more than 1.5% per year.

If I invested $1,000 per month and it returned 14.7% per year, that would grow into $1 million in roughly 19 years. That sounds good to me! I plan to utilise the QUAL ETF alongside a portfolio of quality ASX shares to help me achieve my goal.

The post Why I'm betting on this ASX ETF to help me become a millionaire appeared first on The Motley Fool Australia.

Motley Fool contributor Tristan Harrison has positions in VanEck Msci International Quality ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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