2 best ETFs to beat the FTSE 100 and global tracker funds over the next 10 years

Beating both FTSE 100 as well as MSCI World indicators in the long term is not easy. But history shows that is something it is possible.

Here, I'll highlight two exchange-traded funds (ETFs) that have beaten both of these major indexes over the past five years. I think they have a good chance of outperforming these indexes over the next decade, and are worth considering as part of a diversified portfolio.

High quality stocks tend to do very well

First we have iShares Edge MSCI World Quality Factor UCITS ETF (LSE: IWQU). This is a global tracking fund that focuses on high-quality companies within the market (those with high return on equity, low debt, and low earnings diversification).

I'm a big fan of 'investing in quality' and this product's performance shows why. In the five-year period to the end of August, it returned 91.3% in US dollar terms compared with an 85.8% return in normal terms. iShares Core MSCI World UCITS ETF and 38.8% of iCore FTSE 100 UCITS ETF Shares (in GBP terms). In other words, it beat the Footsie and outperformed the average global ETF by about 1% per year.

It's worth noting that with this ETF, investors still get exposure to many of the biggest names in the stock market. At the end of August, the top five holdings Nvidia, an apple, Microsoft, Meta Platformsagain Visa. Personally, I invested directly in four of the five companies because I believe they are long-term winners that will outperform the market.

Now, a quality investment strategy will not always perform very well. There will always be times when low quality (cyclical) stocks have periods of strength.

Given that research shows that high-quality stocks tend to beat the market over time, however, I think there is a good chance that they will deliver higher returns over time.

The AI ​​revolution is beginning

Another ETF I want to highlight is this one IL&G Artificial Intelligence UCITS ETF (LSE: AIAG). This is an emerging product Legal & General that focuses on artificial intelligence (AI) stocks.

AI is a big theme today (and my main focus) and this is reflected in the recent performance figures of this ETF. In US dollar terms, it gained 102.8% in the five-year period to the end of August. That is significantly higher than the gains from the FTSE 100 and MSCI World indices.

Considering that the AI ​​industry is forecast to grow by about 30 percent per year between now and 2030, I believe there is a good chance that this product will continue to do well going forward. As always, nothing is guaranteed in the stock market.

This is a high risk ETF (Legal and Common rated 7 out of 7 in terms of risk). That's because it holds a lot of technology stocks and these can be volatile at times. At the end of August, the top five holdings Samsara, Palo Alto Networks, Cloudflare, Service Nowagain Autodesk (Nvidia and Microsoft were in the top 10).

Looking at the long term, I think this ETF has the potential to deliver blockbuster returns.