Is Vanguard All-World ex-U.S. Shares Index ETF (ASX:VEU) the best for passive investing?

There are a lot of shares out there that could be good options for passive investors.

To me, passive investing needs to offer good returns, diversification and low(ish) risk as far as shares go.

I think one of the best options that fits the above description could be Vanguard All-World ex-U.S. Shares Index ETF (ASX: VEU). This is an exchange-traded fund (ETF) that is run by Vanguard, one of the world’s largest ETF providers.

As you might be able to guess from the name, it offers investors exposure to a wide variety of global shares except for US stocks.

Indeed, it has over 2,700 holdings. Of this, 17.7% of the fund is allocated to Japan, 12.4% is allocated to the UK, 7.2% to France, 7% to China, 6.5% to Germany, 5.6% to Canada, 5.2% to Switzerland and so on.

Even just its top holdings are diverse, which includes Royal Dutch Shell, Tencent, Samsung, Nestle, HSBC, Taiwan Semiconductor Manufacturing and Toyota.

This ETF has a very low annual management cost of 0.11% per annum, which is one of the lowest on the ASX. If you’re going to invest for the market average return, you want the lowest fees possible.

Over the past five years it has generated a total return per annum of 12.67%, of which 3.29% per annum was distributed as income and 9.38% per annum was capital growth.

I believe this ETF could actually be a good option for growth because several of the regions it is allocated to, particularly Asian countries, are growing strongly. There is a fast-growing middle class in Asia that could create a whole new wave of service business that end up on the Asian share markets.

President Trump’s actions could have negative consequences for the US economy over the next few years, meaning some US businesses may suffer.

Foolish takeaway

There’s a lot to like about this ETF, but there are also a couple of downsides. Obviously you miss out on the best American shares like Alphabet (Google) and Amazon. There is also the risk of volatility due to rising interest rates because a lot of Asian companies have American debt on their balance sheets.

If this ETF hasn’t won you over, perhaps these exciting growth shares would be a better option for your portfolio.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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