With the ASX still below its all-time highs, many investors are looking elsewhere for growth. The US and international markets have certainly performed better over recent years, with tech companies doing the heavy lifting.
For those who think this growth run is just getting started, here are two ways you can hitch a ride on these international high-flyers.
MFF Capital Investments Ltd (ASX: MFF)
This is a listed investment company which is focused on long-term compounding capital growth. It won’t suit income investors, with a dividend yield of only around 1% before franking. The company tries to retain as much capital as possible to be reinvested in high quality businesses, which appear to offer above average prospects, in being able to compound their earnings.
The portfolio is made up of quality names like Facebook, Alphabet (Google), Visa and Mastercard.
Over the last 10 years, MFF has provided investors with a total shareholder return of 18.2% per annum, and 39.8% over the past year alone.
Its shares also trade at a discount of 4% to the value of the underlying portfolio.
Vanguard MSCI Index International Shares ETF (ASX: VGS)
Rather than rely on the skills of a fund manager, this ETF will virtually guarantee you’ll hold the biggest winners from the universe of international shares.
In fact, holding this one share will mean you own a tiny piece of over 1,500 international companies, from a spread of countries – including the US, Japan, UK, France and Germany.
The ETF currently has great diversification, with no sector representing more than 20% of the portfolio. On the dividend front, it’s a little better than MFF with a dividend yield of 2.3%.
While the ETF hasn’t yet been listed for 10 years, the Vanguard International Shares Index Fund’s performance was 8% per annum over the decade.
Which one of these you choose will depend largely on your risk tolerance. While MFF Capital Investments has performed extremely well over the last 10 years, the fund is heavily exposed to the US market – whereas VGS only has around 60% exposure to the US currently.
If you’re taking a much longer view, MFF may offer the greatest after-tax compounding opportunity, but for a higher level of risk. Investment managers are prone to long periods of under-performance which is something to keep in mind.
The safer choice is definitely VGS, but I think both options offer good exposure to international growth stocks and a tax-efficient way of building wealth over the long term.
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Motley Fool contributor Dave Gow owns shares of Magellan Flagship Fund Ltd. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. 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.