Is it worth investing in Vanguard MSCI Index International Shares ETF (ASX: VGS)? I believe it could be.
An exchange-traded fund (ETF) is a way to access a fund via a stock exchange such as the ASX. Normally the underlying fund that we’re investing in with an ETF is based on an index of some description.
Vanguard is one of the world leaders in offering low-cost ETFs for investors to access quality indexes.
One of its most popular offerings is the one I’m writing about, the Vanguard MSCI International Index. Instead of focusing on the ASX, this ETF provides excellent diversification.
It has nearly 1,600 holdings that are located in the US, Japan, UK, Fance, Canada, Germany, Switzerland, Hong Kong, the Netherlands, Spain and Sweden. There are other countries with less than 1% of the fund allocated to them.
Instead of being concentrated on financials and resources like the ASX index is, this ETF gives good diversification to IT businesses, financials, health care, consumer discretionary and industrials. Each sector has a double-digit allocation.
Its largest holdings include all of the large global technology shares including Apple, Microsoft, Amazon, Alphabet, Facebook. You just can’t find this high-quality large-cap tech ideas on the ASX.
Vanguard lives up to its low-cost reputation with this ETF – its annual management fee is only 0.18%, leaving much more of the returns for investors.
Since inception in November 2014 this ETF has delivered average returns of 14.04% per annum. Over the past year its return has been 20.86%. This goes to show that even though it’s invested across many regions and economies it can still generate returns better than 10%. Although it remains to be seen what its average return would be after the next recession.
However, it’s not trading cheaply with a price/earnings ratio of 18.1x and a dividend yield of only 2.2% according to Vanguard.
It would possible to just own this ETF and no other investments, it could provide the diversification and returns you need.
However, as an investor looking to generate returns of more than 10% per annum over the long-term, I’m not sure now is the best time to buy this ETF when there are several growth shares trading at better value like MNF Group Ltd (ASX: MNF) and Costa Group Holdings Ltd (ASX: CGC).
Some more growth options that could be better than the Vanguard MSCI ETF are these top stocks.
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Motley Fool contributor Tristan Harrison owns shares of COSTA GRP FPO. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and MNF Group Limited. 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.