Why Vanguard MSCI Index International Shares ETF (ASX:VGS) could be a good long-term buy

The Vanguard MSCI Index International Shares ETF could be one of the good ideas to think about for the long-term.

| More on:
map of australia featured on a globe being held by many hands

Image source: Getty Images

The Vanguard MSCI Index International Shares ETF (ASX: VGS) could be a good option to consider for the long-term.

The exchange-traded fund (ETF) offers a few different things that investors may want to look for.

It’s offered by Vanguard, which has a goal of trying to provide as low cost investment options for investors as it can.

This particular investment option may tick some of the boxes.

Here are a few different reasons why it could be worth considering:

Global diversification

The investment objective of this ETF is to track the return of the MSCI World ex-Australia Index.

It provides exposure to many of the world’s largest companies listed in major developed countries.

There are many different countries represented in the holdings including the US, Japan, the UK, Canada, France, Germany, Switzerland, the Netherlands, Sweden, Hong Kong, Italy, Spain, Denmark, Finland, Singapore, Belgium, Norway, Israel and Ireland.

It can be helpful at mitigating country-specific risk when it’s invested in so many regions, although the US allocation is still at a hefty 68%.

High quality holdings across different sectors

Vanguard is able to share some portfolio characteristics statistics. It says that the return on equity (ROE) ratio was 15.9% and the earnings growth rate was currently 12% as at 31 March 2021.

Some, or many, of the world’s strongest businesses can be found in this portfolio. The biggest 10 weightings are: Apple, Microsoft, Alphabet, Amazon.com, Facebook, JPMorgan Chase, Tesla, Johnson & Johnson, NVIDIA and Berkshire Hathaway.

It has a total of around 1,500 holdings, so there is substantial diversification.

In terms of sector allocation, the biggest weighting is to information technology (21.4%).

Vanguard MSCI Index International Shares ETF’s low management fees

Vanguard’s owners are the investors themselves. The investment management outfit shares the profit with investors by lowering the management costs as much as it can.

Whilst not the lowest on the ASX, the annual cost is lower than many other ETFs out there at 0.18% per annum.

Historical returns

Past performance is not an indicator of future performance.

However, the longer-term returns of the ETF have been double digit numbers.

Over the past three years, Vanguard MSCI Index International Shares ETF has delivered an average return per annum of 13.7%. Over the last five years it has delivered an average return per annum of 12.9%.

A substantial amount of that return was capital growth, though there are distributions paid too. According to Vanguard, the equity yield as at 31 May 2021 was 1.6%.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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 recommended Vanguard MSCI Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News