There are many different ways for investors to invest on the ASX. Some people consider ASX exchange-traded funds (ETFs), while others may decide to invest in individual shares.
Investing in ASX dividend shares is one investment style, for example, while buying ASX growth shares is another.
But, choosing ASX ETFs may be the simplest way to invest.
While there are some compelling ETFs that are focused on individual sectors, like Betashares Global Cybersecurity ETF (ASX: HACK) and VanEck Video Gaming and Esports ETF (ASX: ESPO), there is one name that might be the most laid-back investing option of them all.
Vanguard MSCI Index International Shares ETF (ASX: VGS)
This investment option is offered by Vanguard, a leading investment manager that aims to offer its investment products as cheaply as possible.
The idea behind this ETF is that it looks to track an index called the MSCI World ex-Australia Index. It invests in many of the world's largest companies listed in "major developed countries".
The top 10 holdings include some of the biggest global businesses listed in the United States:
- Apple
- Microsoft
- Alphabet
- Amazon.com
- Tesla
- UnitedHealth
- Exxon Mobil
- Johnson & Johnson
- Berkshire Hathaway
- JPMorgan Chase
Unsurprisingly, just over 70% of the portfolio is invested in US-listed businesses. The US is the biggest economy and where many of the world's largest companies are headquartered.
But, many other countries are represented in the Vanguard MSCI Index International Shares ETF portfolio. There are plenty of countries with a market allocation of more than 0.5% within the ASX ETF: Japan, the UK, Canada, France, Switzerland, Germany, the Netherlands, Sweden, Spain, Hong Kong, Italy and Denmark.
One of the great things about this investment option is that it owns almost 1,500 holdings. This means that there is excellent underlying diversification across many companies and sectors.
It's invested across numerous industries with the following allocations (as of October 2022): IT (21.5%), healthcare (14.4%), financials (13.3%), consumer discretionary (10.8%), industrials (10.4%), consumer staples (7.7%), communication services (6.7%), energy (5.8%), materials (3.8%), utilities (3%) and real estate (2.6%).
Why it's an easy investment to potentially make $1 million
The ASX ETF has such a large and diverse portfolio that if things go wrong for a particular investment, such as Meta Platforms, it's not a major setback for the whole portfolio.
Its holdings are regularly changing, so investors won't need to worry about adjusting the portfolio themselves. This is one of the things that make it an effective low-effort investment. As businesses become bigger or smaller, they will naturally move up or down the portfolio's holding list.
The Vanguard MSCI Index International Shares ETF has returned an average of 10.5% per annum, after fees, over the last five years. Past performance is not a guarantee of future performance, though. That includes a decline of more than 10% in 2022. It has an annual management fee of just 0.18%.
According to the compound interest calculator from Moneysmart, investing $1,000 a month and it generating a return of 10% per annum will turn into $1.06 million over 24 years. With a global share portfolio, investors may not need to consider investing in other international share ETFs.
However, volatility is likely in the coming years, and the 10% average return is an average. In one year, it could rise 15%, and in another, it could fall 5%.
