The exchange-traded fund (ETF) Vanguard MSCI Index International Shares ETF (ASX: VGS) has been on a rollercoaster ride this year. At one point it was down over 20% in the year to date, though it has recovered a little since then.
This offering from Vanguard is one of the most compelling passive ways to invest in the global share market in my opinion.
For investors that haven't heard of Vanguard, it's an organisation that offers investment funds, like ETFs. A key point of difference with Vanguard is that it aims to offer its funds for as little cost as possible because the owners of Vanguard are the investors themselves. Vanguard shares the profit in the form of lower management fees.
This ETF specifically looks to provide "exposure to many of the world's largest companies listed in major developed countries." The idea is that it's invested in over 1,000 businesses outside of Australia, to get exposure to those international economies.
With that in mind, here are three reasons why it could be a good time to invest in the Vanguard MSCI Index International Shares ETF:
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Lower valuation
Part of investing is about choosing an investment that can grow well over time. But, a key element of the return is the purchase price. So, for whatever investment we're looking at, it's obviously better to buy it at a lower price.
The share market doesn't fall over 10% for no reason, the higher interest rates and elevated inflation are justifiably hitting businesses in different ways.
But, I think the fact that it's down around 15% makes it much more interesting. When something declines by 15%, getting back to the same level would be a rise of 18%.
Great holdings
When investing, I think it's important to go for quality businesses or assets that can do well even during a downturn. When the going gets tough, it's the low-quality stuff that could quickly get into trouble.
Looking at the holdings in the Vanguard MSCI Index International Shares ETF, these are some of the strongest national, or even global names, within the 1,460-plus positions in the portfolio.
The top 10 holdings are: Apple, Microsoft, Alphabet, Amazon.com, Tesla, UnitedHealth, Johnson & Johnson, Exxon Mobil, Nvidia and Berkshire Hathaway. I'd be happy to own most of those names myself, so I'd be happy to have a portfolio with them. All of this diversification comes with a low management fee of 0.18%.
Don't try to time the market
If investors are regularly investing in the Vanguard MSCI Index International Shares ETF, then I don't think they should be put off by changes in the unit price.
A regular investment plan can take out the guesswork, and trying to time the market could mean missing out on opportunities and long-term growth.
To the end of November 2022, the ETF had returned an average return per annum of 10.2% over the prior five years. I'm not sure what the future holds in terms of the returns, but, a return on equity (ROE) of just over 18% is promising for long-term double-digit returns.
