Is right now a massive buying opportunity for the Vanguard MSCI Index International Shares ETF (VGS)?

This popular ETF has lost a lot of value this week.

| More on:
ETF in written in different colours with different colour arrows pointing to it.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Vanguard International Shares ETF is a popular index fund on the ASX
  • This ETF covers more than 20 advanced economies from around the world
  • But it has fallen significantly in the past week...

Most ASX investors would know that the past week has been a brutal one for ASX shares and the Australian share market. But it's not just our markets that are in a world of pain right now. So today, let's check out the damage with the Vanguard MSCI Index International Shares ETF (ASX: VGS). 

This exchange-traded fund (ETF) from provider Vanguard is one of the best barometers for global shares around. The Vanguard International Shares ETF is a massive fund in scope and scale. It holds shares from all kinds of advanced economies around the world. Here you'll find shares from Canada, the United Kingdom, Japan, France, Switzerland, Sweden, Germany, Israel, Singapore and Hong Kong.

But most of its major constituents come from the United States. This ETF's top holdings are names that will probably be familiar to most readers. They include the likes of Apple, Microsoft, Amazon, Tesla and Exxon Mobil.

As such, this ETF is a popular and effective choice for any investor wishing to diversify their ASX share portfolio using a single, simple index fund.

So let's look at the damage that the past week or so has done to this ETF. Since 7 March, the Vanguard International Shares ETF has fallen from $98.60 a unit to the $95.60 we see today. That's a hefty loss of 3%.

Thus, many investors might be wondering if this is a buying opportunity for this popular ETF.

Is it time to buy the Vanguard International Shares ETF?

Well, I would argue that it is. Whenever a quality index fund experiences a significant drop in value, it can be a good chance to pick up additional units. Index funds are not individual companies. They hold an ever-changing basket of shares, weighted by market capitalisation.

In this ETF's case, these sources are from around the world, but the same principle applies. Because an index fund is periodically rebalanced to ensure it always has the largest companies within it, losers are weeded out over time, while winners are added.

Because of this nature, investing in index funds using a dollar-cost-averaging strategy is usually a popular and effective way of building wealth. That would work well for most investors. But the principles of 'buy low sell high' still apply here too.

If you can handle the emotional baggage of buying more of an investment when it falls in price, then you should do so. As the great Warren Buffett once said, "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down".

So I think it is indeed a great time to buy the Vanguard International Shares ETF right now. Remember, this index fund has returned an average of 11.09% per annum since its inception in 2014. Past performance is no guarantee of future results, of course. But it still leads me to believe that the cheaper you can get this ETF, the better.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Amazon.com, Apple, Microsoft, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon.com, Apple, Microsoft, Tesla, and Vanguard Msci Index International Shares ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Amazon.com, Apple, and 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 Scott Phillips.

More on Index investing

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Index investing

3 top ASX index funds to buy now

I think these index funds are well worth a look right now.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Index investing

If you own the Vanguard Australian Shares ETF (VAS), make sure you're doing this

This one mistake could cost ETF investors dearly.

Read more »

A young man wearing glasses writes down his stock picks in his living room.
Index investing

Should I buy the iShares S&P 500 ETF (IVV) at all-time highs or wait?

Does 'buy low, sell high' apply to index funds?

Read more »

ETF with different images around it on top of a tablet.
Index investing

Thinking about buying the Vanguard Australian Shares ETF (VAS)? Here's what you're really buying

An investment in this index fund could be VAS-tly more complicated than you'd think.

Read more »

A smiling woman with a satisfied look on her face lies on a rug in her home with her laptop open and a large cup on the floor nearby, gazing at the screen. researching new ETFs
Index investing

Should I buy the Vanguard Australian Shares Index ETF (VAS) now or wait for an ASX dip?

Here's my take on VAS' current price.

Read more »

Woman on a swing at a beach, symbolising passive income.
Index investing

If I'd put $2k in the ASX 200 at the start of 2023, here's how much I'd have now!

Did index fund investing pay off last year?

Read more »

A baby reaches into the bottom drawer of a chest of drawers.
Index investing

Is the Vanguard Australian Shares ETF (VAS) the best bottom-drawer investment?

How does this popular ETF measure up against other passive investments?

Read more »

ETF spelt out with a piggybank.
Index investing

Can the Vanguard Australian Shares Index ETF (VAS) reach $90 by Christmas?

Can this popular ETF give its investors a $90 Christmas present?

Read more »