Investors in the Vanguard MSCI Index International Shares ETF (ASX: VGS) have just capped off a very profitable financial year indeed. Since the start of the 2023 financial year, VGS units have gone from $88.08 each to the $106.10 this exchange-traded fund (ETF) is now trading at.
That's a gain of just under 21% – far better than the gain enjoyed by many ASX shares. In stark contrast, the S&P/ASX 200 Index (ASX: XJO) returned a solid but still inferior 10.14% over the same period.
It's not surprising to see such a divergence between the ASX 200 and the Vanguard VGS ETF. After all, the Vanguard International Shares ETF holds no ASX shares at all. Instead, it represents a portfolio of around 1,500 individual shares from more than 20 advanced economies around the world.
These include Canada, France, Switzerland, Sweden, Singapore, Germany, Japan, and the United Kingdom. But most of its concentration is in the US markets, with more than 70% of VGS's weighted portfolio in American shares.
Its top five holdings – Apple Inc (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), Amazon Inc (NASDAQ: AMZN), and NVIDIA Corporation (NASDAQ: NVDA) – account for more than 15% of the entire VGS portfolio. That's despite the near-1,500 individual holdings.
So given Apple, Microsoft, Alphabet, Amazon, and Nvidia are up 38.7%, 39.5%, 9.3%, 20.4%, and 169% over the past 12 months respectively, it's no surprise to see this ETF record such a healthy gain as well.
But just because an ETF records a pleasing gian one year, it is by no means guaranteed that investors will see a repeat the next. With this in mind, let's discuss what might FY2024 hold in store for the Vanguard International Shares ETF?
What's next for Vanguard's VGS ETF in FY2024?
Well, as we've noted, this ETF has more than 1,500 individual shares. So it's very hard to predict what might happen with this fund going forward, given it is so diversified across different markets and countries.
In saying that, we've also established the dominance of US shares in this fund, especially the tech giants. Thus, it's not hard to conclude that if the next 12 months are just as kind to the likes of Apple, Amazon, and Nvidia as the past 12 have been, then the Vanguard International Shares ETF will have another solid year of returns.
With interest rates still rising and fears of a global recession still looming, this is by no means a done deal. But that's what everyone was saying this time last year, and look at this ETF now.
Earlier this week, we also looked at the performance of the BetaShares NASDAQ 100 ETF (ASX: NDQ) and the fine chance it has of another strong few months at least.
If this indeed comes to pass, then it would also bode well for the Vanguard International Shares ETF. But, we'll just have to wait and see what happens.
