ASX investor interest in the Vanguard Diversified High Growth Index ETF (ASX: VDHG) has been on the rise lately. This comprehensive exchange-traded fund (ETF) offers an all-in-one approach to passive investing.
But this ETF isn't the easiest to get one's head around. Especially when trying to sort out which underlying holdings you actually have your money invested in.
So today, let's do a deep dive into the VDHG ETF and work out the top holdings you will have in your ETF's portfolio if you buy into this fund today.
As we discussed late last month, the ASX's VDHG ETF isn't your typical ETF. A normal index fund like the Vanguard Australian Shares Index ETF (ASX: VAS) basically tracks a certain index — in this case, the S&P/ASX 300 Index (ASX: XKO). That means that the VAS ETF simply holds the 300 shares largest shares on the ASX by market capitalisation.
However, the VDHG ETF isn't so simple. Instead of holding a basket of underlying shares, this fund holds a basket of underlying ETFs. These, in turn, hold shares within them. It's the closest thing to a Babushka doll you can get on the share market.
How does the ASX's VHDG ETF work?
These ETFs are designed to give the investor a wide range of different asset classes under the one proverbial VDHG roof, in order to give investors as much diversification as possible.
Here's how the Vanguard Diversified High Growth Index ETF currently proportions these different ETFs:
- Australian shares – 35.47%
- Unhedged international shares – 26.58%
- Hedged international shares – 16.52%
- International bonds and fixed-interest investments – 7%
- International small-cap shares – 6.54%
- Emerging markets shares – 4.89%
- Australian bonds and fixed-interest investments – 3%
Each of these sectors is represented by one of Vanguard's other ETFs. For example, the Australian shares segment is covered by the VAS ETF we discussed above. The international shares segment would be handled by the Vanguard MSCI Index International Shares ETF (ASX: VGS), and so on.
So as you can see, this ETF's primary asset class is international shares, with a combined 62.05% of the ETF's weighted portfolio. That's merging both the hedged and unhedged international shares ETFs.
Both the Vanguard MSCI Index International Shares ETF and the Vanguard MSCI Index International Shares (Hedged) ETF (ASX: VGAD) contain the same underlying holdings. The only difference is currency hedging.
What are the Vanguard Diversified High Growth ETF's top holdings?
These two ETFs are dominated by the US tech giants, with Apple, Microsoft, Alphabet, Amazon and NVIDIA coming in at the top five positions. So, by extension, these are going to be the VDHG's largest investments too.
But at a 35.47% weighting in the VDHG ETF, the ASX 300 fund shouldn't be ignored. We all know the largest companies on the ASX. But if you need a refresher, the top five currently comprise BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC).
So if you're wondering which are the top investments in the VDHG ETF, you can take Apple, Microsoft, Alphabet, Amazon, NVIDIA, BHP, Commonwealth Bank, CSL, NAB and Westpac to the bank.
