The Vanguard Diversified High Growth Index ETF (ASX: VDHG) has been a great place to invest over the last 12 months.
Since this time last year, the exchange-traded fund (ETF) has risen by over 10%.
That's despite a recent pullback which has seen it fall almost 3.5% since hitting a 52-week high last month.
What is the Vanguard Diversified High Growth Index ETF?
The Vanguard Diversified High Growth Index ETF is an interesting proposition for investors.
Rather than being invested in individual stocks, it is invested in a total of seven other Vanguard ETFs. These are as follows:
- Vanguard Australian Shares Index Fund (weighting 35.97%)
- Vanguard International Shares Index Fund (weighting 26.74%)
- Vanguard International Shares Index Fund Hedged (weighting 15.88%)
- Vanguard Global Aggregate Bond Index Fund Hedged (weighting 7.02%)
- Vanguard International Small Cos. Index Fund (weighting 6.55%)
- Vanguard Emerging Markets Shares Index Fund (weighting 4.82%)
- Vanguard Australian Fixed Interest Index Fund (weighting 3.02%)
As you can see above, there's a nice mix of local and international shares, as well as a smidgen of fixed income.
Vanguard notes that this provides low-cost access to a range of sector funds, offering broad diversification across multiple asset classes.
In addition, it notes that the VDHG ETF invests mainly in growth assets. As a result, it is only really suitable for investors with a high tolerance for risk and seeking long-term capital growth.
What could $1,000 invested in the VDHG ETF become in a year?
It's difficult to say how an ETF may perform because analysts don't issue price targets for them.
However, we have two items that we could possibly work with. These are its recent performance and historical share market returns. However, neither are guarantees of future returns.
In respect to the latter, the Australian share market has returned an average of 9.6% per annum over the last 30 years. If the VDHG ETF were to match this return, a $1,000 investment would grow to be worth $1,096 in a year.
As for its recent performance, the Vanguard Diversified High Growth Index ETF has delivered a return of 7.9% since inception. If it were to continue this trend, then your $1,000 investment would become $1,079.
But it could be worth holding on because of compounding. For example, were the ETF to continue delivering this return for a decade, your $1,000 would turn into over $2,100. Not bad if you ask me.