I know that we still have another two weeks or so in 2023, so this might be a bit premature. But I think it's safe to say that the Vanguard MSCI Index International Shares ETF (ASX: VGS) has had a very good year indeed.
Backtrack to the start of 2023, and VGS units were trading at just over $91 each. But today, those same units are asking $111.22 at the time of writing. That's a year-to-date gain worth 22.1%, and not even accounting for dividend returns (add another 2% or so).
Unless something catastrophic happens on global markets in the next fortnight, the Vanguard International Shares ETF will make its investors a very happy bunch come New Year's Eve.
But we investors should always be looking forward. So now that we can almost call 2023 a resounding success, what might 2024 bring to this popular ASX VGS exchange-traded fund (ETF)?
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Will VGS units have another great year on the ASX in 2024?
Well, it's difficult to predict what even an individual share will do in an upcoming calendar year, let alone an ETF that has close to 1,500 underlying holdings, spread across more than 20 economies.
Indeed, the Vanguard International Shares ETF lies up to its name in this regard, housing companies from countries as diverse as Finland, Israel, Singapore and Portugal.
However, we can make one or two significant observations. Although there are nearly 1,500 shares from 20 countries in this ETF, it is an extraordinarily top-heavy fund when the rubber hits the road.
More than 70% of VGS' weighted portfolio hails from one country – the United States. And the largest five shares in the fund's portfolio make up almost 17% of its weighting. These five companies are Apple, Microsft, Amazon, Alphabet and NVIDIA.
It's largely down to these companies that explain why the Vanguard International Shares ETF has had such a lucrative year in 2023 so far. For instance, Apple stock has gained more than 58% this year to date. Amazon is up 71.8%, while NVIDIA shares have surged a whopping 237.8%.
So just like these shares have ensured VGS' success in 2023, so too will they in 2024 in all likelihood.
It's also worth keeping an eye on the Australian dollar in 2024. Most assets in the VGS portfolio are priced in US dollars. As such, when the Aussie dollar falls in value against the US dollar, it gives the fund a value boost.
Thus, if our dollar rises against the greenback in 2024, it may weigh on the performance of this ETF. The same is also true in reverse.
Only time will tell what 2024 will bring for the ASX's VGS ETF. But these are the things to keep an eye on next year.
