The Vanguard MSCI Index International Shares ETF (ASX: VGS) is a high-quality exchange-traded fund (ETF) investment choice, in my opinion. I think it would make a good pick for nearly everyone's portfolio.
For readers that don't know what this ASX-listed ETF does, Vanguard describes it as the following:
The ETF provides exposure to many of the world's largest companies listed in major developed countries. It offers low-cost access to a broadly diversified range of securities that allows investors to participate in the long-term growth potential of international economies outside Australia.
With how it's set up, it would be suitable for a lot of investors, in my opinion.
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Great diversification and strong positions
The ETF is invested in 1,433 businesses across the world.
There are numerous geographic markets with an allocation of at least 0.4%: the US (71.5%), Japan (6.4%), the UK (4%), France (3.3%), Canada (3.3%), Switzerland (2.7%), Germany (2.3%), the Netherlands (1.3%), Denmark (0.9%), Sweden (0.8%), Spain (0.7%), Italy (0.7%), Hong Kong (0.5%) and Singapore (0.4%).
It offers so much diversification that I think this could be used by Aussies as the only way they access the global share market.
The most significant weightings are with incredibly strong tech businesses that have appealing growth potential such as Apple, Microsoft, Alphabet, NVIDIA, Amazon.com, Meta Platforms and Tesla. It's exciting to think what these investments can achieve in the next five and ten years.
We can't know which shares are going to perform the best in the short-term or the long-term, but I think the VGS ETF is well-placed to be invested in solid businesses.
Solid returns
Past performance is not indicative of future performance, but I think the biggest global businesses as a group have the capability to continue to produce good profits and re-invest retained money into more opportunities for a good return within the business (and/or make acquisitions).
Since the Vanguard MSCI Index International Shares ETF started in November 2014, it has delivered an average return per annum of 12.4%.
VGS ETF has low management fees
It makes solid returns and I think the costs are very reasonable considering how much diversification we get from just one investment.
The VGS ETF has an annual management fee of 0.18%, which is one of the cheapest ways for Aussies to get global diversification via the ASX.
It's possible that Vanguard may be able to reduce management fees over time.
Can provide cash flow for income-focused investors
I mentioned that the VGS ETF could work for almost anyone. Its passive income is low in a world where interest rates are higher and savings accounts offer a pleasing return now.
According to Vanguard, it has a dividend yield of 1.9%. That's not very exciting.
But, with the ASX ETF's long-term returns, we could decide to sell some of it each year to create a cash flow.
Imagine starting with a $50,000 balance and it rises by 10% over a year. If someone decided to create a 5% 'dividend yield' of the original $50,000 balance, it would unlock $2,500 of cash flow. This would leave the VGS ETF balance at $52,500 to compound again next year.
I think the VGS ETF can tick the box for people looking for both growth and income.
