Over the past two years, more Australian investors have diversified their portfolios by investing in exchange-traded funds (ETFs) with exposure to international shares.
This is mainly due to US shares outperforming the S&P/ASX 200 Index (ASX: XJO) in recent times.
For example, last year, the S&P 500 Index (SP: INX) delivered total returns (including dividends) of 25.02% compared to 11.44% for the ASX 200.
The Vanguard MSCI Index International Shares ETF (ASX: VGS) is the biggest ETF holding international shares on the ASX.
According to March data from ASX, the VGS ETF has $10,427 million in funds under management (FUM).
That makes it the largest ETF exposed to international shares on the Australian share market.
It's also the second-largest ETF overall, behind Vanguard Australian Shares Index ETF (ASX: VAS), which has $18,178 million in FUM.
The VGS ETF seeks to track the MSCI World ex-Australia (with net dividends reinvested) in Australian dollars Index.
It holds 1,325 stocks, mostly large-caps, listed in developed nations such as the US and some in Europe, the Pacific, the Middle East, and other countries. US shares dominate the portfolio at more than 70%.
So, how well is the VGS ETF performing for Australian investors?
Let's take a look at what's happened over the past year.
Is the VGS ETF delivering for Australian investors?
Today, the VGS ETF is trading for $129.05 apiece, down 0.093%.
This time last year, the VGS closed at $118.61 apiece on Friday, 12 April.
If you had put $10,000 into the VGS ETF on 12 April last year, it would have bought you 84 units (for $9,963.24).
There's been a capital gain of $10.44 per unit since then, which equates to $876.96 for your portfolio of 84 units.
But what about dividends (or distributions, as they are called with ETFs)?
Since 12 April 2024, VGS has paid three lots of dividends, with a fourth coming this Wednesday.
The VGS ETF paid investors 218.1273 cents per unit on 16 July last year. The ETF then paid 28.7066 cents per unit on 16 October.
VGS ETF investors got another payment of 71.6777 cents per unit on 17 January this year.
The next VGS ETF dividend will be paid on Wednesday. VGS investors will receive 147.0283 cents per unit.
All up, that is 465.5399 cents per share, which adds $391.05 worth of annual income from your 84 units of ASX VGS.
Grand total…
Your capital gain of $876.96 plus your distributions of $391.05 gives you a total return in dollar terms of $1,268.01.
You invested $9,963.24 buying your 84 units of VGS ETF on 12 April.
This means you have received a total return, in percentage terms, of 12.73%.
That's a pleasing return in anyone's language.
Your portfolio of VGS units is now worth $11,231.25.
ASX VGS popular during last week's market sell-off
New data from online trading platform Stake shows the VGS ETF was one of the 7 most popular ETFs bought during last week's sell-off.
The data, which covers trading in ASX ETFs on Monday, 7 April, shows the VGS was the fourth most popular ETF traded by Stake clients.
About 88% of VGS transactions were buy orders, and 12% were sell orders.
Stake's markets analyst Samy Sriram said Aussie investors buying the dip on Monday were more interested in ETFs than individual stocks.
Sriram said:
ETFs dominated trading activity, although one particular callout is the Vanguard Msci Index International Shares ETF which has seen a big uptick in buys week over week since February.
In the last week alone, VGS saw a 52% increase in buys, suggesting that investors are adding more exposure to international stocks and shifting away from being overly concentrated in the U.S. market.
