The ASX-listed exchange-traded fund (ETF) Vanguard MSCI Index International Shares ETF (ASX: VGS) is so good that it could tick all of the boxes that it needs to as a one-and-only type of investment, in my eyes.
For investors who haven't looked into this fund before, it allows Aussies to gain exposure to a portfolio of global businesses, from a wide range of major economically developed countries.
One of the advantages of an ASX ETF is that it allows an investor to gain exposure to all of the businesses inside the portfolio with just one transaction. That's effective investing, in my opinion.
Let's look at the reasons why I like the VGS ETF so much.
Diversification
The reason why it has a strong level of diversification is that it has well over 1,000 positions, which spread the investment risk across many markets.
Its 1,314 holdings are from countries including the US, Japan, the UK, Canada, France, Germany, Switzerland, the Netherlands, Sweden, Spain, Italy, Denmark, Hong Kong, Singapore, Finland, Belgium, Israel, Norway and Ireland.
It's a real positive that not all these holdings are based in the US, with the ongoing worries about what could happen as a result of the tariffs.
However, we should remember that many US-listed businesses don't just make their profit in the US, they also have operations globally, making those companies diversified as well.
The biggest allocation in the ASX ETF sector-wise is to IT with a 23.9% weighting, which I think is a good thing. There are four other sectors that also have a double-digit weighting to four other industries: financials (16.9%), healthcare (11.2%), industrials (11.1%) and consumer discretionary (10.2%).
Great businesses
This ASX ETF doesn't just own (on average) mediocre businesses, I'd describe its holdings as high-quality.
For starters, according to Vanguard, the fund has a return on equity (ROE) of 19.2%. That statistic tells investors how much profit the business is making on the shareholder money retained within the business. A ROE of 19% suggests pleasing profit growth in the future if those businesses can make at least a 19% return on additional money invested within the company.
I'm not going to list out all 1,300 businesses. But, I will note the top 10 holdings, which include: Apple, NVIDIA, Microsoft, Amazon.com, Alphabet, Meta Platforms, Tesla, Broadcom, Berkshire Hathaway and JPMorgan Chase.
In my view, great businesses like the ones above have a habit of continuing to 'win' and deliver profit growth, so I'd be very happy to own this collective group of companies.
Solid returns by the ASX ETF
The past few weeks have been painful for the global share market – this ASX ETF's unit price is down 11% from 14 February 2025.
However, the long-term returns by this fund have been very good, in my view. The VGS ETF returned an average of 13.1% between inception in November 2014 to 31 March 2025.
The drop in the unit price means the collective businesses are now noticeably cheaper than they were in February 2025. I think it's even more attractive than it was before and I'm optimistic it can continue to outperform the S&P/ASX 200 Index (ASX: XJO) in the long-term.
