The Vanguard MSCI Index International Shares ETF (ASX: VGS) is a leading exchange-traded fund (ETF) that should be on most investors' radars, in my view. I think it ticks a lot of boxes that make for a successful investment.
VGS ETF is over $10 billion in size, making it one of the largest ETFs on the ASX. I'm not surprised it's so popular with investors because it provides several things that Aussie investors may typically lack in their own investment property and share portfolios.
Let's get into what makes it such an appealing investment to me and many other investors.
The fund offers extremely attractive levels of diversification.
Aussies primarily focused on Australian property or Australian businesses could do well to expand their exposure to other parts of the global economy.
Australia is a great place to invest, but there are thousands of businesses listed outside of this lucky country which could be worth owning a piece of.
The VGS ETF owns more than 1,300 businesses in its portfolio, making it very easy to gain access to share markets like the US, Japan, the UK, Canada, France, Germany, Switzerland, the Netherlands and plenty more.
These businesses come from a variety of sectors, with five industries having a weighting of more than 10% in the portfolio, including IT, financials, industrials, healthcare and consumer discretionary.
One of the main benefits of going with an ETF provided by Vanguard is that the management costs are usually very low. This leaves more of the fund's value in the hands of the investors rather than going to fund managers.
The Vanguard MSCI Index International Shares ETF has an annual management fee of 0.18% and no performance fees. That can make a big difference to the long-term compounding of wealth for investors.
I think it's a very reasonable fee for the amount of geographic diversification that comes with the investment.
This fund is invested in many of the world's leading technology businesses, such as Apple, Microsoft, Nvidia, Amazon.com, Alphabet, Meta Platforms and Broadcom.
I believe technology businesses can deliver great returns because of their ability to achieve strong profit margins and grow their market presence globally.
But, if there are other smaller listed businesses listed around the world that become a major player, VGS ETF investors will benefit from that too.
One of the quality factors that is demonstrated by this fund is the high return on equity (ROE) of the fund. This figure tells investors how much profit a business is making on the shareholder money retained within the company. A high ROE can imply additional money invested within the business by the company can deliver a good return.
VGS ETF has an overall ROE of 19.2%, according to Vanguard. I think that's a great sign for the long-term health of the VGS ETF.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.