The December 2018 quarter was a painful one for the Vanguard MSCI Index International Shares ETF (ASX: VGS), it fell 11%.
The Vanguard MSCI Index International Shares ETF is an exchange traded fund (ETF), VGS aims to track the return of the MSCI World ex-Australia Index in Australian dollar terms. This translates to low cost, diversified exposure to many international shares outside of Australia. It is offered by Vanguard, one of the world-leading providers of low cost investing.
Why The Vanguard MSCI Index International Shares ETF fell 11% in 3 months
The December 2018 quarter saw some of the ETF’s biggest holdings like Apple, Microsoft, Alphabet and Amazon fall in value. A combination of the ongoing trade war, President Trump and a US Federal Reserve rate hike caused the share market to be volatile.
Despite the drop of the unit price, the ETF’s main attractions still apply for investors. It has a low annual management fee of 0.18%, many of its largest holdings are global leaders of their industries and the underlying return on equity (ROE) of the index is 14%.
In-fact, the ETF’s holdings are so diverse that five sectors have more than 10% allocated:
- Information Technology
- Health Care
- Consumer Discretionary
According to Vanguard, this ETF was valued at 31 December 2018 with a price/earnings ratio of 15x and an earnings growth rate of 7.9%.
Is now a good time to buy The Vanguard MSCI Index International Shares ETF?
Famous investor Warren Buffett has an excellent analogy when thinking about shares:
“I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.”
You’d need a time machine to know if the December 2018 quarter was the worst of the share market falls.
But, an effective strategy could be to invest a regular amount every month to take advantage of falls and gains over time.