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Why VAE ETF is a good contender for diversification

I believe that Vanguard FTSE Asia Ex-Japan Shares Index ETF (ASX: VAE) is a really good contender to add good diversification to a portfolio.

About VAE ETF

The VAE ETF is about providing access to the Asian share market outside of Japan.

As you might expect, there’s a large allocation to China with 45.5% of the portfolio. Taiwan has a 13.6% allocation, South Korea has a 12.5% allocation, India has a 9.5% allocation and Hong Kong has a 9.3% allocation.

Other countries with an allocation of around 1% or more are: Singapore, Thailand, Malaysia, Indonesia and the Philippines.

Whilst this ETF owns over 1,300 holdings, you get exposure to some of the world’s best businesses like Alibaba, Tencent, Taiwan Semiconductor Manufacturing and Samsung.

There was good economic growth in Asia before COVID-19 and this could continue over the coming years. China, Taiwan and South Korea appear to have good control of the coronavirus.

Other similar ETFs

Other Asian ETF examples are: Betashares Asia Technology Tigers ETF (ASX: ASIA) and iShares Asia 50 ETF (ASX: IAA).

How has the ETF performed?

Source: Best ETFs VAE 5-year share price chart.

According to Vanguard, over the past year it has produced a total return of 10% (after the annual 0.40% fee) and since inception in December 2015 it has returned an average of 9.7% per annum.

Why it’s a diversification contender

Most Aussie investors have a lot of exposure to ASX shares and probably the US share market.

But Asia is a huge part of the global economy with a number of high quality businesses listed there. I think the Asian tech shares can rival the US tech shares, and they’re probably priced cheaper.

There are China risks with this ETF, but I think it’d be a good way to diversify away from an ASX ETF without necessarily lowering returns. ‘Diworsification’ isn’t a good idea.

But there are plenty of other ETFs out there for growth and/or dividends. Check out our list of ASX ETFs.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

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From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

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