If I were looking to invest in an ASX exchange-traded fund (ETF) right now, the Vanguard Diversified High Growth Index ETF (ASX: VDHG) would be my top pick.
For those unfamiliar, an ETF basically lets you invest in a whole bunch of different businesses with a single investment. Check out the video below to learn more, or take the free ETF beginners course over on Rask Education.
Unpacking the VDHG ETF
ETFs have many advantages compared to active managers or individuals doing the investing themselves. It takes the guesswork out of things – being less active with your investment strategy can often be the best thing to do, particularly for those just starting out.
VDHG is fairly different – normally, an index-based ETF gives you exposure to all of the underlying businesses in the index that it tracks. For example, an ETF that tracks the ASX 200 index would provide exposure to the 200 odd companies included in that particular index (click here to learn more). Instead, VDHG invests in multiple ETFs to give it excellent levels of diversification.
The ‘high growth’ part of the name is from the fact that most of the fund is invested in growth assets, namely shares. There is also a 10% allocation to the bond asset class.
What is VDHG invested in?
VDHG is invested in the following ETFs (and the corresponding percentage of the overall portfolio):
- Vanguard Australian Shares Index Fund (Wholesale) – 35.90%
- Vanguard International Shares Index Fund (Wholesale) – 26.70%
- Vanguard International Shares Index Fund (Hedged) – AUD Class (Wholesale) – 15.90%
- Vanguard Global Aggregate Bond Index Fund (Hedged) – 7.00%
- Vanguard International Small Companies Index Fund (Wholesale) – 6.50%
- Vanguard Emerging Markets Shares Index Fund (Wholesale) – 5.00%
- Vanguard Australian Fixed Interest Index Fund (Wholesale) – 3.00%
VDHG’s performance and fees
VDHG has annual management fees of 0.27%, which isn’t bad at all considering how much diversification you can get.
Over the last three years, the return has been an average of 8.83% per annum. That’s not bad considering this includes the COVID-19 crash.
Why is VDHG a top choice?
It’s difficult to know exactly how much of one ETF or another to buy for your portfolio to get the right mix of diversification, growth, income, bonds and so on.
Therefore, I think the VDHG ETF is a great way to have all of that done for you in just one investment.
I believe VDHG is the type of investment you could hold for many years and be reasonably happy with the result, though it likely won’t perform as well as an ETF that’s purely about investing in shares.