The Vanguard Diversified High Growth Index ETF (ASX: VDHG) is an ETF that invests in other Vanguard funds. Here are the answers for five top questions on the VDHG ETF.
This compelling investment idea does raise a few questions on how it works and as the old adage says ‘only invest in things that you understand’. Once understanding how VDHG works, it could be a worthy contender.
What is VDHG invested in?
VDHG has exposure to ASX shares, international shares and bonds. This ETF invests in other funds which creates sizable diversification.
The VDHG portfolio is made up of seven different Vanguard products, five of them are growth funds and make up a total of 90% of VDHG. The income/bond portion of VDHG is made up by two funds and represents 10% of the ETF. The large allocation to growth isn’t a surprise, with “high growth” in the name.
Two of the funds in the VDHG portfolio are hedged. Regarding the funds that are hedged, Vanguard said “the fund is hedged to Australian dollars so the value of the fund is relatively unaffected by currency fluctuations.”
The growth focused funds in VDHG are:
- Vanguard Australian Shares Index Fund (Wholesale)
- Vanguard International Shares Index Fund (Wholesale)
- Vanguard International Shares Index Fund (Hedged) – AUD Class (Wholesale)
- Vanguard International Small Companies Index Fund (Wholesale)
- Vanguard Emerging Markets Shares Index Fund (Wholesale)
The income/bonds focused funds in VDHG are:
- Vanguard Global Aggregate Bond Index Fund (Hedged)
- Vanguard Australian Fixed Interest Index Fund (Wholesale)
What companies are in VDHG?
Because VDHG is an ETF of other funds, it isn’t instantly clear what companies make up the underlying investments. An easy way to see all of holdings of each fund in VDHG is to head to the VDHG broker basket and click through to see the holdings of the seven funds from there.
VDHG has so much depth to its diversification that it would be a whole article in itself to outline the companies in each fund. To keep it brief, some of the products in VDHG are essentially the same as other ETFs that investors would be familiar with.
As an example, the Vanguard Australian Shares Index Fund (Wholesale) portion of VDHG is essentially Vanguard Australian Shares Index ETF (ASX: VAS) and tracks the ASX 300.
What is the dividend yield of VDHG?
VDHG pays a quarterly distribution with payments in January, April, July and October. The distributions can be made up of both income and capital gains and the yield is dependant on what the underlying funds distribute to VDHG. Since VDHG launched in November 2017 it has paid an average distribution of 5.66% per year.
What is the return on VDHG?
The total return is a combination of distributions and growth. Since VDHG’s inception it has retuned an average of 10.71% each year after fees.
Management fees are important to consider, fees can have a large impact on returns. For VDHG the management fee is 0.27%, this means if an investor had $1,000 invested in VDHG the fee would be $2.70 a year. This is very low for the immense diversification included.
Is VDHG a good investment?
For some investors it might not provide enough bond exposure, for other investors it might be too much exposure to bonds. If VDHG is a base to a portfolio, other investments can be tailored around it to change the amount of exposure.
This ETF has the potential to be a great foundation of a portfolio. Or perhaps for an investor who really wants to own only one name, VDHG could fit the bill.