If I had $1,000 to invest into an exchange-traded fund (ETF), then I’d pick Vanguard Diversified High Growth Index ETF (ASX: VDHG).
What’s VDHG?
If you don’t know what an ETF is then it could be a smart idea to look at Rask’s free beginner ETF investor course.
ETFs have many advantages compared to going with active managers or individuals doing the investing themselves. It takes the guesswork out of things – being less active with your investment strategy is normally the best thing to do.
VDHG is pretty different – normally an (index-based) ETF gives you exposure to all of the underlying businesses in the index that it tracks. But 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 it is invested in growth assets, namely shares. There is also a 10% allocation to the bond asset class.
What ETFs is VDHG invested in?
It’s invested in the following ETFs (and the corresponding percentage of the overall portfolio):
Vanguard Australian Shares Index Fund (Wholesale) – 36.20%
Vanguard International Shares Index Fund (Wholesale) – 26.50%
Vanguard International Shares Index Fund (Hedged) – AUD Class (Wholesale) – 15.90%
Vanguard Global Aggregate Bond Index Fund (Hedged) – 7.10%
Vanguard International Small Companies Index Fund (Wholesale) – 6.40%
Vanguard Emerging Markets Shares Index Fund (Wholesale) – 4.90%
Vanguard Australian Fixed Interest Index Fund (Wholesale) – 3.00%
Performance and fees
VDHG has annual management costs 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 8.3%. That’s not bad considering it includes the COVID-19 crash.
Why it’s such a good ETF to consider
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.
VDHG ETF is a great way to have all of that done for you in just one investment.
I think it’s 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.
