Why I think this Vanguard ETF could be one of the best to buy and hold forever

Some investments become more attractive to me because of how little attention they require.

The Vanguard Diversified High Growth Index ETF (ASX: VDHG) is designed to give investors a diversified portfolio through a single investment.

For someone looking decades ahead, I think that simplicity can be a major advantage.

One Vanguard ETF does a lot of work

The VDHG ETF invests across Australian shares, international shares, emerging markets, smaller companies, and defensive assets such as bonds.

Its portfolio is tilted heavily towards growth assets, with roughly 90% invested in shares.

I think that makes sense for investors with a long timeframe who are prepared to accept periods of market volatility in exchange for greater growth potential.

More importantly, investors do not need to decide for themselves how much money to allocate to Australia, the US, Europe, Asia, or emerging markets.

Vanguard handles those allocations within the fund.

That removes a surprisingly difficult part of investing. It is easy to spend too much time wondering whether one market has become expensive or another is about to outperform.

With this Vanguard ETF, I can simply own a collection of markets and let the portfolio develop over time.

It automatically stays diversified

Another feature I like is rebalancing.

Markets rarely move together. Australian shares might have a strong year while international shares struggle, or technology stocks might surge while another part of the market falls behind.

Over time, those movements can push a portfolio away from its intended allocation.

The VDHG ETF takes care of bringing its investments back towards their target weightings.

For an individual investor, that means fewer decisions. There is no need to work out what to sell, what to buy, or whether a strong-performing market has become too large a part of the portfolio.

I think reducing the number of decisions investors need to make can make it easier to stay with a strategy for the long term.

It can grow with an investor for decades

This Vanguard ETF also has a quality I think is sometimes underestimated. That is that it can grow with an investor.

Someone could buy the fund with their first few thousand dollars and continue adding to the same investment as their portfolio becomes much larger.

The underlying diversification is already built in.

That makes it quite different from buying a handful of individual shares, where a growing portfolio may eventually need more holdings to avoid becoming too concentrated.

An investor could simply keep contributing when they have money available and reinvest dividends along the way.

Given enough time, the combination of regular investing, market growth, and compounding could do much of the wealth-building work.

Foolish takeaway

This Vanguard ETF is the type of investment I could imagine buying and leaving alone for a very long time.

It is diversified, growth-focused, automatically rebalanced, and requires very little ongoing decision-making.

Sometimes making investing easier is one of the best ways to give compounding the time it needs to work.

The post Why I think this Vanguard ETF could be one of the best to buy and hold forever appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.