There are plenty of global exchange-traded funds (ETFs) available to Australian investors.
One of the best for growth investors, in my opinion, is the Vanguard MSCI International Small Companies Index ETF (ASX: VISM).
It focuses on smaller companies across developed economies, which is an area that often flies under the radar.
For growth-focused investors, I think that creates a very interesting opportunity.
Exposure to a different part of the market
Most global portfolios tend to lean heavily toward large-cap companies.
This Vanguard ETF offers something different. It provides exposure to around 3,700 small-cap stocks across developed markets, with a median market capitalisation of about $7.6 billion.
These are businesses that are still growing into their markets.
They are often earlier in their expansion phase, which means there is more room to scale over time. That can translate into stronger earnings growth compared to more established large-cap names.
The fund’s underlying earnings growth rate of around 11.5% highlights that point.
Built-in diversification across industries and regions
Another feature I like is how diversified the ETF is.
The portfolio spans multiple sectors, including industrials, financials, technology, consumer discretionary, and healthcare. Industrials make up about 20.9% of the fund, followed by financials at 14.4% and technology at 11.5%.
Geographically, the United States accounts for about 63% of the portfolio, with meaningful exposure to Japan, Canada, and the United Kingdom as well.
That spread is important, in my opinion. It means you are not relying on a single sector or country to drive returns. Instead, you are tapping into a wide range of industries and economic drivers.
A simple way to access global small-cap growth
Picking individual small-cap ASX stocks globally is not easy.
There are thousands of companies, and information can be harder to access compared to large-cap names.
This Vanguard ETF solves that problem.
It tracks the MSCI World ex-Australia Small Cap Index, giving investors access to a broad group of companies in one investment. Holdings include businesses like Sandisk, XPO, and Woodward, which operate across technology, transport, and aerospace.
That simplicity can be valuable, especially for investors who want exposure to growth without having to research dozens of individual stocks.
Long-term growth potential with a reasonable valuation base
Even though this is a growth-oriented ETF, the valuation profile still looks balanced.
According to Vanguard, the ETF trades on a price-to-earnings ratio of around 17.4 times and a price-to-book ratio of 1.87 times, which are not excessive for a portfolio of growing companies.
Return on equity sits close to 10%, which reflects a solid level of profitability across the portfolio.
There is also a dividend yield of around 1.9%, which adds a small income component alongside growth.
Foolish takeaway
This Vanguard ETF offers exposure to a large and diverse group of smaller companies across global markets.
For growth investors, I think that is where the appeal lies. These businesses are still expanding, and the ETF provides a simple way to access that opportunity.
With broad diversification, steady earnings growth, and a reasonable valuation base, I see it as a compelling option for long-term investors looking beyond the usual large-cap names.
The post Why I think Australian growth investors would love this Vanguard ETF 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 recommended XPO. 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.