As we may all be aware, 2021 has been a pretty solid year for investing on the ASX share market. Over the year to date in 2021, the S&P/ASX 200 Index (ASX: XJO) has gained close to 10%. Considering the added bonuses of dividends and franking, that’s an objectively fine performance from ASX shares for the year (touch wood). But what of the Vanguard MSCI Index International Shares ETF (ASX: VGS)?
Well, it appears VGS was not to be outdone by the ASX 200. VGS units have, year to date, returned just over 27% to its investors since the start of January. But that’s looking backwards. What is the outlook for VGS units going into 2022? Can investors expect another year of near-30% returns from this humble index fund?
Where did VGS’s 2021 gains come from?
Well, to answer that as best we can, let’s dig into how this exchange-traded fund (ETF) is structured. So VGS is one of the widest and most diversified ETFs on the ASX. It covers an astonishing 1,502 individual companies, spread across more than 20 countries. These advanced economies include Canada, Japan, Europe, Singapore, Hong Kong and the United Kingdom. But are mostly dominated by the United States, which commands nearly 70% of this ETF’s weighting.
The US is also heavily reflected in VGS’s top holdings. AS of 31 October, these were:
- Apple Inc (NASDAQ: AAPL)
- Microsoft Corp (NASDAQ: MSFT)
- Amazon.com Inc (NASDAQ: AMZN)
- Tesla Inc (NASDAQ: TSLA)
- Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL)
- Meta Platforms Inc (NASDAQ: FB)
- NVIDIA Corp (NASDAQ: NVDA)
- JPMorganChase & Co Inc (NYSE: JPM)
- UnitedHeath Group Inc (NYSE: UNH)
- Johnson & Johnson (NYSE: JNJ)
They’re all US companies, together making up close to 20% of VGS’s total weighting despite its 1,502 individual holdings. And all of these top 10 holdings have enjoyed a phenomenal year in 2021 so far. For example, Apple shares are up 25.8% in 2021 so far. Microsoft shares are up almost 56%, while Amazon has had a far more muted year with a 6.4% gain. Tesla has gained 32.4%, while Alphabet Class A shares have put on nearly 69%.
As such, it’s not hard to see why VGS itself has had such a strong year thus far. It’s all helped along by the falling Aussie dollar in 2021 too, no doubt.
What does 2022 hold for the Vanguard MSCI Index International Shares ETF?
So for 2022 to be another top year for VGS units, we would probably have to see another strong showing for these top US shares, especially those in the top echelon (Apple, Microsoft etc.). A further drop in the value of the Aussie dollar against the US dollar would also help.
So only time will tell if 2022 ends up being another great year to hold VGS units. But keep your eye on those top holdings if you want to keep track.
The Vanguard MSCI Index International Shares ETF charges a management fee of 0.18% per annum.
The post Could 2022 be a good year for the Vanguard International Shares ETF (ASX:VGS)? appeared first on The Motley Fool Australia.
Should you invest $1,000 in VGS right now?
Before you consider VGS, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and VGS wasn’t one of them.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen owns Alphabet (A shares), JPMorgan Chase, Johnson & Johnson, Meta Platforms, Inc., and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Alphabet (A shares), Meta Platforms, Inc., Microsoft, and Vanguard MSCI Index International Shares ETF. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Meta Platforms, Inc., Nvidia, and Vanguard MSCI Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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