Is the Vanguard MSCI International ETF (VGS) a good alternative to global tech shares?

The Vanguard MSCI Index International Shares ETF (ASX: VGS) is one of the most popular exchange-traded funds (ETFs) with a fund size of more than $4.4 billion.

It may also provide an alternative to investing in technology shares but let’s look at the detail.

ASX technology shares include names like Xero Limited (ASX: XRO), Altium Limited (ASX: ALU), and WiseTech Global Ltd (ASX: WTC).

Globally, there are many household names that investors can choose from, including Microsoft, Alphabet, and Apple.

But, the tricky thing is knowing which one to invest in. Technology and trends can change quickly. Just look at what happened to MySpace and Blackberry. One way to mitigate the impact of that could be to go for a diversified investment option that enables investors to get exposure to a whole bunch of different technology businesses.

Is the VGS ETF the answer?

The Vanguard MSCI Index International Shares ETF is invested in a total of 1,473 businesses across the world.

The purpose of the ETF is to track the MSCI World ex-Australia Index. This means the VGS ETF is an index fund.

Looking at the weighting of its portfolio, 21.5% is officially classified as ‘information technology’. That’s a much larger allocation than its second-largest weighting of healthcare at 14.2%.

But, it’s important to remember that plenty of names we may think of as ‘technology’ are actually classified as something else. For example, Alphabet, Amazon, Meta Platforms, and Tesla aren’t classified as IT businesses.

If more IT and tech businesses rise up the ranks to become global leaders, then the VGS ETF could have an even bigger weighting to IT in the future than it already does.

Considering the Vanguard MSCI Index International Shares ETF has an annual management fee of just 0.18%, I think it seems like an effective way to get exposure to many of the world’s leading technology names.

Are there other options?

The VGS ETF is a good option. But, there are other ETF options that could also be a useful way to get exposure to tech.

For example, the iShares S&P 500 ETF (ASX: IVV) has an IT weighting of 28.3% because the US share market is more tech-weighted than the global share market.

The Betashares Nasdaq 100 ETF (ASX: NDQ) has an IT weighting of 50.8%. This is focused on the 100 largest non-financial businesses on the NASDAQ.

There are a number of other targeted ETFs that are not as diverse but are heavily invested in technology businesses such as Betashares Asia Technology Tigers ETF (ASX: ASIA), Betashares Cloud Computing ETF (ASX: CLDD), and Betashares Global Cybersecurity ETF (ASX: HACK).

So, there are plenty of options to get exposure to tech shares, however, the VGS ETF is the one that provides the most global diversification of the ones I’ve mentioned.

The post Is the Vanguard MSCI International ETF (VGS) a good alternative to global tech shares? appeared first on The Motley Fool Australia.

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• Is VGS the best international shares ETF on the ASX?

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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. Motley Fool contributor Tristan Harrison has positions in Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Altium, Amazon, Apple, BETA CYBER ETF UNITS, BETANASDAQ ETF UNITS, Meta Platforms, Inc., Microsoft, Tesla, Vanguard MSCI Index International Shares ETF, WiseTech Global, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended BETA CYBER ETF UNITS, BETANASDAQ ETF UNITS, WiseTech Global, and Xero. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, BetaShares Asia Technology Tigers ETF, Meta Platforms, Inc., Vanguard MSCI Index International Shares ETF, and iShares Trust – iShares Core S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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