Vanguard offers a number of great exchange-traded funds (ETFs), the Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE) is my favourite one.
Vanguard is one of the world’s largest investment organisations, it has around 415 low-cost funds and ETFs with 18 locations worldwide and approximately 17,600 staff. The idea of Vanguard is that there are no outside owners seeking profits, instead the investors in Vanguard are the owners and benefit from lower and lower costs which are spread across more investors.
An ETF is a way to buy a fund through an exchange. There are various types of funds including index funds which give investors access to good diversification with one investment.
Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE)
I have full respect for everyone that just invests in one or two ETFs, but I think it’s possible to beat the ASX index returns with the right investments, which is why I was attracted to the Vanguard FTSE Asia ex Japan Shares Index ETF.
Number Of Holdings
It looks to invest in a large number of Asian businesses outside of Japan, Australia and New Zealand. At the last count it had 888 holdings, which is great diversification if you ask me.
When you look at the country allocation of the ETF it has 32.6% allocated to China, 14.1% allocated to South Korea, 12.9% allocated to Taiwan, 12.8% allocated to Hong Kong and 12.6% allocated to India. with smaller allocations to Thailand, Malaysia, Indonesia and the Philippines.
What I like about the idea of this ETF is that you simply can’t get exposure to many of these countries from other ETFs or even individual companies. It’s one of the few ways to invest into Asia on the ASX.
Over half of this ETF is invested in financial and technology businesses, but I think it’s very positive that over 21% of the ETF is invested in technology businesses – which is better than the ASX which has a lot more resources.
In terms of the actual business holdings, its top four biggest holdings are Tencent, Samsung, Alibaba and Taiwan Semiconductor Manufacturing. I think these are some great Asian investment options.
Valuation And Dividend Yield
According to Vanguard, at the end of May 2019 the ETF had a price/earnings ratio of 12.6x with an earnings growth rate of 10.5%, which is a PEG of almost 1, which is good value for an ETF.
The ETF also has a dividend yield of 2.7%, which is materially higher than USA based ETFs.
The main risk to me is Chinese risk. The businesses may be as operationally capable as Western businesses, but Australian and American businesses don’t face the intrusion and uncertainty of the Chinese Government that can make serious changes.
Is Vanguard FTSE Asia ex Japan Shares Index ETF A Buy?
I would certainly be comfortable buying some units today, it looks good value comparatively. However, I wouldn’t want to make it a large part of my portfolio. At most I’m looking at it being 5% to 10% of my portfolio over time.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Jaz owns units of Vanguard FTSE Asia ex Japan Shares Index ETF at the time of writing, but this could change at any time.