Vanguard MSCI Index International Shares ETF (ASX: VGS) is one of the most effective ways for Aussies to build their net worth over the long term, in my opinion.
This fund enables Australians to invest in the global share market. It’s understandable why many Aussies end up with significant exposure to the Australian economy – residential and commercial property is based here, while blue-chip ASX businesses and franking credits can also seem like comfortable, familiar investments.
Many of the world’s best businesses can be found overseas. They may have stronger competitive advantages, more growth potential and better profit margins. So, why not invest in a large group of them? That’s what the VGS ETF can provide for investors. Let’s look at what it actually invests in.
Great portfolio
The VGS ETF gives Aussies access to a portfolio of almost 1,300 businesses from a range of countries including the US, Japan, Canada, the UK, France, German, Switzerland, the Netherlands, Sweden, Spain and more.
Already, we can see that there’s good geographic diversification in the portfolio. This is because it seeks to track the return of the MSCI World ex-Australia Index, which covers many of the world’s developed markets.
Unsurprisingly, the biggest businesses in the world are the biggest positions in the VGS ETF portfolio. We’re talking about stocks like Nvidia, Apple, Microsoft, Alphabet, Amazon, Broadcom and Meta Platforms.
There are plenty of other recognisable names in the portfolio like Netflix, Costco, HSBC, Berkshire Hathaway, ASML, Caterpillar, Walt Disney, Blackrock and Unilever.
As we can see from the stocks in the portfolio, there’s a diversity of industries. There are currently six sectors with an allocation of more than 9%, which gives me confidence it’s diversified. Those ones are IT (27.7%), financials (16.1%), industrials (11%), consumer discretionary (10.1%), healthcare (9.9%) and communication services (9.1%).
Good returns
Diversification is good, but returns are even more important to me.
When the business revealed its November 2025 monthly update, the long-term returns were impressive. Over the prior decade, it had returned an average of 13.1% per year and over the prior five years it delivered an average return per year of 15.7%.
Time will tell how it performs in the future, but there are signs that good returns can continue over time.
Earnings growth is a key factor in driving share prices higher. According to Vanguard, the current earnings growth rate is 22% – that could slow down, though.
With a return on equity (ROE) ratio of 19.6% for the portfolio, that generally implies that re-invested profit could make a return of 20%, which is impressive.
Many of the biggest businesses have also demonstrated an ability to create new products and services for household and business customers, unlocking further earnings growth.
If it can continue delivering returns of more than 10% per year over the long-term, which I think it can, the VGS ETF can be a very effective investment.
