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When it comes to ASX shares, I’m guilty of being an accumulator.
This was particularly evident in the earlier stages of my investing journey.
I’d accumulate a wide range of different shares, often in small parcels, without having much regard for the finer details of portfolio construction.
I’m now at a stage where I recognize that I’d prefer to have fewer, high-conviction ideas in my portfolio rather than spreading my capital thinly over more speculative bets.
But taking this to the extreme, if I had to whittle down my portfolio to just one investment, I’d be sticking with… the Vanguard Diversified High Growth Index ETF (ASX: VDHG).
What’s all the rage with the VDHG ETF?
The VDHG ETF was my first-ever investment as I forayed into the world of ASX investing.
And if I were to implement a single-investment portfolio, it’s the one I’d be keeping.
If I could have just one investment, diversification would be a high priority for me. As would the investment’s ability to stand the test of time.
So, I’d be going with an exchange-traded fund (ETF).
Instead of my fortunes resting on the success of one specific company, I could gain exposure to the performance of a broad range of leading companies across the globe.
But VDHG isn’t just any ordinary ETF.
It’s a diversified ETF, comprising many other ETFs. You can think of it as an ‘ETF of ETFs’.
VDHG is the high-growth version of Vanguard’s range of diversified ETFs. Accordingly, it targets a 90% allocation to growth assets, such as shares, and a 10% allocation to income assets, such as bonds.
There are three other diversified ETFs in Vanguard’s stable across conservative, balanced, and growth options. The balanced ETF, for example, has an evenly-split allocation across growth and income assets.
When weighing up these different options, it’s important to consider how they align with your investment timeframe and tolerance for risk.
Personally, I’m comfortable stomaching the inevitable periods of volatility that are part and parcel of investing. And with many decades to invest, I decided the high-growth option was best suited for me.
What’s inside the VDHG ETF?
By design, the VDHG ETF mimics a diversified portfolio, investing in a range of Vanguard funds.
VDHG’s largest holdings are the wholesale versions of the Vanguard Australian Shares Index ETF (ASX: VAS) and the Vanguard MSCI Index International Shares ETF (ASX: VGS). Together, this currently makes up nearly 80% of the portfolio.
The rest of the growth exposure comes from small companies and emerging markets, while the remaining ~10% goes towards fixed-interest assets, such as bonds.
So, if I were forced to sell all of my ASX shares except VDHG, I could take comfort in knowing that my capital is being spread across a wide range of established ASX and global shares.
What’s more, Vanguard would take care of the rebalancing for me. And I’d be able to take advantage of VDHG’s distribution reinvestment plan (DRP), which would automatically reinvest my regular distributions into more units.
Overall, I think VDHG is a great ETF for long-term investors looking for a one-stop-shop, hands-off approach. And it just so happens to be the largest position in my portfolio today.