The Vanguard International Shares ETF (VGS) just hit a new 52-week high. Too late to buy?

The global share market continues to rise.

| More on:
A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Vanguard International Shares ETF is an easy way for Aussies to access the global share market
  • The VGS ETF just hit a 52-week high
  • I think it can keep rising in the coming years as the underlying earnings of its holdings continue to increase

The Vanguard MSCI Index International Shares ETF (ASX: VGS) hit a 52-week high yesterday, yet investors may not have missed the boat on investing in this exchange-traded fund (ETF).

For readers who aren't sure what this ETF is, the investment fund represents a portfolio of close to 1,500 businesses listed around the world in places like the US, Japan, the UK, France, Canada, and so on.

Why is the VGS ETF rising?

The return of an ETF simply reflects the performance of its underlying holdings. If the combined performance of the ETF's investments show capital growth, then the ETF should rise in value as well.

Each position in the portfolio influences the overall return, but the biggest weightings will have the largest effect.

Since the start of 2023, the share prices of Apple, Microsoft, and Alphabet — the largest three positions — have each risen by more than 30%. This has helped the Vanguard MSCI Index International Shares ETF climb by 16% since the start of the year.

Despite inflation and rising interest rates, global investors seem to be becoming more confident about the future.

Is it too late to invest in the Vanguard MSCI Index International Shares ETF?

If you asked me whether I would rather buy at today's price of over $105, or at around $91 which is where it was at the start of the start of the year, it's pretty obvious which value is better.

However, I think it would be a big mistake to think there won't be any future long-term gains.

Yes, there could be a fall of the ETF later this year. The strength of the market gains this year may not make a lot of sense considering the effects of interest rate rises have hardly been felt throughout the global economy as yet.

As an example, the US commercial property sector could be facing a lot of difficulties in the medium term.

But, ignoring the possibility of a one-off fall, look at the long-term performance of the VGS ETF, which we can see on the chart below.

Created with Highcharts 11.4.3Vanguard Msci Index International Shares ETF PriceZoom1M3M6MYTD1Y5Y10YALL1 Jun 201728 Jun 2023Zoom ▾201820192020202120222023201820182020202020222022www.fool.com.au

We can see past peaks in 2018 and 2020 and the relatively steep decline after that, followed by a stronger, steady rise. Indeed, today's valuation is 20% higher than the 2020 peak and 42% higher than the 2018 peak.

However, past performance doesn't mean we're definitely going to see ongoing growth in the short term. But earnings growth of the underlying businesses has helped push the ETF higher over time.

So, I have no idea if we're going to see the Vanguard MSCI Index International Shares ETF fall back to $90 this year, but I do think it's generally going to travel steadily higher in the coming years, driven by higher earnings. That being the case, I'd say it's not too late to invest for the long term.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, Microsoft, and Vanguard MSCI Index International Shares ETF. The Motley Fool Australia has recommended Alphabet, Apple, 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 Scott Phillips.

More on ETFs

A graphic illustration with the words NASDAQ atop a US city and currency
ETFs

5 reasons to buy the Betashares Nasdaq 100 ETF

This fund could be well worth a spot in your investment portfolio. But why?

Read more »

A group of businesspeople clapping.
ETFs

3 reasons why the Vanguard MSCI Index International Shares ETF (VGS) is one of the best ASX ETFs

I like a lot about this fund.

Read more »

A group of young ASX investors sitting around a laptop with an older lady standing behind them explaining how investing works.
ETFs

What investors can learn from the best performing ASX ETF of FY25

Can you guess the top preforming ASX ETF of FY25?

Read more »

Two young boys sit at a desk wearing helmets with lightbulbs, indicating two ASX 200 shares that a broker has recommended as buys today
ETFs

3 things about the Vanguard Australian Shares Index ETF (VAS) every smart investor knows

There’s a lot to know about the VAS ETF.

Read more »

A woman sits at her desk thinking. She is surrounded by projections of world maps on various screens with data appearing below them.
ETFs

Which ASX ETFs holding international shares gave investors the best returns in FY25?

These ASX ETFs earned 35% to 90% returns last financial year.

Read more »

Cubes placed on a Notebook with the letters "ETF" which stands for "Exchange traded funds".
ETFs

Australian ASX ETFs that have doubled in the last 5 years

These domestically focused funds have been market beaters.

Read more »

A young well-dressed couple at a luxury resort celebrate successful life choices.
ETFs

How long would it take to build a $1 million ASX share portfolio investing $500 per month?

Reaching $1 million is possible with patience.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
ETFs

5 excellent ASX ETFs to buy with $2,000

Let's see why these funds could be top picks for your hard-earned money.

Read more »