Ishares s&p (Ivv) or vanguard diversified high growth (VDHG)?? Help!

Hi Vanessa,

Good question, and a common one.

The first thing to understand is that a US ETF will give you access to only the US, whereas a diversified ‘all in one’ fund like VDHG or DHHF gives you access to a globally diversified portfolio, including Aussie shares.

If you want to bet on the US outperforming the rest of the world’s markets over the long run, then a US ETF will be suitable. The downside with this approach is it lacks diversification. There’s a risk that the US could perform worse than other markets over time.

US companies are strong and dominant today, but this doesn’t necessarily mean they will have the best performance going forward. US shares are also typically priced higher for these reasons. Higher valuations can impact future returns for shareholders, because higher growth is already expected and ‘priced in’.

Also, while the US has had excellent performance in recent decades, since 1900 the stock markets of US and Australia have performed roughly the same.

With a diversified fund like VDHG, the main downside is it will never be the ‘best’ performing ETF in a given year. There will always be a certain market which will outperform in a given year. Markets often have periods of strong/weak performance relative to each other. Sometimes ASX will be the strongest, sometimes US, sometimes Asia or Europe.

Having exposure to multiple markets has the effect of smoothing out returns. At the end of the day, nobody really knows which markets will perform best over the long run. Invest in a way that makes the most sense to you, but be aware that the future may look different to what you expect.

Hope that helps.

When deciding between Vanguard’s High Growth ETF (VDHG) and iShares S&P 500 ETF (IVV), it’s important to consider your investment goals, risk tolerance, and the importance of diversification in your portfolio.

VDHG is known for its broad diversification not only across different sectors but also geographically and across asset classes. It includes a mix of Australian and international equities, bonds, and other assets. This diversification can help reduce risk because the performance of different markets and asset classes can offset each other. For long-term investors, VDHG offers a convenient way to achieve a diversified investment portfolio through a single transaction.

On the other hand, IVV focuses solely on large-cap U.S. stocks, specifically those in the S&P 500. This ETF provides exposure to some of the largest and most influential companies in the U.S. While it has shown strong performance historically, it lacks the diversification across different types of assets and regions that VDHG offers. The performance of IVV is more tied to the economic and market conditions of the U.S.

Given that you are looking at a long-term investment horizon and plan on regularly contributing, the diversification offered by VDHG could be particularly beneficial. It aligns well with a strategy that seeks to build wealth sustainably over decades, as it can potentially offer more stability and less volatility in various market conditions.

Moreover, for investors who value straightforward, cost-effective investments that align with a buy-and-hold strategy, VDHG could be appealing. It offers a comprehensive investment solution with automatic rebalancing, which can save time and effort in managing a portfolio.

In the context of using Pearler, which supports long-term investing strategies, VDHG might align well with the platform’s focus on wealth accumulation and retirement planning. Pearler’s features that facilitate regular investing could be effectively utilized with an ETF like VD

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