Should I Buy VDHG, VDHG, VDHG Share Price, VDHG Dividends

VDHG is a favorite within the FIRE community for being a low-cost highly diversified option that many use as their sole investment choice. I am bullish on VDHG, the fund has performed well with solid capital gains and distributions every quarter. But should you put all your eggs in one basket?

Should I buy VDHG ETF?

Should I Buy VDHG ETF: Pros And Cons

The Good

  • Massive Diversification
  • Exposure to International Assets
  • Exposure to Emerging Markets
  • Reasonably Priced
  • Vanguard well-established fund
  • Australian Domiciled
  • DRIP Opportunities

The Bad

  • Large Tax Liabilities from distributions
  • Large Australian Allocations
  • Bonds and Fixed Income Assets* (Can be seen as a positive)
  • Unknown Historic Returns

Who Should Buy VDHG Shares

VDHG is used by many investors to gain exposure to a broad basket of some of the world’s biggest public companies and fixed income assets in an efficient manner.

For this reason, it is extremely popular with the Passive ‘FIRE’ community.

Extremely popular with the Passive ‘FIRE’ community

It can be suitable for beginners and advanced investors to add instant diversification to a portfolio. The fund may be used by itself or in conjunction with other funds depending on your portfolio goals. Here are some popular ideas of how it can be used in a portfolio: Creating The Ultimate ETF Portfolio

Should I Buy VDHG ETF: Facts

Should I Buy VDHG, VDHG, VDHG Share Price, VDHG Dividends
Ticker CodeVDHG
BenchmarkHigh Growth Composite Index
Number of Holdings7*
Assets Under Management$1,127.1 million
Management Fee0.27%
Portfolio Turnover0
Inception Date20 November 2017
Income DistributionsQuarterly
Distribution Reinvestment PlanYes
Total 3-Year Returns11.36
Source: Vanguard

*The fund holds 7 direct holdings, these holdings are funds that hold thousands of securities.

VDHG ETF Price

About VDHG ETF ASX

The Vanguard Diversified High Growth Index ETF (VDHG) is a fan favorite amongst the FIRE community over at r/fiaustralia. The ETF has $1.127 billion in funds under management and a total fund size of $5.445 Billion. VDHG provides massive diversification across international shares and assets classes in one reasonably priced product. It also offers potential long-term capital growth along with dividend income and franking credits.

The ETF is a passive index fund tracking the High Growth Composite Index. The Fund invests in a diversified portfolio of securities and assets, which means the Fund is less exposed to the performance fluctuations of individual securities and the overall stock market. The fund takes a passive index investing approach. which has been shown to outperform Active investing.

S&P concludes that 81.70% of active funds will underperform the index over a five-year period. However, this is in relation to broad market indexes. The exact stats are unclear for funds not based on a broad market index.

Should I Buy VDHG, VDHG, VDHG Share Price, VDHG Dividends

VDHG is used by many Australian investors to gain exposure to a broad basket of International shares and assets classes in an efficient manner.

VDHG Share registry: Computershare. Through Computershare, you can manage your holdings and communications, and also select whether or not to reinvest distributions.

VDHG is domiciled in Australia meaning it is a registered fund in Australia for tax purposes. Investors who buy into this ETF, and are Australian residents for tax purposes, will be subject to Australian taxes and regulation.

Portfolio Goal

“Vanguard Diversified High Growth Index ETF seeks to track the weighted average return of the various indices of the underlying funds in which it invests, in proportion to the Strategic Asset Allocation, before taking into account fees, expenses, and tax.” Source, Vanguard

The Benchmark Index

VDHG is benchmarked against the High Growth Composite Index. The index has been created by Vanguard based on the ownership of several subindices.

The exactly Index definition is:

  • 36% S&P/ASX300 Index
  • 26.5% MSCI World ex-Australia Index (with net dividends reinvested) in Australian dollars
  • 16% MSCI World ex-Australia Index (with net dividends reinvested) hedged to Australian dollars
  • 6.5% MSCI World ex-Australia Small Cap Index (with net dividends reinvested) in Australian dollars
  • 5% MSCI Emerging Markets Index (with net dividends reinvested) in Australian dollars
  • 3% Bloomberg AusBond Composite 0+ Yr Index
  • 7% Bloomberg Barclays Global Aggregate Float-Adjusted and Scaled Index hedged to Australian dollars.

The fund is allowed to operate in a broad range of the index, as such portfolio turnover is quite low.

Should I Buy VDHG, VDHG, VDHG Share Price, VDHG Dividends
VDHG Asset Allocations

VDHG Holdings

We can see VDHG is diversified across global equities and income assets. Here we have broken down the top five components of each VDHG holding:

Vanguard Australian Shares Index Fund: 36%

Holding% Of Fund% Of VDHG
CBA8.3363
BHP6.7312.423
CSL6.1042.197
WBC4.4541.603
NAB4.0651.463

Vanguard International Shares Index Fund and Hedged: 26.5% and 16% (42.5% total)

Holding% Of Fund% Of VDHG
AAPL4.0581.724
MSFT3.4251.455
AMZN2.5981.104
FB1.4760.6273
GOOG1.3140.558

Vanguard Global Aggregate Bond Index Fund: 7%

Holding% Of Fund % Of VDHG
Fannie Mae or Freddie Mac0.94412%0.066
United States Treasury Note/Bond0.51130%0.036
French Republic Government Bond OAT0.48913%0.034
Fannie Mae or Freddie Mac0.47317%0.033
United States Treasury Note/Bond0.44814%0.031

Vanguard International Small Companies Index Fund: 6.4%

HoldingCodeCountry% Of Fund % Of VDHG
AMC Entertainment Holdings Inc. Class AAMCUS0.25923%0.0165
Entegris Inc.ENTGUS0.20191%0.0129
Diamondback Energy Inc.FANGUS0.19704%0.0126
Nuance Communications Inc.NUANUS0.18872%0.0120
Signature Bank/New York NYSBNYUS0.15821%0.0101

Vanguard Emerging Markets Shares Index Fund: 5.1%

Holding nameTickerCountry % Of Fund % Of VDHG
Taiwan Semiconductor Manufacturing Co. Ltd.2330TW6.10228%0.3112
Tencent Holdings Ltd.700CN5.01890%0.2559
Alibaba Group Holding Ltd.9988CN4.97885%0.2539
Samsung Electronics Co. Ltd.005930KR3.93021%0.2004
Meituan Dianping Class B3690CN1.72502%0.0879

Vanguard Australian Fixed Interest Index Fund: 3%

Holding name % Of Fund % Of VDHG
Australia Government Bond 4.253.21681%0.0965
Australia Government Bond 3.253.12555%0.0937
Australia Government Bond 2.53.05999%0.0917
Australia Government Bond 3.252.96878%0.0890
Australia Government Bond 2.752.73407%0.0820

Top 10 Holdings

After accounting for the top holding within each fund we can see the total top 10 holdings within the fund are:

  1. CBA 3%
  2. BHP 2.423%
  3. CSL 2.197%
  4. AAPL 1.724%
  5. WBC 1.603%
  6. NAB 1.463%
  7. MSFT 1.455%
  8. AMZN 1.104%
  9. GOOG 0.558%
  10. Taiwan Semiconductor Manufacturing 0.311%

From this, we can see VDHG still has a large weighting towards Australian shares. The top three holdings being Australian shares and weighted above some big international companies such as Apple, Microsoft, and Amazon.

VDHG Bond and Fixed Income Allocation

VDHG also holds ‘Income assets’ as part of its portfolio. This is comprised of:

  • Vanguard Global Aggregate Bond Index Fund (Hedged) 7%; allowable range 5-9%
  • Vanguard Australian Fixed Interest Index Fund (Wholesale) 4%; allowable range 1-5%

Together these assets makeup 10% of the holdings but are allowed to range from 8-12%.

The Bond allocation

Vanguard Global Aggregate Bond Index (Hedged) ETF seeks to track the return of the Bloomberg Barclays Global Aggregate Float-Adjusted and Scaled Index hedged into Australian dollars.

The fund invests in bonds of BBB- standard or higher. It holds a mixture of global governments, government-owned entities, government-guaranteed entities, investment-grade corporate issues, and securitized assets.

The fund has a total of 10,107 holdings, with an average credit quality of AA-

Should I Buy VDHG, VDHG, VDHG Share Price, VDHG Dividends

We can see the large majority of allocations are towards government treasury bonds. When we have a look at the regional allocation the large majority (41.8% are US bonds)

Top Three Regions:

  • US 41.8%
  • Japan 9%
  • France 6.4%

Credit Allocation:

  • AAA 41.2%
  • AA 16.2%
  • A 22.2%
  • BBB 19.7%
  • Not rated 0.7%

Actual Holdings:

Fannie Mae or Freddie Mac issues are the largest holdings of the fund.

SecurityRateMaturity date% of net assets
Fannie Mae or Freddie Mac214 Jul 20210.94412%
United States Treasury Note/Bond0.12515 Dec 20230.51130%
French Republic Government Bond OAT25 Feb 20230.48913%
Fannie Mae or Freddie Mac2.514 Jul 20210.47317%
United States Treasury Note/Bond0.37531 Dec 20250.44814%
United States Treasury Note/Bond0.62531 Mar 20270.37675%
Bundesobligation14 Apr 20230.33750%
United States Treasury Note/Bond0.37530 Nov 20250.33140%
Ginnie Mae221 Jul 20210.33117%
Bundesobligation11 Apr 20250.31204%
Italy Buoni Poliennali Del Tesoro1.8501 Jul 20250.27203%
French Republic Government Bond OAT0.525 May 20290.26117%
United States Treasury Note/Bond0.12515 Feb 20240.25169%
Bundesobligation10 Oct 20250.25119%
Fannie Mae or Freddie Mac219 Jul 20210.24946%

Vanguard Global Aggregate Bond Index (Hedged) ETF VBND Performance

MonthYTD1 Year3 Year
VBND NAV0.63%-1.92%-0.23%4.05%
Benchmark0.58%-1.85%-0.10%4.28%

The Fixed Income Allocation

VDHG’s fixed income allocation comes from the Vanguard Australian Fixed Interest Index Fund.

The Vanguard Australian Fixed Interest Index Fund seeks to track the return of the Bloomberg AusBond Composite 0+ Yr Index before taking into account fees, expenses, and tax.

The Fund invests in high-quality, income-generating securities issued by the Commonwealth Government of Australia, Australian State Government authorities and treasury corporations, investment-grade corporate issuers, as well as overseas entities that issue debt in Australia, in Australian dollars. Source, Vanguard

The fund has a total of 188 holdings, with an average credit quality of AA+

Should I Buy VDHG, VDHG, VDHG Share Price, VDHG Dividends

Once again the large majority of allocations are towards government treasury bonds. When we have a look at the regional allocation the large majority (87.5%) are Australian bonds.

Top Three Regions:

  • Australia 87.5%
  • Supranational 4.7%
  • Germany 2.3%

Credit Allocation:

  • AAA 65.8%
  • AA 28.0%
  • A 3.3%
  • BBB 2.9%

Actual holdings:

SecurityRateMaturity date% of net assets
Australia Government Bond4.2521 Apr 20263.21681%
Australia Government Bond3.2521 Apr 20293.12555%
Australia Government Bond2.521 May 20303.05999%
Australia Government Bond3.2521 Apr 20252.96878%
Australia Government Bond2.7521 Nov 20292.73407%
Australia Government Bond5.521 Apr 20232.66848%
Australia Government Bond121 Dec 20302.64650%
Australia Government Bond2.7521 Nov 20282.50197%
Australia Government Bond4.7521 Apr 20272.49446%
Australia Government Bond0.2521 Nov 20242.44883%
Australia Government Bond121 Nov 20312.20208%
Australia Government Bond1.521 Jun 20312.18819%
Australia Government Bond2.7521 Apr 20242.18363%
Australia Government Bond2.2521 Nov 20222.01965%
Australia Government Bond0.2521 Nov 20251.95358%

We can see the primary focus is Australian Government Bonds.

Vanguard Australian Fixed Interest Index Fund Performance

MonthYTD1 Year3 Years5 Years10 YearsInception
Total0.67%-1.88%-1.06%3.99%2.97%4.73%5.67%
Benchmark0.69%-1.74%-0.84%4.22%3.19%4.95%5.84%

The Impact of Fixed Income Assets on Fund Performance

When compared against VDAG (world ex-Australia hedged) and VAS (ASX 200) we can see that VDHG’s small allocation to fixed income may be responsible for smoothing out returns over the COVID crash.

  • VGAD experienced a drop of 37.09%
  • VAS experienced a drop of 38.3%
  • VDHG experienced a drop of 30%

However, we can see the bull market after the crash has driven substantial gains where we can see that VDHG has fallen flat compared to broad market index funds.

Over a one year period:

  • VGAD is up 19.78%
  • VAS is up 25.53%
  • VDHG is up 15.05%

We can also see from the graph below that long-term investors holding before and after the crash would be better off in VGAD or VAS.

Bonds and fixed income are can be added to a portfolio to reduce risk and smooth returns. However, over the long run equities have been shown to far outperform bond returns. The COVID period has demonstrated this well, we see the smoothing effect during the downturn and the vast outperformance during the bull market.

However, we can see that investors have performed much better by adopting a buy-and-hold mentality. Investors that didn’t sell during the downturn were much better off investing in equities.

In the current market condition, we are seeing low-interest rates, with growing inflation. With the reduction in returns from cash and bonds, investors have turned heavily to equities.

Should I Buy VDHG, VDHG, VDHG Share Price, VDHG Dividends, VGAD, VAS, VDHG Performance

VDHG Shares Fees

  • Management Fee: 0.27% p.a
  • Indirect Costs: 0%
  • Bid/Ask Spread: 0.02%

How Are Management Fees Paid?

Management fees are automatically deducted from the fund’s Net Asset Value on a daily basis. This means is you as an investor never have to directly send money to Vanguard. It is all processed by the fund as they deduct the fees from the underlying earnings/capital of the fund.

Because of this you never really notice the fees, instead, it just reduces the fund’s performance over time. When the fund sends out their AMMA statement at tax time you can see the full details of this.

Bid-Ask Spreads

The bid-ask spread is the difference in price between the highest price that a buyer is willing to pay for a security and the lowest price for which a seller is willing to sell it.

  • The narrower the spread the better, as this reduces the trading costs associated with buying and selling ETFs
  • Exchange-based spreads, as on the ASX, are set by the competitive tensions between market markers
  • Larger Funds (like VDHG) will tend to have lower bid-ask spreads.
  • Bid-Ask spreads are not set but constantly change throughout the day, depending on supply and demand.

Fee Comparison

Ticker CodeVDHGDHHFVASVGAD
AUM$1.1B$67.9M$8.5B$1.8B
Mgmt Fees0.27%0.19%0.10%0.21%
Indirect Fees
Average Bid/Ask Spread0.02%?0.02%0.04
Total Fees0.29>0.19%0.12%0.25%

Minimize Fees With Low-Cost Flat Free Brokerage

To help boost returns and cut fees, consider using low-cost flat-free brokers such as pearler. Sign up using our link below for the best deal.

VDHG ETF Share Price: Performance

In the below table we set out the returns of VDHG compared to its Index over various time frames. From this data, we can see the fund does an excellent job at replicating the benchmark.

We have also compared the performance of VDHG to several other popular ETFs. They are expressed as average returns per annum. We can see VDHG has performed well in the past and has been very competitive. Although we would like to see its performance over a longer time frame.

MonthYTD1 year3 years5 years10 yearsInception
VDHG NAV2.88%12.68%26.96%11.36%10.92%
Benchmark2.90%12.85%27.45%11.85%11.36%
VAS2.31%10.49%28.78%10.08%10.16%8.64%9.59%
A2002.52%28.93%10.09%9.63%
VGAD2.38%14.18%35.72%13.55%14.48%14.47%
IVV20.09%16.74%15.38%17.93%5.62%
VGS1.21%11.07%20.49%13.73%12.88%13.03%
Should I Buy VDHG ETF: VDHG ETF Share Price

The below performance graph by Vanguard demonstrated the cumulative total returns of VDHG over varying periods. We can see that the total investor returns over the course of 3 years are 38.10% and 45.34% since its inception in 2017.

Should I Buy VDHG, VDHG, VDHG Share Price, VDHG Dividends

Should I Buy VDHG: Competitors

The main competition for VDHG in the High Grow Diversified index space is the BetaShares Diversified All Growth ETF which was established in late 2019.

This comes after the launch of A200 in 2018 as Betashares has been releasing low-cost fees in direct competition to some of Vanguard’s largest funds. DHHF does not have a fixed income allocation.

Ticker CodeVDHGDHHFVGADIVVVAS
BenchmarkHigh Growth Comp.-all cap, all worldMSCI World ex-AusS&P 500S&P/ASX 300 Index
Number of Holdings7*4*1505509307
Assets Under Management$1.1B$68M$1.8B$4.5B$8.5B
Management Fee0.27%0.19%0.21%0.04%0.10%
Portfolio Turnover0.670.490.82%
Inception Date20 Nov 20173 Dec 201920 Nov 201410 Oct 20074th May 2009
Income DistributionsQuarterly Quarterly Quarterly Quarterly Quarterly
Distribution Reinvestment PlanYes Yes Yes Yes Yes
Total 3-Year Returns 11.36% p.a 13.55% p.a17.62 p.a. 10.08% p.a

From our comparison, we can see that VDHG is a much larger fund in terms of assets under management compared to the newly launched DHHF. VDHG has a very low turnover ratio due to its large portfolio allowable range. Although in saying this all these funds have a very low turnover. We can see VDHG does have higher fees than simple broad market index funds.

Distributions

At the current rates, VDHG pays a distribution of $5.5275 or $5.6942 gross. This gives VDHG a dividend yield of 9.16% and 9.44% gross. The distribution amount and yield are relatively high compared to the historical trends, this is due to large distributions in 2021.

VDHG has always paid a large distribution, this is linked to its holdings in the International Shares Index (Hedged). Hedging currencies required a lot of buying and selling with the income then passed onto shareholders. The fixed income component also realizes a large amount of income.

The high distribution can actually be seen as a downside to the fund as this creates a large tax liability for investors which can reduce the overall net performance of the fund.

High distribution can actually be seen as a negative; they create large tax liabilities, which can reduce net returns

Non-hedged Funds which pay out very low distributions such as S&P 500 funds can be very attractive for net returns, due to their lower tax liabilities.

Since VDHG isn’t completely Australian shares the franking credits are also low averaging 2-38%, thus there are limited credits to offset the tax liabilities.

VDHG Distribution History (Previous Two Years)

Distribution dateCPUEx-entitlement dateRecord datePayable dateRe-invest price (AUD)
30 Jun 2021162.49568001 Jul 202102 Jul 202116 Jul 2021$59.4612
31 Mar 2021200.98964401 Apr 202106 Apr 202120 Apr 2021$56.7864
31 Dec 202099.37669504 Jan 202105 Jan 202119 Jan 2021$56.1345
30 Sep 202089.89149201 Oct 202002 Oct 202016 Oct 2020$52.0017
30 Jun 2020125.97455101 Jul 202002 Jul 202016 Jul 2020$51.5778
31 Mar 202044.91617501 Apr 202002 Apr 202020 Apr 2020$47.3967
31 Dec 201933.27741702 Jan 202003 Jan 202017 Jan 2020$56.9673
30 Sep 201938.09160801 Oct 201902 Oct 201916 Oct 2019$55.5607
30 Jun 2019104.83824801 Jul 201902 Jul 201916 Jul 2019$54.4248
31 Mar 201944.89124101 Apr 201902 Apr 201916 Apr 2019$52.6185

As an ETF is a trust structure the fund will payout all its earnings after expenses to investors.

Should I Buy VDHG, VDHG, VDHG Share Price, VDHG Dividends

When does VDHG pay dividends? Historically VDHG pays distributions quarterly (4 times a year). The Ex-Date of the distributions is usually the first day of trading in January, April, July, and October (Every three months).

The distributions are normally be paid within 20 business days following the end of the distribution period. VDHG investors are eligible to participate in a Distribution Reinvestment Plan (DRIP), which can be set up through the share registry, Computershare.

Should I Buy VDHG, VDHG, VDHG Share Price, VDHG Dividends

Should I Buy VDHG ETF: Prophet’s Take

VDHG provides efficient exposure to a range of international shares and fixed income assets in one simple easy product. Its low cost is an excellent option for many beginning and expert investors looking for diversification.

Due to the holdings allocation of the fund, there is a large portion of Australian shares. These are held out of proportion, for example, Commonwealth Bank has a higher allocation than Apple and Amazon combined. The hedging and fixed income assets also make the fund relatively tax-inefficient which can reduce investor’s net returns.

In terms of competition, Betashares has recently launched DHHF which seems to be a direct competitor to VDHG without the fixed income holdings. This fund has a lower management fee of 0.19% compared to VDHG’s 0.27%. With this fund being launched in Dec 2019 their AUM are still low, and long-term returns are unclear.

The fixed-income assets of VDHG proved to smooth investor returns during the downturn but were a liability for the fund during the bull market. Since the COVID crash, VAS and VGAD have both delivered stronger returns.

VDHG is an excellent way to gain diversification, I am very Bullish on VAS. However, I personally prefer some other alternatives that are more tax-efficient and don’t have an allocation to bonds and fixed income. For example, I hold a large amount of VAS in our portfolio.

Pearler offers free brokerage on a range of ETFs, although VDHG isn’t one of them check out pearler here.

Please Remember all Articles Published on Prophet Invest are Opinion only

Learn How We Analyze A Company:

The Ultimate Stock DD Checklist For Beginners

Or Check Out Our 

ETF Checklist

What Are We Currently Buying?

In the past few weeks here’s some exciting companies we jumped in on:

Taking A Bet On PointsBet

Initial Public Offering Askari Metals Will Be Epic

Leave a Reply

Your email address will not be published. Required fields are marked *


Introducing our latest and one of our largest portfolio holdings Askari Metals (AS2). 

The Company has 5 prospective copper-gold projects in tier 1 mining jurisdictions in nearology to mining giants.

You May Also Like

The Ultimate Stock DD Checklist For Beginners 2021

Are you sick of getting Fooled into terrible stocks? Stock DD or…

Should I Buy Flight Centre Shares 2021

Flight Centre’s share price has been bid down massively following the COVID…

Webjet Share Price Forecast 2021 and Beyond!

Online travel stock Webjet (ASX:WEB) despite their revenue being massively affected by the pandemic have outpaced the ASX200 benchmark in the past twelve months.