Overinvested in the Vanguard US Total Market Shares Index ETF (VTS)? Here are two ideas for diversification

The exchange-traded fund (ETF) Vanguard US Total Market Shares Index ETF (ASX: VTS) is one of the largest funds in Australia – it's over $5 billion in size. Some investors may have a lot of their portfolio invested in the VTS ETF, which has been a good investment since it started, though it could be a good idea to consider other diversification options.

The VTS ETF listed on the ASX in May 2009, and between then and February 2025, it returned an average of 16% per year, which is great. However, it's also worth noting that the ETF unit price has dropped close to 10% since 31 January 2025.

The fund's pure exposure to the US share market has been very beneficial over the long term, but the worries about tariffs and the US economy are painful in the short term.

For investors who don't want their portfolio as exposed to the US share market, it could be a good idea to look at ETFs that give different geographic exposure.  

Betashares FTSE 100 ETF (ASX: F100)

This fund gives investors exposure to the UK share market. Many of these businesses just happen to be listed in London, but they can earn profit from across the world.

Some of the biggest companies in this portfolio include AstraZeneca, Shell, HSBC, Unilever, BP, Rolls Royce, GSK, London Stock Exchange, BAE Systems, Diageo, and Barclays.

Impressively, the fund's unit price has risen since the end of January 2025, despite the volatility of the global share market, as the chart shows.

In the three years to February 2025, the F100 ETF has delivered a net return of 12.6%. That's stronger than the S&P/ASX 300 Index (ASX: XKO) return of an average of 8.9% per year over the same time period. Of course, past outperformance is not a guarantee of future outperformance.

I also like that this fund has a double-digit weighting to five sectors, which is good diversification in my eyes. Those five industries are: financials (23.6%), consumer staples (17%), industrials (15.2%), healthcare (12.1%), and energy (11%).

Betashares Japan Currency Hedged ETF (ASX: HJPN)

The Japan share market has livened up in recent times after changes were made to encourage Japanese businesses to invest and grow.

This fund owns approximately 140 businesses, and its Yen exposure is currency hedged, which aims to reduce the effect of currency fluctuations on portfolio performance.

Some of the biggest positions in this portfolio include Toyota Motor, Mitsubishi UFJ Financial, Sony, Hitachi, Keyence, Nintendo, and Canon.

In the three years to February 2025, this ASX ETF has delivered an average annual return of 16.5%. Again, past performance is not a reliable indicator of future returns, but it shows that Japanese stocks can deliver good returns.

I think this could also be a solid option for diversification to add to US and Australian exposure. There are four sectors that have a double-digit weighting in the HJPN ETF: consumer discretionary (23.8%), industrials (23%), IT (15.8%), and financials (14%).

The post Overinvested in the Vanguard US Total Market Shares Index ETF (VTS)? Here are two ideas for diversification appeared first on The Motley Fool Australia.

HSBC Holdings is an advertising partner of Motley Fool Money. 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 recommended AstraZeneca Plc, BAE Systems, BP, Barclays Plc, Diageo Plc, GSK, HSBC Holdings, Nintendo, Rolls-Royce Plc, and Unilever. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.  

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