This ASX ETF might just be the only investment you'll ever need

Many Australian investors like to keep things simple in their investing portfolios by just owning a handful of ASX exchange-traded funds (ETFs).

As I've written about before, this approach makes sense for many investors. By using just two or three index funds, you can build a diversified portfolio of passive investments that you can leave in the proverbial bottom drawer without too much worry or effort.

I've long advocated owning more than one exchange-traded fund in this endeavour. After all, just buying an Australian index fund, for example, leaves out some of the world's best companies and exposes one to any potential problems with the Australian economy or the Australian dollar.

By supplementing an ASX index fund with something like the Vanguard MSCI Index International Shares ETF (ASX: VGS) and the iShares MSCI EAFE ETF (ASX: IVE), you can mitigate these risks while broadening your portfolio's horizons significantly. You'll also get exposure to some of the world's best companies, which, sadly, lie outside the ASX. I'm talking about the likes of Apple, Microsoft, Coca-Cola, and Amazon.

But perhaps ASX investors who value simplicity can get by with just one ETF after all.

They can do so by buying something like the Vanguard Diversified Growth Index ETF (ASX: VDGR).

An all-in-one ASX ETF?

This ETF gets around our diversification problem by actually investing in multiple underlying ETFs within its portfolio. It's a 'buy one, get several free' arrangement.

Yes, this Vanguard ETF holds several underlying stakes in other Vanguard ETFs within it. These cover Australian shares, international shares from advanced economies (both currency hedged and unhedged), shares from emerging markets, small-cap shares, and government and corporate bonds.

By following this approach, VDGR offers inherent diversification and portfolio balance up front, with the only step required from the investor being to actually buy the units.

The Vanguard Diversified Growth Index ETF is just one of the funds in Vanguard's offering, though. Investors who might prefer a more conservative approach, with more bonds and cash and fewer shares, might want to check out the Vanguard Diversified Conservative Index ETF (ASX: VDCO).

In contrast, younger investors with a higher risk appetite might prefer the Vanguard Diversified High Growth Index ETF (ASX: VDHG). This fund has far less exposure to bonds and cash and opts instead for a larger allocation to shares.

For passive investors, one of these funds might be the only investment you need to buy.

The post This ASX ETF might just be the only investment you'll ever need appeared first on The Motley Fool Australia.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Amazon, Apple, Coca-Cola, and Microsoft. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, and Microsoft. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Amazon, Apple, Microsoft, 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.

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