When it comes to building long-term wealth, the beauty often lies in simplicity. For many Australians looking to invest for the next two decades, exchange-traded funds (ETFs) offer a remarkably straightforward path. Instead of the often daunting task of researching and selecting individual stocks, ETFs allow investors to gain exposure to a broad basket of companies with a single purchase. This inherent diversification is a powerful tool, particularly over extended timeframes, helping to smooth out the inevitable ups and downs of market cycles and making it easier to remain invested.
For those with a long-term horizon, focusing on the next 20 years rather than the next few months, broad-based ETFs can form a robust foundation for any investment portfolio. Here are two Australian Securities Exchange (ASX) listed ETFs that could be excellent candidates for a buy-and-hold strategy over the coming two decades.
Vanguard MSCI Index International Shares ETF (ASX: VGS)
A cornerstone of any well-diversified long-term portfolio should be international exposure, and the Vanguard MSCI Index International Shares ETF (VGS) fits this bill perfectly. This fund provides investors with access to a vast array of companies spanning major developed economies across the globe. Think the United States, Europe, and significant parts of Asia.
By investing in VGS, you gain indirect ownership of some of the world’s largest and most influential corporations. This includes technology giants like Microsoft and Apple, as well as leading semiconductor innovator Nvidia. The appeal of VGS lies in its ability to tap into global economic growth, rather than being solely reliant on the performance of the Australian market. Over the long haul, this global diversification can significantly mitigate the impact of regional economic downturns or specific market cycles. For investors diligently building wealth over decades, holding a fund like VGS, which grants access to the world’s leading businesses, simply makes sound financial sense.
Vanguard Australian Shares Index ETF (ASX: VAS)
While global diversification is undeniably crucial, maintaining a stake in the Australian share market also holds considerable value. The Vanguard Australian Shares Index ETF (VAS) is designed to track the performance of the S&P/ASX 300 Index, effectively holding a broad cross-section of Australian companies across a multitude of industries.
This means your investment in VAS encompasses major Australian pillars of industry. You’ll find exposure to the big four banks, such as Commonwealth Bank of Australia (CBA), alongside vital resource companies like BHP Group Ltd (BHP). Healthcare innovators like CSL Ltd (CSL) and prominent consumer staples and retail businesses like Harvey Norman Holdings Ltd (HVN) are also part of the mix. Collectively, these companies represent a significant portion of the Australian economic landscape.
A key reason why Australian equities are often favoured, particularly by income-focused investors, is the nation’s strong dividend culture. Many companies listed on the ASX offer attractive dividend yields, often enhanced by the benefit of franking credits, which can provide a tax advantage for Australian residents. For long-term investors, this combination of consistent income generation and exposure to the domestic economy provides a valuable complement to international investments, creating a more balanced and resilient portfolio.
The Takeaway: Simplicity and Diversification
Investing for the next 20 years doesn’t necessitate complex or speculative strategies. Often, the most effective approach is to construct a well-diversified portfolio and allow it to grow steadily over time. By combining the global reach of the Vanguard MSCI Index International Shares ETF (VGS) with the domestic focus of the Vanguard Australian Shares Index ETF (VAS), investors can achieve broad exposure to hundreds of companies across diverse industries and geographies. This dual-pronged approach offers a robust and relatively simple strategy for long-term wealth creation on the ASX.
