I think it's worth considering whether Vanguard Australian Share ETF (ASX: VAS) is a good long-term investment.
For starters, you can't go wrong by choosing Vanguard as the provider of your exchange-traded fund (ETF). Vanguard seeks to provide ETFs for as low a cost as possible, it's run for the benefit of members.
The Vanguard Australian Share ETF gives an investor exposure to the ASX 300. Getting diversification to 300 different companies is pretty good! The annual costs are only 0.15% per annum, which is very cheap. Lower costs means more net returns for us.
The largest five exposures you get with this ETF are Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC), CSL Limited (ASX: CSL) and Australia and New Zealand Banking Group (ASX: ANZ).
Being invested in this ETF is better diversification than having shares of a single business, but around half of the ETF is invested in the industries of financials and materials. This shows Australia's reliance on the property market and raw materials.
Since inception in May 2009, the ETF has delivered average annual returns of 9.28% per annum, which doesn't include the benefit of franking credits.
According to Vanguard, the ETF is trading with a price/earnings ratio of 16.3x and a dividend yield of 4.3% (which doesn't include franking credits). This isn't cheap for the fairly limited growth being achieved.
Foolish takeaway
If you were just going to mix this ETF with global ETFs like Vanguard MSCI Index International Shares ETF (ASX: VGS) or iShares S&P 500 ETF (ASX: IVV) then the Vanguard Australian Share ETF could be a good long-term choice.
However, I think that the Australian index as a whole is lower quality because of the weighting to the big banks and miners. The only benefit is the bonus franking credits. I would rather invest in overseas ETFs than the Australian one.
