One of the most popular exchange-traded funds (ETFs) on the ASX is the Vanguard Australian Share ETF (ASX: VAS), does popularity mean it's a good long-term investment?
ETFs have been rising in popularity, boosting the amount of money invested in passive investment options. For most people ETFs are a good idea because a lot of ETFs have very low operating costs and fees. One of the biggest detractors to people's long-term wealth growth is fees.
Vanguard is a global leader in providing low-cost investment options, it's run for the benefit of members, so the management fees have been driven lower.
The Vanguard Australian ETF is one of the cheapest ways to get exposure to the Australian share market, with annual costs of around 0.15%, this leaves more net returns for investors.
Specifically, this ETF looks to track the S&P/ASX 300 Index, being 300 of the biggest businesses listed on the ASX.
One of the best reasons to own this ETF is the dividend yield, which is 4.3% excluding franking credits. This is a solid start, particularly for retirees.
Its top holdings are the biggest blue chips on the ASX like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC) and CSL Limited (ASX: CSL).
The returns generated by an ETF are entirely driven by the underlying holdings. Over the past five years it has returned an average of 7.14% per annum, with the ASX somewhat struggling in this time. However, the quoted returns don't include the franking credits.
Most of the ETF is allocated to financials and resource businesses, which sums up Australia really.
Foolish takeaway
I think this ETF is a fairly attractive option for people seeking income. But whilst ASX banks make up such a large percentage of the index I don't think it's a great option for younger people. Globally-focused ETFs are probably better for long-term growth.
