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3 reasons to buy Vanguard Australian Shares Index ETFs

I love the simplicity of exchange-traded funds (ETFs). There’s something great about the set and forget option that a share like the Vanguard Australian Shares Index ETF (ASX: VAS) provides. 

For those that don’t know, this Vanguard ETF seeks to track the S&P/ASX 300 Index (ASX: XKO). Here are 3 reasons why this Vanguard ETF is a great option for many Aussie share portfolios.

Why I like the Vanguard Australian Shares Index ETF

1. Diversification

One of the best things about ETFs is the diversification they offer. And that is certainly true of the Vanguard Australian Shares Index ETF.

In tracking the ASX 300, VAS invests in 306 different shares with a price-to-earnings (P/E) ratio of 16.9.

That means investors get diversified exposure to the vast majority of the Australian share market with a management fee of just 0.10% per annum.

One of the big knocks of VAS is its heavy weightings to the ASX resources and bank shares. However, it is just trying to track the ASX 300 which is, itself, heavily weighted towards those sectors.

And when you’re buying VAS shares and getting exposure to 306 companies, I feel it’s still heavily diversified.

2. Indirect international exposure

While it is the Vanguard Australian Shares Index ETF, there is still a fair bit of indirect international exposure.

That’s because many top ASX companies have significant international operations. This includes global heavyweights like CSL Limited (ASX: CSL) and Transurban Group (ASX: TCL).

There’s also many of the top tech stocks that are expanding overseas. In particular, ‘WAAAX’ shares like Afterpay Ltd (ASX: APT) and Altium Limited (ASX: ALU) continue to ramp up their international footprints. 

That means while you might be buying an Australian-based ETF, there is still indirect exposure to offshore economies.

3. Strong dividends

This is a hot topic right now given the impact coronavirus is having on corporate earnings.

Strong dividend yields are hard to come by in the current market. The trouble with dividend yields is that they are often backward-looking and may be irrelevant later in the year.

For the moment, the Vanguard Australian Shares Index ETF is yielding 4.07%. That’s the same as the benchmark index right now but who knows where that will go in 2020.

With a number of top dividend shares heavily weighted in its portfolio, this Vanguard ETF could be a good option for yield this year.

Foolish takeaway

These are just a few reasons I like the Vanguard Australian Shares Index ETF. If you’re more of an active investor, however, you might have to look elsewhere for outperformance in 2020…

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Motley Fool contributor Ken Hall owns shares of Vanguard Australian Shares Index. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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