The Vanguard Australian Shares Index ETF (ASX: VAS) has had a reasonably solid year in 2021 (touch wood). VAS units have, as of today, appreciated by roughly 10.65% over the year to date. Including dividend distributions, investors have enjoyed a return of roughly 14.6%.
That compares pretty well against VAS's 10-year average of 10.26% per annum. But now that 2021 is edging closer to its end, what does 2022 hold for this index ETF?
VAS is, after all, the most popular exchange-traded fund (ETF) on the ASX. And by a mile, too. It currently has more than $9 billion in funds under management, besting the next most popular ETF by several billion.
VAS is a unique ETF in that it is the only major fund to cover the S&P/ASX 300 Index (ASX: XKO). All other major index ETFs covering the Australian share market track the S&P/ASX 200 Index (ASX: XJO).
The additional 100 shares beyond the ASX 200 gives VAS more diversification and exposure to small-cap shares than other ASX index ETFs.
So what should investors look out for in 2022?
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2022: A VAS-t opportunity?
VAS, like most ETFs, is weighted by market capitalisation, meaning the largest companies on the index that it tracks have the largest weightings in the fund's portfolio. So if we want to track how VAS might perform next year, we only need to look at its largest holdings. As of 30 November, VAS had the greatest weightings in the following ASX shares:
- Commonwealth Bank of Australia (ASX: CBA) with a fund weighting of 7.47%
- CSL Limited (ASX: CSL) with a weighting of 6.56%
- BHP Group Ltd (ASX: BHP) with a weighting of 5.45%
- National Australia Bank Ltd (ASX: NAB) with a weighting of 4.23%
- Australia and New Zealand Banking Group Ltd (ASX: ANZ) with a weighting of 3.57%
- Westpac Banking Corp (ASX: WBC) with a weighting of 3.54%
- Macquarie Group Ltd (ASX: MQG) with a weighting of 3.27%
- Wesfarmers Ltd (ASX: WES) with a weighting of 3.03%
- Woolworths Group Ltd (ASX: WOW) with a weighting of 2.32%
- Telstra Corporation Ltd (ASX: TLS) with a weighting of 2.27%
So even though VAS invests in a portfolio of 300 ASX shares, these top 10 stocks make up more than 40% of the ETF's weighting. ASX bank shares (the big 4 and Macquarie) make up 22% just by themselves.
As such, we can say with some conviction that VAS's fortunes are rather intertwined with those of ASX bank shares. If ASX bank shares have a year in 2021 like they have had (so far) in 2021, then VAS will likely also have a solid year.
If CSL and BHP join the party, then things will get even better for VAS units.
So if you're invested in VAS, keep an eye on these shares next year. Generally, whenever ASX banks go up, the VAS share price tends to follow.
