Is Vanguard's VAS the ASX's cheapest index fund?

Is VAS the cheapest ASX index ETF on the market? The answer might surprise you.

Sebastian Bowen

Author Bio Sebastian Bowen has been a Motley Fool contributor since late 2018. Sebastian found his passion for writing and educating others about shares and all things finance after completing his studies in political, economic and social science and enjoys bringing this passion to life at the Fool. His investment philosophy is a simple one – buying high-quality companies at prices that make sense. When he’s not researching his next investment at all hours of the morning, Sebastian enjoys classic movies and likes to unwind with a good book, newspaper or record. Areas of Expertise Dividend investing ETFs Education Bachelor of Political, Economic, and Social Sciences (Government and International Relations), University of Sydney Social Media X/Twitter Favorite Investment Quote "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." – Benjamin Graham

Published May 6, 2022 2:55 pm AEST

The Vanguard Australian Shares Index ETF (ASX: VAS) is, by far, ASX's investors' first choice when it comes to index exchange-traded funds (ETFs). Currently, VAS has around $10 billion in funds under management, which is significantly more than its closest ETF rival.

VAS is a rather unique index fund too. It tracks the S&P/ASX 300 Index (ASX: XKO), which is slightly different from the flagship S&P/ASX 200 Index (ASX: XJO) that most ASX index funds go off. An investment in VAS is really an investment in the 300 largest ASX shares on the Australian share market, weighted by market capitalisation.

So since VAS is the most popular ASX ETF, you might think it is also the cheapest. After all, much of the appeal of an index fund is the ultra-low fees investors are charged, especially compared with what an active managed fund levies.

Well, VAS does indeed have a relatively low fee. it charges its investors 0.1% per annum. That equates to $10 a year for every $10,000 invested.

But is VAS the cheapest index ETF on the ASX?

Young woman thinking with laptop open. — Image source: Getty Images

Is the VAS ETF the cheapest ASX index fund?

No, to be quite frank.

The cheapest index fund on the ASX goes to the Vanguard U.S. Total Market Shares Index ETF (ASX: VTS), which charges an annual management fee of just 0.03%. That's $3 a year for every $10,000 invested. The iShares S&P 500 ETF (ASX: IVV) is right behind VTS with its 0.04% per annum fee.

But these two ETFs are US-based and don't cover ASX shares.

So what of ASX index funds?

Well, VAS comes from behind in that department too. The iShares Core S&P/ASX 200 ETF (ASX: IOZ) just pips VAS with its fee of 0.09% per annum.

The BetaShares Australia 200 ETF (ASX: A200) does been better, charging a fee of 0.07% per annum.

And yet VAS remains far more popular than either of these funds. Perhaps its VAS's unique nature in covering the ASX 300 rather than the ASX 200 that keeps investors coming back for more. Or perhaps it's for a number of other factors. Whatever the true reason, the Vanguard Australian Shares Index ETF remains the indisputable king of the ASX ETF sector.

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