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.

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Key points

  • The ASX is home to a number of popular index funds 
  • But VAS is by far the most popular choice for ASX investors 
  • But does this mean it is also the cheapest? Let's investigate... 

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?

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.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended iShares Trust - iShares Core S&P 500 ETF. 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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