VAS: Were you better off buying the Nasdaq ETF?

VAS is a popular ASX ETF. But would investors have done better with a Nasdaq fund?

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Key points

  • The Vanguard Australian Shares Index ETF is the most popular ETF on the ASX
  • But until recently, US tech shares were leaving ASX shares in the dust
  • Over the longer term, Nasdaq-based funds have outperformed VAS 

The Vanguard Australian Shares Index ETF (ASX: VAS) is ASX investors’ most popular choice when it comes to an index exchange-traded fund (ETF). And by a mile too. VAS tracks the S&P/ASX 300 Index (ASX: XKO) which means that it holds a portfolio of around 300 of the ASX’s largest companies.

Thus, investors get a comprehensive exposure to the Australian share market, with the most exposure to blue-chip shares like Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), and Telstra Corporation Ltd (ASX: TLS).

But, in recent years, VAS’s slow-but-steady performance has been outstripped by the US-based NASDAQ-100 (INDEXNASDAQ: NDX). The Nasdaq is the US exchange that typically houses US tech companies. Think names like Apple Inc (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT) and Tesla Inc (NASDAQ: TSLA).

The breakneck rises of these companies over the past few years have led to some fairly epic returns from the Nasdaq 100 Index, and ETFs that track it. On the ASX, that would be the BetaShares Nasdaq 100 ETF (ASX: NDQ).

But the past few months have given investors a bit of a shakeup. Many US tech shares have suffered some serious falls in value. Some, such as Tesla, have seen falls of more than 30% (or even greater) over 2022 thus far.

So, as it stands today, would VAS have been a better investment than a Nasdaq ETF like NDQ?

Well, let’s check out the data.

VAS vs. NDQ: Which ASX ETF comes out on top?

So, as of the end of April, the Vanguard Australian Shares ETF had returned 10.23% over the preceding 12 months, including dividend returns. That looks pretty good against the BetaShares Nasdaq 100 ETF and its return of just 0.91% over the same period.

However, the Nasdaq’s recent falls haven’t been enough to dent its longer-term returns just yet. NDQ units have still returned an average of 18.14% over the past three years. Over the past five, the returns have averaged 19.76%.

That contrasts with VAS and its average returns of 9.5% per annum over the past three years, and 8.96% over the past five.

So ASX shares (and VAS by extension) have had a relatively strong year compared to Nasdaq shares. But even so, this hasn’t been enough to make it the preferred ETF to have owned in hindsight. So yes, longer-term investors would have definitely been better off owning NDQ instead of VAS. But, as we always say, past performance is no guarantee of future returns. So who knows what the next one, three and five years will bring for these two ASX ETFs.

Motley Fool contributor Sebastian Bowen has positions in Apple, Microsoft, Telstra Corporation Limited, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, BETANASDAQ ETF UNITS, CSL Ltd., Microsoft, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended BETANASDAQ ETF UNITS and Telstra Corporation Limited. The Motley Fool Australia has recommended Apple. 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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