VAS is a unique ETF on the ASX. Here’s why

VAS is the ASX’s most popular exchange-traded fund. But that’s not what makes it special…

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Key points

  • The Vanguard Australian Shares Index ETF is the most popular ASX exchange-traded fund
  • VAS is unique among ASX ETFs in that it tracks the ASX 300 Index, rather than the ASX 200
  • The index fund has returned an average of almost 10% per annum over the past 10 years

We know that the Vanguard Australian Shares Index ETF (ASX: VAS) is a popular choice for ASX investors. So much so that VAS remains the most popular ASX exchange-traded fund (ETF) by quite a mile. But that’s not all that makes the Vanguard Australian Shares ETF special.

VAS is an index fund, meaning that it blindly mirrors the ASX shares listed on an index in their proper proportions. But this is where VAS is unique. Most index funds that cover Australian ASX-listed shares on our share market do so by using the S&P/ASX 200 Index (ASX: XJO).

The ASX 200 is arguably the flagship index covering ASX shares. It lists the largest 200 or so companies by market capitalisation. So it makes sense that most ASX index funds use this simple benchmark.

But the Vanguard Australian Shares ETF isn’t most funds. VAS is unique among ASX ETFs in that it tracks the S&P/ASX 300 Index (ASX: XKO) rather than the ASX 200.

VAS: Is 300 better than 200?

As you might imagine, the ASX 300 reflects the performance of the 300 largest ASX shares, rather than the ASX 200’s 200.

This means that VAS has exposure to an additional 100 smaller ASX shares that aren’t held by any ASX 200 ETFs. It also means, by extension, that VAS’s portfolio is slightly less concentrated towards the largest blue-chip ASX shares such as BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA) than an ASX 200 ETF is.

Thus, we can conclude that VAS is a unique ETF. But so what?

Well, VAS’s unique structure pays off for its investors. Or at least, it has. As of 30 April, VAS has returned an average of 9.78% per annum over the past 10 years. In contrast, an ASX 200 ETF in the iShares Core S&P/ASX 200 ETF (ASX: IOZ) has averaged 9.65% per annum over the same period. Perhaps that is making a mountain out of a molehill, but outperformance is outperformance.

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 no position in any of the stocks mentioned. 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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