It's been a fairly depressing day for ASX shares this Wednesday, and the same can be said for the Vanguard Australian Shares Index ETF (ASX: VAS). This exchange-traded fund (ETF) has suffered a painful 2.64% drop during this session, closing at $86.21 a unit.
Up until yesterday, this ETF had recorded a year-to-date loss in 2022 of around 8.8%. But with today's falls, this has stretched all the way to an 11.1% loss.
So what's going on here? Many investors would doubtless like to know, given that the Vanguard Australian Shares ETF is by far the most popular ETF on the ASX.
Why has the Vanguard Australian Shares ETF had such a terrible day?
Well, to answer that, let's examine what this ETF actually does. So the Vanguard Australian Shares ETF is an index fund that tracks the S&P/ASX 300 Index (ASX: XKO).
The ASX 300 is an index that tracks the performance of the 300 largest ASX shares by market capitalisation.
Like most indexes, it is also weighted by market cap. This means the largest companies occupy the largest weighting in the index.
So for example, although BHP Group Ltd (ASX: BHP) is just one of the 300 companies in the ASX 300 Index, its status as the largest ASX share by market cap means it currently has a 9.27% weighting (as of 31 July) in the Vanguard Australian Shares ETF.
The short version as to why the Vanguard Australian Shares ETF has dropped 2.64% is because the index it tracks, the ASX 300, has seen a 2.56% fall.
The long version is that most of the heaviest shares in the ASX 300 also fell. For example, the BHP share price lost 1.77% today. Commonwealth Bank of Australia (ASX: CBA) shares shed 3.55%, with the other ASX banks also copping big falls.
With this all going on, the Vanguard Australian Shares ETF was never going to have a good day.
