The Vanguard Australian Shares Index ETF (ASX: VAS) is the most popular exchange-traded fund (ETF) on the ASX, going off of total funds under management. This ETF from Vanguard has more than $10 billion of ASX investor dollars in its custody. So it must be doing something right.
So let's look at five reasons why I'd consider adding to my existing position in this popular ASX ETF.
Five reasons I'd buy the Vanguard Australian Shares ETF today
Simplicity
The Vanguard Australian Shares ETF is a single investment on the ASX, with a single ticker code. When you're investing in this ETF, you're really investing in the 300 companies that it holds in its underlying portfolio.
Yes, this fund is an index fund, mirroring every holding in the S&P/ASX 300 Index (ASX: XKO). As such, if you want a broad slice of the Australian share market, investing in the Vanguard Australian Shares ETF is one of the easiest ways to accomplish it.
Diversity
We've probably all heard the phrase 'don't put your eggs in one basket'. This is commonly used in investing to tout the benefits of diversification. Most investors will tell you that spreading your cash over different types of companies is a great way to reduce risk in your portfolio.
A typical investor might do this by holding bank shares, mining shares, grocers, telcos, and healthcare companies.
But with the Vanguard Australian Shares ETF, this diversification is built in. This ETF covers every corner of the ASX share market, with exposure to all of the above industries, and more.
Sure, you are getting a lot of banks and miners compared to everything else. But it is still a reasonably well-diversified investment.
Dividend income
ASX shares are well-known for paying dividend income. Receiving income from your investments is a beautiful thing. It enables us to have a source of cash flow we can easily reinvest back into more shares, or else use to pay our bills if in retirement.
Luckily, because the Vanguard Australian Shares ETF holds so many dividend payers in its portfolio, it can pass on this dividend income to its own investors.
It also doles out a dividend distribution every three months too. On current pricing, this ETF's distributions over the past 12 months give it a trailing yield of almost 7%.
The Vanguard Australian Shares ETF is cheap
One of the biggest pitfalls of investing in funds like the Vanguard Australian Shares ETF is the fees the providers charge. Fees can eat into your returns over time. So it's important to make sure you are getting bang for your bucks.
In this ETF's case though, the fees are highly competitive. Vanguard charges investors 0.1% per annum for investing in this ETF, which is on the low side of the ASX ETF sector. That works out to be $10 per year for every $10,000 invested.
Returns
Last, but certainly not least, we have returns. There's little point in investing in ASX shares if you'd get a better return by leaving your money in the bank. Fortunately, in this ETF's case, it has certainly delivered better returns than cash has over a long time horizon.
As of 31 December 2022, investors have enjoyed an average return of 7.09% per annum over the past five years. Over the past 10, this stretches to 8.54% per annum. That's a pretty decent return for a single, simple, diversified, relatively cheap, income-producing investment.
