Choosing the right ASX stock or stocks to buy for an investment portfolio is a tricky process. With so many options on the Australian stock market to choose from, many new investors can get overwhelmed and pick the wrong shares to start with. Or even worse, they may decide the whole investing thing isn't for them after all, and keep their cash in the bank. But if I had $1,000 to put into a new ASX stock today, there's only one I would choose. It would be the Vanguard Australian Shares Index ETF (ASX: VAS).
The Vanguard Australian Shares ETF is the largest index fund on the ASX. it offers investors a simple deal: invest in this exchange-traded fund (ETF) and immediately gain access to a portfolio of ASX shares that almost perfectly reflect the largest 300 stocks on the ASX, weighted by market capitalisation.
Those 300 shares include everything from Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Woolworths Group Ltd (ASX: WOW) to Telstra Group Ltd (ASX: TLS), AGL Energy Ltd (ASX: AGL) and Harvey Norman Holdings Limited (ASX: HVN).
You are effectively getting everything the Australian share market has to offer, the whole shebang. Miners, banks, energy stocks, consumer discretionary shares, real estate investment trusts (REITs), consumer staples companies, healthcare businesses… everything.
Why I would recommend the VAS ETF to any ASX investor today
This, in my view, makes VAS a great investment for almost anyone. Whether you're an investing veteran or share market novice, this ASX stock can be a great addition to any portfolio.
For one, you are getting an investment that has historically given back a decent return over many decades. As of 30 April, VAS has averaged an ASX return of 8.97% per annum since its market inception in 2009. That includes both capital growth and dividends.
Speaking of dividends, VAS is an ASX investment that also has significant dividend income potential. Since this index fund holds the 300 largest shares on the ASX within its portfolio, it receives any dividends that these companies pay out. VAS passes these on to its ASX investors in the form of quarterly dividend distributions.
At recent pricing, the Vanguard Australian Shares ETF is trading on a trailing dividend distribution yield of 3.84%. This comes partially franked too, seeing as most of the dividends coming out of the ASX 300 come with at least some franking credits attached.
So with this VAS ETF, ASX investors can get instant diversification, a decent history of capital growth, and solid dividend income prospects all in one investment. For these reasons, I think VAS is a perfect place for any ASX investor to put $1,000 in spare cash today.
