The ASX share market has suffered alongside the global market amid investor fears about a growing tariff trade war. The Vanguard Australian Shares Index ETF (ASX: VAS) has declined 8% in the past month, as the chart below shows.
With that fall, the VAS ETF is back to where it was in August 2024. The decline isn't near COVID levels, but it does raise the question of whether the exchange-traded fund (ETF) is a buy-the-dip opportunity.
An investment isn't automatically worth buying just because it has dropped, so let's consider if it's attractive today.
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Better valuation
The VAS ETF gives investors exposure to the S&P/ASX 300 Index (ASX: XKO), an index of 300 of the biggest businesses on the ASX.
The returns of an ETF are dictated by the performance of the underlying holdings. It has been a rough period for plenty of the ASX blue-chip shares in the last few weeks.
Since 17 February 2025:
- The Commonwealth Bank of Australia (ASX: CBA) share price has declined 14%
- The BHP Group Ltd (ASX: BHP) share price has fallen 5%
- The CSL Ltd (ASX: CSL) share price has dropped 3%
- The National Australia Bank Ltd (ASX: NAB) share price has declined 18%
- The Westpac Banking Corp (ASX: WBC) share price has fallen 11%
- The ANZ Group Holdings Ltd (ASX: ANZ) share price has dropped 9%
- The Wesfarmers Ltd (ASX: WES) share price has declined 12%
- The Macquarie Group Ltd (ASX: MQG) share price has fallen 16%
- The Goodman Group (ASX: GMG) share price dropped over 12%
- The Fortescue Ltd (ASX: FMG) share price has declined 16%
Collectively, the ASX is noticeably cheaper. Around half of the VAS ETF's decline (half of 8%) occurred in March (at the time of writing). That's useful to know because at the end of February 2025, according to Vanguard, the fund had an overall price/earnings (P/E) ratio of 20.1x. It's cheaper now, though a P/E ratio of above 20 was elevated.
For people who are tactical with their investments in the VAS ETF, it seems like the best time of the past seven months to invest. There have been times over the past three years when it was cheaper, but it's impossible to know whether it's going to fall further or whether we've seen the bottom of this volatile period.
Either way, the VAS ETF has an incredibly low management fee to access the ASX share market, and it's more appealing than it was a month ago.
Dividend yield
One of the appealing things about share market declines is that they make business valuations cheaper and increase the passive income on offer.
When a share price falls 10%, it boosts the dividend yield by 10%. So, the VAS ETF offers investors a more appealing dividend yield after its 8% decline in the past month.
The banks and miners are not known for delivering exceptional capital growth, so the dividend return is important.
At the end of February 2025, the VAS ETF had a dividend yield of 3.5%, and the (trailing) yield is slightly better than that today.
For investors wanting a diversified portfolio and passive income, the VAS ETF could be a solid option, particularly for investors wanting to avoid the global share market.
