I think the Vanguard Australian Shares Index ETF (ASX: VAS), an exchange-traded fund (ETF) that enables Aussies to invest in the S&P/ASX 300 Index (ASX: XKO), effectively represents the ASX share market. However, it's worth asking whether this is a good time to buy units of the fund.
The VAS ETF has managed to deliver pleasing returns for investors in recent times, with the unit price going up more than 9% in the last year, as the chart below shows.
For investors that prefer to invest in ETFs like clockwork, I don't think there's anything wrong with choosing to invest today for a few different reasons.
Let's start with the positives of investing today in the VAS ETF.
Positives about the Vanguard Australian Shares Index ETF
For starters, VAS ETF comes with solid diversification, with 300 holdings in the portfolio. While a few names from the ASX bank share and ASX mining share spaces are heavily represented, there are other sectors too, such as retail. Some of the biggest positions include Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Telstra Group Ltd (ASX: TLS) and Wesfarmers Ltd (ASX: WES).
Second, it has very low management fees of just 0.07%. While that's not the absolute lowest for an ASX ETF, it's one of the cheapest. This means most of the portfolio value stays in the hands of investors rather than being taken by the fund manager.
Third, the dividend yield of this fund is relatively high thanks to the generous dividend payout ratios of the businesses involved. In the May 2025 update, Vanguard said the VAS ETF had a dividend yield of 3.3%, which doesn't include the bonus of the attached franking credits.
These positives generally don't change year-to-year.
Negatives of the VAS ETF right now
There are a few things that make me cautious about investing too much in an ASX blue-chip focused fund right now.
Firstly, not only is the VAS ETF near an all-time high, but some businesses within the portfolio are also trading at higher price/earnings (P/E) ratio valuations than they have done in recent year. CBA shares are trading at a particularly high valuation. For a relatively slow growing business to be the biggest position, I'm not sure what the size of the future returns of the VAS ETF may be over the next couple of years, starting from this high level.
We have a wide array of potential investments on the ASX – I'd prefer to choose something that may be more likely to deliver stronger underlying earnings growth and better capital growth.
The other negative is that, given the ongoing strength of the CBA (and others), I'm concerned that the VAS ETF may become less diversified, with a larger portion of the fund allocated to just a few large names. Passive investing (from super funds and ETFs) could reinforce that market buying focus on the large end of the ASX.
I think the VAS ETF is still a good option, but at this price, I'd rather choose my own ASX share investments for my portfolio that I believe have stronger growth potential.
