The Vanguard Australian Shares Index ETF (ASX: VAS) gives investors the opportunity to invest across the S&P/ASX 300 Index (ASX: XKO), which includes many of the ASX's most compelling businesses.
When you can invest in 300 businesses at once, it makes the investment appealing for diversification purposes.
Spreading the risk across numerous businesses is better than being focused on a specific industry, in my view.
Despite the ASX exchange-traded fund (ETF)'s appeal, I wouldn't automatically say it's a buy. Let's take a closer look.
Why the VAS ETF is appealing
I've already mentioned the appealing diversification of the business, which could allow Aussie investors to sleep easier at night. It's invested in Australia's biggest blue-chip shares such as Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Wesfarmers Ltd (ASX: WES), and Telstra Group Ltd (ASX: TLS).
Another positive aspect of the ASX ETF is that it's one of the lowest-cost funds on the ASX, with an annual management fee of just 0.07%. Low annual fees mean more of the net returns stay in the hands of investors, which is good for wealth-building.
I'll also point out that, compared to international share ETFs, the VAS ETF has relatively limited exposure to AI. While investing in the AI theme over the last few years has been a tailwind for returns, some market commentators now suggest that valuations may have risen too far in the sector, making it a positive to have less exposure if a correction is coming.
So, in terms of putting money into the global share market or the ASX share market, some value-focused investors may suggest the ASX is a better place to put money if a speed bump is coming for AI stocks.
Reasons to consider other investments over the Vanguard Australian Shares Index ETF
The VAS ETF does provide exposure to the ASX share market, but there are two sectors that receive a lot of exposure: ASX bank shares and ASX mining shares, which make up 52.5% of the portfolio. I'd prefer there to be a more even spread between sectors.
Within those two sectors, CBA and BHP alone accounted for 17.8% of the entire VAS ETF portfolio at 31 August 2025.
Many investors point the finger at CBA shares and say it's the most expensive bank on the planet. Meanwhile, BHP is facing problems in China, as the Asian superpower has reportedly imposed a temporary ban on BHP's iron ore shipments due to contract renewal talks breaking down, according to a report by the Australian Financial Review. However, this has been disputed by a Chinese analyst.
To me, the VAS ETF doesn't seem like a great value to buy right now, nor is it the best option for diversification. At the same time, this is highly unlikely to be the highest unit price investors ever see, as I'm confident the Vanguard Australian Shares Index ETF can rise in the long term. But I'm not forecasting strong share (unit) price growth in the short term.
I believe the fund can be a decent long-term investment option today, but as ASX investors, there are numerous other options we can choose to put our money into that look better value to me and could produce stronger returns.
