There are few ways to get as cheap exposure to the ASX share market as the Vanguard Australian Shares Index ETF (ASX: VAS). What's not to love about a low management fee and plenty of diversification?
Impressively, the VAS ETF has an annual cost of 0.07% per year, which is very close to zero. Investors can hold this fund and be charged very little, while plenty of fund managers may charge 1% or more of the net assets of the fund. That's pleasing for net returns.
Another strength of the investment is the number of holdings it has. The fund tracks the S&P/ASX 300 Index (ASX: XKO), which is an index of 300 of the biggest businesses on the ASX. That certainly helps diversification.
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How much of an investor's portfolio should the VAS ETF comprise?
There isn't a 'right' answer of course – it depends on what an investor is looking for.
For an investor wanting a passive investment that can provide a solid dividend yield, this ASX ETF certainly ticks the box and could play a key role. At the end of October 2025, it had a dividend yield of 3.1% (with franking credits being a bonus on top of that).
But I think we'd be missing out on other appealing investments if the VAS ETF were to be 100% of our portfolio.
Some of the most respected and diversified investment options in Australia have a minority weighting in ASX shares.
For example, the Vanguard Diversified High Growth Index ETF (ASX: VDHG) is invested in a variety of assets, including ASX shares, international shares, emerging market shares, and bonds. The VDHG ETF has a target allocation of 36% to Australian shares.
Meanwhile, AustralianSuper's 'high growth' investment option has a current allocation of 32.2% to Australian shares.
So, for Australian-based, diversified juggernauts, they have around a third of their portfolios invested in Australian shares. I think that's a very reasonable allocation for Australians who are considering the VAS ETF.
However, we should keep in mind that the ASX accounts for only around 2% of the global share market; we shouldn't ignore the excellent opportunities overseas.
My own portfolio
Currently, none of my portfolio is invested in the VAS ETF for two key reasons.
Firstly, the fund is heavily weighted to the largest ASX blue-chip shares – around 45% of the portfolio is invested in the biggest ten positions. That makes the Vanguard Australian Shares Index ETF seem a bit less appealing on the diversification side of things than at first glance.
I also believe that there are plenty of investments on the ASX that can grow faster than the VAS ETF, which is why I allocate money to the best opportunities I can see every chance I get.
