As we embark on a new calendar year, one constant on the ASX looks likely to continue – the supremacy of the Vanguard Australian Shares Index ETF (ASX: VAS). This exchange-traded fund (ETF) remains, by far, the most popular of its kind on the Australian markets, with more than $22.5 billion in assets under management.
Given this enduring popularity, it's a great time, as we start another lap around the sun, to do a deep dive into this index fund. So let's talk about two reasons ASX investors might want to buy the Vanguard Australian Shares ETF in 2026, and two reasons why they might wish to reconsider an investment.
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Two reasons why the VAS ETF is an ASX buy in 2026
VAS: Simple and cheap
One of the reasons ASX investors love investing in VAS is its simple nature. This index fund offers exposure to the largest 300 stocks listed on the ASX, weighted by market capitalisation. Nothing more, nothing less. Like all index funds, this avenue is appealing for many investors who wish to take a hands-off, passive approach to investing. The largest 300 companies in Australia change over time, VAS changes with them though, periodically rebalancing its portfolio to ensure that the successful stocks are added to, while the losers are weeded out.
The Vanguard Australian Shares ETF charges a relatively cheap 0.07% per annum for this service.
A stellar long-term track record
We can point to decades of historical data that show the Australian share market has always generated wealth-building returns for investors. The Vanguard Australian Shares Index ETF has itself returned an average of 9.15% per annum since its inception in 2009. But, as we looked at in August of last year, Vanguard itself has calculated that the Australian market returned 9.3% per annum over the 30 years to 30 June 2025.
Past performance is never a guarantee of future returns, of course. But it still gives us an insight into the potential benefits of long-term investing.
Two reasons to sell the Vanguard Australian Shares ETF (VAS)
So there are plenty of positives in buying the VAS ETF for an ASX portfolio. But this is arguably no slam dunk. Many investors have justified concerns about ploughing more capital into this fund in early 2026. Let's go through two.
Banks and miners
One of the primary concerns over buying more VAS units in the ASX investor community is its over-concentration on two sectors of the Australian share market. Most ASX investors know that bank stocks like Commonwealth Bank of Australia (ASX: CBA) and mining shares like BHP Group Ltd (ASX: BHP) dominate the ASX. But a look at VAS' portfolio throws this dynamic into sharp relief.
As it currently stands, more than 50% of any investment in VAS today would go into either financial or mining shares. That's 32.1% to financials and 22.1% to miners. The next most influential sector in this ASX ETF is healthcare, making up just 7.9% of VAS' portfolio. The big four banks alone attract more than $1 of every $5 invested in the fund.
This might be just fine with investors who prioritise dividend income. But any investor who wants true diversity might wish to at least dilute this heavy exposure to banks and miners with other ASX ETFs.
VAS: Where's the innovation?
Another potential concern that some ASX investors might have with the Vanguard Australian Shares ETF is the lack of innovative, exciting and quick-growing companies at its highest echelons. VAS' banks and miners might be mature, profitable businesses. But there aren't too many companies in this ETF that are moving fast or breaking things, to paraphrase Mark Zuckerberg.
While the flagship S&P 500 Index that tracks the US markets holds innovators like Amazon, Microsoft, NVIDIA and Zuckerberg's own Meta Platforms among its top holdings, most of the ASX's top stocks have been delivering steady but slow growth for decades.
If you'd like to invest in an index fund that includes at least some innovative, exciting companies that are growing at healthy clips, VAS might not be the fund for you.
