For more than a decade, the Vanguard Australian Shares Index ETF (ASX: VAS) was the only choice for an investor looking for a cheap, established, reputable, and efficient ASX index fund that went beyond the scope of the S&P/ASX 200 Index (ASX: XJO).
There are many ASX index funds that cover the ASX 200 Index and meet the criteria listed above. One popular example is the iShares Core S&P/ASX 200 ETF (ASX: IOZ).
However, if an investor wanted to add some small-cap diversification by expanding into the S&P/ASX 300 Index (ASX: XKO), then Vanguard's VAS was the only spot in town.
That all changed when provider Global X launched the Global X Australia 300 ETF (ASX: A300) last year. The admission of this ASX 300 index fund means that Australian index fund investors set on the ASX 300 index now have a genuine competition for their investing dollars.
So today, let's dive into the pros and cons of both the VAS and A300 ETFs.
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VAS vs. A300: Which SASX ETF comes out on top?
On the surface, these products seem almost identical. An investment in either index fund is effectively an investment in the same 300 shares, the largest 300 shares listed on the ASX, weighted by market capitalisation. Technically, VAS tracks the S&P/ASX 300 Index, while A300 follows the FTSE Australia 300 Index. But this is a 'tomato, tomato' situation in practicality.
Your money is essentially going towards the same 30 companies, with the lion's share ending up with the likes of Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and the other large-caps of the ASX.
The only real point of differentiation between VAS and A300 is the fee. Both index funds charge relatively cheap and competitive fees by ASX standards. VAS is the more expensive of the two, asking 0.07% per annum. That's $7 a year for every $10,000 invested. A300 undercuts this, charging 0.04% per annum ($4 per year for every $10,000 invested). Although that is a small difference, it is not negligible, and may sway some investors to pick A300.
There is one more caveat to mention, though. VAS is the established player here, with more than $24 billion in funds under management. In contrast, A300 is an upstart and currently only has a little over $12 million in its bank.
That's typical of an ETF that is less than a year old. However, it still might give some investors pause. There's never a risk to existing investors if a fund has low investment. However, it does indicate that the fund is probably running at a loss for its provider, given that ultra-low fee. The risk is that A300 doesn't end up attracting enough capital to make itself economically viable and closes after a time.
If that does happen, investors will not lose their capital. However, they may be forced to liquidate their ETF units.
Aside from this risk, there is little reason to opt for the lower fee A300 offers. Plenty of investors may just choose to stick to the beloved Vanguard brand regardless, though.
