Vanguard ETFs have become a favourite shortcut for Australians chasing long-term wealth. But what if your "boring" ETF pick is leaving money on the table?
Two of Vanguard's biggest Australian-listed funds, the Vanguard Australian Shares Index ETF (ASX: VAS) and Vanguard MSCI Index International Shares ETF (ASX: VGS), offer very different paths to wealth.
So, which one has come out on top?
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VAS: The Aussie dividend machine
The Vanguard Australian Shares Index ETF tracks the S&P/ASX 300 Index (ASX: XKO), giving investors exposure to around 300 Australian companies in a single trade.
And VAS has been no slouch. Vanguard's largest ETF gained around 6% over the past month and is up roughly 6% year to date. Over five years, it has delivered about 19%, while its 10-year return sits at approximately 55%.
The portfolio is packed with familiar names, including Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Wesfarmers Ltd (ASX: WES) and Telstra Group Ltd (ASX: TLS).
In other words, banks and miners are doing a lot of the heavy lifting. That concentration has its perks. Investors get exposure to some of Australia's biggest companies and a healthy stream of dividend income.
The catch? Australia's market isn't exactly a diversification champion. Financials and resources make up a hefty chunk of the index.
Still, VAS is exceptionally cheap, charging a management fee of just 0.07% per year. It also recently paid a distribution of 48.99 cents per unit.
VGS: The global growth engine
This Vanguard ETF takes the opposite approach. Rather than putting most of your eggs in the Australian basket, it provides exposure to more than 1,300 large and mid-sized companies across developed markets worldwide.
And lately, that strategy has been winning. VGS is up around 1% over the past month and 6% year to date. Over the past 12 months, it has gained approximately 12%, while its five-year return is around 63%.
But the real eye-catcher is its 10-year performance: approximately 195%, comfortably ahead of VAS.
The fund owns global heavyweights including Microsoft Corp (NASDAQ: MSFT), Apple Inc (NASDAQ: AAPL) and Nvidia Corp (NASDAQ: NVDA), alongside leading technology, healthcare, consumer and industrial companies.
Investors pay a little more for that global exposure, with VGS charging a management fee of 0.18%. It recently paid a distribution of 80.11 cents per unit.
So, which Vanguard ETF wins?
Both ETFs can have a place in a long-term portfolio, but they do different jobs.
VAS offers Australian exposure, dividend income and a cheap way to own the local market. VGS provides considerably broader geographical diversification and exposure to some of the world's fastest-growing companies.
If past performance is the scoreboard, VGS is the clear winner.
That doesn't necessarily make VAS a loser. For many investors, owning both Vanguard ETFs could provide a compelling combination of Australian income and global growth.
