Might Vanguard Australian Shares Index ETF (ASX: VAS) be the best exchange-traded fund (ETF) to own in a portfolio?
A lot of investors have certainly put their money into the VAS ETF.
There are quite a few reasons to consider it:
Exposure to ASX 300 shares
The VAS ETF could be one of the best ways to get exposure to the ASX share market.
Investors do get exposure to 300 businesses with this investment, but a lot of the allocation is on a few large businesses like BHP Group Ltd (ASX: BHP), CSL Limited (ASX: CSL), Rio Tinto Limited (ASX: RIO), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA).
There are plenty of other names in the portfolio, though they become tiny parts of the portfolio the further down the ASX 300 list you go.
Low costs
The annual management fee is an important part of the equation for the net returns. Vanguard ETFs are famous for having very low management fees.
The Vanguard Australian Shares Index ETF is no different. It has an annual management fee of 0.10%, which is really good.
Dividend yield
The businesses that dominate the holdings of the ETF are typically known for paying big dividends – the banks, miners and so on.
But COVID-19 has hit those dividends, though I expect they will recover over this reporting season.
An ETF simply passes through the dividends and distributions it receives, so if there are bigger dividends then the ETF can have a bigger yield.
Why I don’t think it’s the best option
The above points are attractive about Vanguard Australian Shares Index ETF.
But, the thing is, I think the total return is the best measure of success. ASX shares aren’t bad, but the blue chips are slow growers (at best).
There are quite a few other ETFs that may be able to produce stronger returns over the long-term such as Betashares Global Quality Leaders ETF (ASX: QLTY) and VanEck Morningstar Wide Moat ETF (ASX: MOAT).
