Should I Buy VAS: Analysis
VAS provides exposure to the largest 300 Australian businesses in just one product. It has proven the ability to outperform 81.70% of active strategies.
Who Should Buy VAS
VAS is used by many investors to gain exposure to a broad basket of Australia’s biggest public companies in an efficient manner. It can be suitable for beginning and advanced investors to add equity diversification to a portfolio. The fund may be used by itself or in conjunction with other funds depending on your portfolio goals.
Vanguard recommends it for:
Buy and hold investors seeking long-term capital growth, some tax-effective income, and a higher tolerance for the risks associated with share market volatility. With a minimum suggested investment timeframe of seven years.
Quick Facts
Ticker Code: VAS
Benchmark: S&P/ASX 300 Index
Number of Holdings: 307
Assets Under Management: $8.5B
Management Fee: 0.10%
Portfolio Turnover: 0.82%
Inception Date: 4th May 2009
Income Distributions: Quarterly
Distribution Reinvestment Plan: Yes
Total 10-Year Returns: 8.64% p.a
VAS Share registry: Computershare. Through Computershare, you can manage your holdings and communications, and also select whether or not to reinvest distributions.
About VAS
The Vanguard Australian Shares Index ETF or VAS is the largest ETF by funds in Australia. The ETF has $8.6 billion in funds under management or the total fund amount of $24.73 Billion. VAS provides low-cost, broadly diversified exposure to Australian companies and property trusts listed on the Australian Securities Exchange. It also offers potential long-term capital growth along with dividend income and franking credits.
The ETF is a passive index fund tracking the S&P/ASX 300 Index.
Portfolio Goal
Vanguard Australian Shares Index ETF seeks to track the return of the S&P/ASX 300 Index before taking into account fees, expenses, and tax. Source: Vanguard
VAS Holdings
Due to the nature of the Australian economy, VAS is heavily weighted towards Banks and materials. We can see in the graph below that Financial Services account for 29.25% of holdings and Materials a further 19.95%. That’s 49.2% combined. In our top 10 holdings, all of the big four banks are listed, these four companies account for 20.36% of all holdings.
Although VAS is highly diversified amongst Australian companies it is heavily weighted to Banks and materials. Meanwhile, technology businesses are very unrepresented account for only 4.41% of holdings.
VAS Shares Fees
- Management Fee: 0.10% p.a
- Indirect Costs: 0%
- Bid/Ask Spread: 0.02%
When we compare the total fees of these VAS, A200, IOZ, STW over the course of twenty years we see the differences are minor. VAS performed the best with total fees of $1,967 compares to STW with fees of $2,774 (a difference of $807).
Although A200 has the lowest management fees, VAS has the lower total fees due to the average bid/ask spread
Performance
- YTD: 10.49%
- 1 Yr: 28.78%
- 10 Yr: 8.64%
The cumulative total returns of VAS over the course of 10-years are 129.13% and 202.15% since its inception in 2009.
Distributions
At the current rates, VAS pays a distribution of $1.9786 or $2.6448 gross. This gives VAS a dividend yield of 2.10% and 2.81%. The distribution amount and yield are relatively low to the historical trends, this is due to the underlying equities reducing dividends during the COVID recessionary period. As profits return we will see this yield again increase to its old average and trend of over $4 per holding. The historical average yield for VAS is 4.41%.
Should I Buy VAS ETF: Retail Fund VS ETF
The Vanguard Australian Shares Fund can also be purchased as a retail fund. This means instead of simply buying and selling the fund on an exchange like an Exchange Traded Fund (ETF), you instead buy the fund directly through Vanguard. As a result, no brokerage is paid in trading. However, the retail fund is slightly more expensive with fees of 0.16% pa.
Either option can be a great investment strategy and the differences are pretty minor between the retail fund or ETF option. The difference in annual fees for $10,000 over the course of a year is $6. Depending on your frequency of buying and selling will depend on which option will be cheaper in the long run. However, the differences will be very minor, and we consider them negligible in most cases.
Passive Vs Active: SPIVA
This report found 81.70% of actively managed funds fail to outperform the S&P/ASX 200 index.
Full Analysis if interested: disallowed link/should-i-buy-vas-etf
Thanks for reading
