There are quite a few ASX shares that I prefer compared to Vanguard Australian Shares Index ETF (ASX: VAS).
The VAS ETF is one of the largest exchange-traded funds (ETFs) on the ASX. It lets investors invest into the ASX 300, which represents 300 of the largest businesses on the ASX.
Some of those businesses that make up important weightings within the ASX 300 include Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), CSL Limited (ASX: CSL), Rio Tinto Limited (ASX: RIO) and National Australia Bank Ltd (ASX: NAB).
The VAS ETF isn’t a bad investment option. It enables people to track the ASX share market for a very cheap fee.
But for me, it has a couple of downsides. One is the somewhat lack of diversification compared to many other stock exchange-based or geographic-based ETFs – the ASX 300 is significantly weighted to resources and financials. Those are sectors that may have decent dividend yields, but they lack consistent solid profit growth and also don’t re-invest much for more growth.
But I think there are a few other options to get exposure to ASX shares with diversified portfolios:
WAM Leaders Ltd (ASX: WLE)
This is a listed investment company (LIC) run by Wilson Asset Management (WAM) which looks at the larger ASX shares on the ASX stock exchange. But it doesn’t just passively hold them, the investment team are happy to move around with the positions, even if many of the portfolio positions are similar names to the index.
Between May 2016 and October 2021, WAM Leaders’ portfolio produced an average return per year of 15.2% (before fees, expenses and taxes), outperforming its benchmark by 5.2% per annum. It also pays an attractively high dividend yield.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
WHSP is an investment conglomerate that invests in a wide variety of ASX shares – large ones, small ones, as well as unlisted Australian businesses. It’s been going for over a century and it continues to diversify its portfolio.
Some of its biggest positions includes ASX shares like TPG Telecom Ltd
(ASX: TPG) and Brickworks Limited (ASX: BKW).
When WHSP released its FY21 result, it noted that its total shareholder return of 16.4% per year over the prior five years was 6% per year better than the All Ordinaries Accumulation Index.
Wam Microcap Limited (ASX: WMI)
WAM Microcap is another LIC, but this one looks at the small end of the ASX, which is where the best ASX share opportunities may be hiding.
The portfolio is probably a bit more volatile than the others I’ve mentioned, as well as the ASX 300, but I think that provides the best opportunity for WAM Microcap and us to invest at different times.
Since inception in June 2017, the WAM Microcap portfolio has delivered an average gross return per year of 25.2% (before fees, expenses and taxes) – outperforming the small cap ASX index by 12.2%.
Summary thoughts
Past performance is not a guarantee of future results, but it shows the level of performance that other diversified, ASX-based investments can achieve. I’d be quite happy to buy WHSP shares and WAM Microcap shares for my portfolio at the moment, particularly after their recent volatility.
