I think that the Vanguard Australian Shares Index ETF (ASX:VAS), AKA the VAS ETF, is a very effective way to invest for the long-term.
Exchange-traded funds (ETFs) are very useful at investing in a large group of ASX shares, or global shares, at the same time.
The VAS ETF is one that is focused on the Australian share market.
For a few different reasons, I think that it’s a solid option for the long-term:
Diversification
The Vanguard Australian Shares Index ETF gives investors access to the ASX 300. That means that investors get diversification to 300 businesses, which is really good diversification.
The bigger business, the bigger the weighting in the ETF’s portfolio.
These are some of the largest positions in the VAS ETF: BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), Macquarie Group Ltd (ASX: MQG), National Australia Bank Ltd
(ASX: NAB) and Wesfarmers Ltd (ASX: WES).
Improving outlook
I haven’t been a big fan of ASX 200 or ASX 300 share investments in recent years.
I thought the heavy weighting to the big four ASX banks was a negative and they had little growth prospects.
However, the banks now have the potential of rising interest rates, which should be a benefit.
I like the growth outlook for Wesfarmers and CSL after acquisitions and recent growth investments.
Macquarie is doing great. BHP can benefit from inflation, it’s divesting the fossil fuels and expanding into future-focused resources.
Dividends from many of these businesses remain strong.
I like the longer-term prospects for most of the VAS ETF.
Very cheap fees
The VAS ETF has one of the cheapest management fees on the ASX.
Vanguard aims to provide its investment products to investors as cheaply as possible. That means more of the value stays in the investor’s portfolio and it can compound more strongly over the long-term.
Vanguard Australian Shares Index ETF has an annual management fee of just 0.10%. That means that most of the investment returns stay in the hands of investors.
Final thoughts
I think that the VAS ETF is a convenient way to get cheap exposure to the ASX share market. For most people, this would be a solid investment. However, there are certain ASX dividend shares that I think could be even more effective for long-term growth and dividends.
