The Vanguard Australian Shares Index ETF (ASX: VAS) is one of the most popular ASX-listed exchange-traded funds (ETFs) in terms of how much money is invested in it.
The offering from Vanguard tracks the S&P/ASX 300 Index (ASX: XKO), a list of 300 of the biggest businesses on the ASX. It's an effective way to gain exposure to Australian businesses, in my view.
But, there are a few other reasons why I think the fund is compelling, so let's get into it.
An index fund like the VAS ETF is trying to match the index's return as closely as possible. If it achieves the same gross return as the ASX 300, then the management costs will be the key element that dictates what the net returns are.
Vanguard aims to provide its index funds for investors as cheaply as possible.
Currently, the Vanguard Australian Shares Index ETF has an annual management fee of 0.07%. That's very low and it's possible that cost could go even lower in the coming years (it was reduced to 0.07% fairly recently).
The businesses inside the VAS ETF portfolio are among the best in Australia at what they do. I think it's a good idea to own investments that can achieve the best margins or win the most customers.
The largest ASX 300 shares inside the portfolio includes Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), CSL Ltd (ASX: CSL), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Wesfarmers Ltd (ASX: WES), ANZ Group Holdings Ltd (ASX: ANZ), Macquarie Group Ltd (ASX: MQG), Goodman Group (ASX: GMG) and Telstra Group Ltd (ASX: TLS). These businesses make up close to half of the portfolio.
These businesses are among the leaders of banking, mining retail and telecommunications in Australia and earn impressive margins. I think they can continue growing profit in the years to come as long as they continue investing in their operations.
Thankfully for Aussies, there aren't many businesses with significant exposure to the US tariffs and uncertainty, with being two of the large companies having sizeable US earnings exposure – CSL and Macquarie. That may help reduce volatility and uncertainty for VAS ETF investors.
One of the pleasing benefits of owning the VAS ETF is that it comes with a generously-high dividend yield, much higher than what the iShares S&P 500 ETF (ASX: IVV) typically pays.
Businesses like Telstra, NAB, ANZ and Westpac have solid dividend yields thanks to their high dividend payout ratios. The bonus of franking credits helps increase the grossed-up dividend yield too.
According to Vanguard, the Vanguard Australian Shares Index ETF had a dividend yield of 3.4% as of 30 April 2025. Hopefully, the underlying payout of the VAS ETF can grow in the coming years if the businesses can collectively increase their payouts.
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