Why is the Vanguard ASX 300 ETF (VAS) so popular among investors?

When we take a look at the most popular exchange-traded funds (ETFs) on the ASX, there is one clear favourite amongst investors. That is the Vanguard Australian Shares Index ETF (ASX: VAS).

As of 31 July, the Vanguard Australian Shares ETF had just over $11 billion in funds under management. That’s more than double that of the iShares S&P 500 ETF (ASX: IVV), which presently has just over $5 billion in funds under management.

The next closest ASX-based index fund in terms of popularity is the SPDR S&P/ASX 200 Fund (ASX: STW). It currently has roughly $4.5 billion in funds under management.

So what makes the Vanguard Australian Shares ETF so wildly popular that it runs rings around the other ASX ETFs on the market?

Well, it could come down to a few factors.

Why is the Vanguard Australian Shares ETF so popular?

The first is the Vanguard Australian Shares ETF’s unique structure. It remains the only index fund on the ASX boards that covers the S&P/ASX 300 Index (ASX: XKO), rather than the more widely covered S&P/ASX 200 Index (ASX: XJO).

The ASX 300 holds all of the shares that the ASX 200 does. But it also holds an additional 100 or so companies from the smaller end of the market. Perhaps ASX investors enjoy this increased diversification.

This has the byproduct of slightly reducing investors’ exposure to the largest shares on the ASX – your BHP Group Ltd (ASX: BHP)s and the big four banks. As most ASX investors know, banks and miners are the two largest sectors on the ASX. So it’s possible investors appreciate less concentration in these sectors.

There’s also performance to consider.

As of 31 July, the Vanguard Australian Shares ETF has averaged a return of 4.48% per annum over the past three years, and 8.12% per annum over the past five.

In contrast, the SPDR S&P/ASX 200 Fund has returned an average of 4.25% over the past three years, and an average of 7.92% over the past five.

That’s not a huge disparity. But it is probably enough to convince investors that Vanguard’s ASX 300 approach is the right one to take.

Bogle’s legacy

A final factor to consider is the reputation of Vanguard itself. Vanguard is a US-based fund manager. Its late founder Jack Bogle was one of the most respected investors in the world and attracted heavy praise from none other than the legendary Warren Buffett himself.

Bogle set up Vanguard as a not-for-profit entity owned by its investors. As such, it has historically often offered the lowest fees in the ETF industry. Bogle also is widely credited with inventing the index fund itself. As such, for many investors, Vanguard has unbeatable bona fides when it comes to offering ETF products.

So it’s probably a combination of these factors that has led the Vanguard Australian Shares Index ETF to its place at the top of the ASX ETF pile today.

The post Why is the Vanguard ASX 300 ETF (VAS) so popular among investors? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Is the VAS ETF a good way to get started with investing?
• Could these ASX ETFs soon play a bigger role in Aussie super funds?
• Why are the VAS ETF’s dividends so erratic?
• How does VGS stack up against other ASX index funds?
• 2 ETFs I think would make good additions to most portfolios

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended iShares Trust – iShares Core S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/7rguQAW