Exchange-traded funds (ETFs) have become one of the simplest and most popular ways to invest in the share market.
It’s clear to see why this is the case. Instead of picking individual shares, investors can buy a single ETF and gain exposure to dozens or even hundreds of businesses at once.
For investors looking for broad exposure to Australian shares, one of the most favoured options is the Vanguard Australian Shares Index ETF (ASX: VAS).
So if I had $2,000 ready to invest, would I consider putting it into this ETF? Personally, I think it could be a very sensible option.
VAS ETF offers exposure to many of Australia’s biggest shares
One of the biggest advantages of the VAS ETF is diversification.
The ETF tracks the S&P/ASX 300 Index, which means it provides exposure to roughly 300 companies listed on the Australian share market. This includes many of the country’s largest and most established businesses.
Major holdings include companies such as Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), CSL Ltd (ASX: CSL), and National Australia Bank Ltd (ASX: NAB).
At the same time, the fund also includes smaller companies that many investors might not otherwise own individually. Businesses like TechnologyOne Ltd (ASX: TNE), Lovisa Holdings Ltd (ASX: LOV), and Netwealth Group Ltd (ASX: NWL) are also part of the index.
That mix gives investors exposure to both the stability of large blue chips and the growth potential of smaller companies.
A simple way to back the Australian economy
Another reason I like broad-market ETFs such as the Vanguard Australian Shares Index ETF is that they effectively allow investors to back the long-term growth of the Australian economy.
Over time, companies rise and fall, industries evolve, and new businesses emerge. Because the VAS ETF tracks the index, it naturally adjusts as the market changes. In fact, we are currently in the process of the latest quarterly rebalance.
If one company declines in importance and another grows, the index gradually reflects that shift.
For investors who prefer not to constantly research and select individual ASX shares, this can be an easy way to stay invested in the broader market.
A slightly better entry point after the pullback
Like many parts of the market, the VAS ETF has experienced some volatility recently.
After hitting a record high not long ago, the fund has pulled back roughly 6%.
While that is not a huge decline, it does make the entry point a little more attractive than it was just a few weeks ago.
Long-term investing still matters most
Of course, buying an ETF doesn’t guarantee positive returns in the short term.
The share market will continue to experience periods of volatility, and prices can move both higher and lower in the months ahead.
But historically, long-term investors who remain invested in diversified share portfolios have benefited from the growth of corporate earnings and dividends over time.
The Vanguard Australian Shares Index ETF provides a simple way to capture that long-term trend.
Foolish takeaway
If I had $2,000 to invest and wanted broad exposure to Australian shares, the Vanguard Australian Shares Index ETF could be a very reasonable option.
It provides diversification across hundreds of companies, exposure to both large and smaller businesses, and a simple way to participate in the long-term growth of the Australian share market.
The post Should I invest $2,000 in the VAS ETF? appeared first on The Motley Fool Australia.
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- New to investing? Start with ASX ETFs and quality ASX stocks
Motley Fool contributor Grace Alvino has positions in CSL, Commonwealth Bank Of Australia, Lovisa, and Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Lovisa, Netwealth Group, and Technology One. The Motley Fool Australia has positions in and has recommended Netwealth Group. The Motley Fool Australia has recommended BHP Group, CSL, Lovisa, and Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.