Is the Vanguard Australian Shares Index ETF a good long-term investment?

If you’re not a fan of picking stocks, I wouldn’t let that stop you from investing.

Not when there are exchange-traded funds (ETFs) out there that make investing easy.

And when it comes to Australian equities, one fund that stands out to me is the Vanguard Australian Shares Index ETF (ASX: VAS).

So, is it a good long-term investment? Personally, I think the answer is yes. But let’s now unpack why.

A simple way to own the Australian market

What I like most about this ETF is its simplicity.

Instead of trying to choose a handful of ASX winners, it gives you exposure to the broader Australian share market in one trade. It tracks an index that includes hundreds of companies, which means you are not relying on any single business to perform.

In my view, that diversification is incredibly powerful over the long term.

You are effectively backing the growth of corporate Australia as a whole, rather than trying to predict which individual company will come out on top.

Exposure across the market

Another reason I find the VAS ETF compelling is the breadth of its holdings.

At the top end, you get exposure to the giants of the ASX. Companies like BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and CSL Ltd (ASX: CSL) make up a significant portion of the portfolio. These are well-established businesses with strong market positions and, in many cases, global operations.

But what I think is often overlooked is that the ETF does not stop there.

It also includes mid-cap and smaller companies such as Catapult Sports Ltd (ASX: CAT), Collins Foods Ltd (ASX: CKF), and Bravura Solutions Ltd (ASX: BVS).

That mix matters.

The large caps tend to provide stability and income, while smaller companies can offer higher growth potential over time. By holding all of them together, I believe the ETF creates a more balanced long-term investment.

Low costs

One of the biggest advantages of this ETF, in my opinion, is its cost.

With a management fee of just 0.07% per year, it is extremely cheap. That might not sound like a big deal at first glance, but over a decade or more, fees can have a meaningful impact on returns.

The lower the cost, the more of the market’s return you get to keep.

That is one of the key reasons I often favour index ETFs for long-term investing.

Income and long-term returns

The Vanguard Australian Shares Index ETF also offers a dividend yield of just under 3%, which I think will appeal to income-focused investors.

Australian shares are generally known for paying dividends, and this ETF captures that characteristic of the market.

On top of that, it has delivered returns of around 10.7% per annum over the past 10 years, according to Vanguard

Of course, past performance is not a guarantee of future returns. But I do think it provides some reassurance that a diversified, low-cost approach to investing in Australian shares can deliver solid outcomes over time.

Foolish takeaway

If I were looking for a set-and-forget way to invest in ASX shares, the Vanguard Australian Shares Index ETF would be high on my list.

It offers broad diversification across large, mid, and small-cap companies, comes with a very low fee, and provides both income and long-term growth potential.

The VAS ETF is not designed to beat the market. Instead, it aims to be the market. And for long-term investors, I believe that is often more than enough.

The post Is the Vanguard Australian Shares Index ETF a good long-term investment? appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has positions in CSL, Commonwealth Bank Of Australia, and Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bravura Solutions, CSL, and Catapult Sports. The Motley Fool Australia has positions in and has recommended Catapult Sports. The Motley Fool Australia has recommended BHP Group, CSL, and Collins Foods. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.