Is it a smart idea to invest $10,000 into the VAS ETF?

Investing $10,000 in an exchange-traded fund (ETF) could be a great way to build wealth over the long term.

And one of the most popular options on the ASX is the Vanguard Australian Shares Index ETF (ASX: VAS).

But is this an ETF I would choose for a $10,000 investment today? Here’s what I think.

A simple way to own Australian shares

One of the things I like about the VAS ETF is how much exposure it provides through a single investment.

The fund tracks the S&P/ASX 300 Index (ASX: XKO), giving investors access to approximately 300 companies listed on the Australian share market.

That includes some of the country’s most established businesses, such as Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP).

I think there is a lot to like about owning companies like these over the long term.

CBA has a powerful position in Australian banking, while BHP provides exposure to commodities that could benefit from global economic development.

And with hundreds of other businesses included, investors can participate in the broader performance of the Australian share market.

For someone who doesn’t want to spend time researching individual companies, I think that simplicity is a major advantage.

Income and long-term growth

Another reason I like the VAS ETF is the combination of income and capital growth it can offer.

Many established Australian shares pay regular dividends, and the fund passes on income from its underlying investments through quarterly distributions.

These can also include franking credits, which may be valuable depending on an investor’s tax circumstances.

I think that gives the VAS ETF an interesting balance. Investors can receive income along the way while potentially benefiting as the underlying businesses grow their profits and become more valuable.

There is also the benefit of low costs. Vanguard charges an annual management fee of just 0.07%, equivalent to around $7 a year for every $10,000 invested.

Over a long investment horizon, I think that is another reason the ETF makes sense.

Would I invest the full $10,000?

This is where I would consider what else I already own.

Although the VAS ETF holds approximately 300 companies, the Australian share market is heavily concentrated in banking and resources.

That means the fund’s performance can be influenced considerably by the fortunes of those industries. It also provides limited exposure to technology businesses and other industries that are more prominent overseas.

For that reason, I would be more comfortable owning the VAS ETF alongside international investments. I think that would give me a better balance across countries and industries.

Foolish takeaway

I think investing $10,000 in the VAS ETF could be a smart long-term decision.

The fund offers exposure to hundreds of Australian businesses, regular income potential, and very low fees.

I would be happy buying it today, but as part of a broader portfolio that also includes international shares.

The post Is it a smart idea to invest $10,000 into the VAS ETF? appeared first on The Motley Fool Australia.

More reading

• Could $750,000 in ASX ETFs fund a comfortable retirement?
• Vanguard ETFs will pay dividends today. Here’s how much
• Why these Vanguard ETFs could be buys for beginners
• Own Betashares ASX ETFs? Here’s your next dividend
• 3 reasons why the Vanguard Australian Shares Index ETF (VAS) is a solid buy

Motley Fool contributor Grace Alvino has positions in Commonwealth Bank Of Australia and Vanguard Australian Shares Index ETF. 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 BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.