Does the fall in the Vanguard Australian Shares Index ETF share price make it a no-brainer buy?

The ASX share market has had a rough few weeks, no way around it. As it stands today, the S&P/ASX 300 Index (ASX: XKO) has lost around 3.6% over the past month alone, as well as a nasty 5.4% since 7 March.

In 2023 so far, ASX shares are barely breaking even after what was a stellar start to the trading year over January and February.

This means that the Vanguard Australian Shares Index ETF (ASX: VAS) has also been a bit shaky of late. This exchange-traded fund (ETF) is an index fund that tracks the ASX 300 Index. This means that wherever the ASX 300 goes, this index fund follows.

Indeed, Vanguard Australian Shares ETF units are now down more than 6.5% since early February and down around 9.2% over the past 12 months:

But this might not be such a bad thing for long-term investors. After all, as Warren Buffett tells us, cheaper shares usually mean better returns over the long run.

So do the weaker markets over the past month or so make the Vanguard Australian Shares Index ETF a no-brainer buy today?

Why is the Vanguard Australian Shares ETF a no-brainer buy?

I think it does. Whenever you are buying an index fund, you are essentially buying a small portion of every company that the index contains. In the Vanguard Australian Shares Index ETF’s case, this means a small piece of the 300 largest companies listed on the ASX.

That’s everything from Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Telstra Group Ltd (ASX: TLS) to Coles Group Ltd (ASX: COL), JB Hi-Fi Ltd (ASX: JBH) and Ampol Ltd (ASX: ALD).

The way an index fund is structured means that the better companies grow in influence within the Index over time while the weaker ones are weeded out. This means that buying an ASX-wide index fund is essentially a bet on the long-term growth of the Australian economy. That is a bet that has historically been a lucrative one for investors.

The Vanguard Australian Shares Index ETF’s managed fund equivalent has been around since October 1998. Since that time, this managed fund has returned an average of 8.11% per annum. That’s despite the Asian financial crisis, the dot-com bust, the global financial crisis and COVID.

This fund’s ETF variation has only been around since 2009. But over its shorter lifetime, it has averaged a return of 8.95% per annum.

So I think that buying this Vanguard index fund is always a good long-term investment. But buying it after a pullback? It’s about as close to a no-brainer buy as you can get on the ASX, in my view.

The post Does the fall in the Vanguard Australian Shares Index ETF share price make it a no-brainer buy? 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(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Help safeguard your retirement with this key Warren Buffett investment strategy
• Here are 3 ways to get passive income from ASX shares
• Is a dividend ETF really better than an ASX index fund for income?
• Want high income right now? These are the ASX dividend shares I would buy
• I bought these two ASX shares last week, here’s why

Motley Fool contributor Sebastian Bowen has positions in Telstra Group 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 positions in and has recommended Coles Group and Telstra Group. The Motley Fool Australia has recommended Jb Hi-Fi. 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/dAsFgHc