Vanguard Australia is a leading ETFs (Exchange Traded Funds) provider in Australia, with over 50 ETFs. So what is the best Vanguard ETF Australia?
In this article, we will look at some of the most popular Vanguard ETFs in Australia.
There are many Australian Investors wanting diversified exposure to both the Australian share market and international shares through global stocks, corporate bonds, and other multiple asset classes. Paying a professional to manage your share portfolio can unfortunateky result in high fees eating away at your retirement funds, as well as failing to beat the market with their returns. It is widely known in the FIRE community that having high fees on one’s portfolio can reduce the effectiveness of compounding over a long period of time.
With Vanguard, you can invest in some of the world’s most profitable companies with a small portfolio of even just a couple of ETFs, or an all-in-one ETF such as VDHG. However, there is more to a fund than just its fees; performance, diversification, and volatility are also a substantial contributing factor in your portfolio’s compounding effect and your trajectory to wealth creation or FIRE. So Let’s look at some of the best Vanguard ETFs in Australia.
What are the Best Vanguard ETFs in Australia?
Four of the most popular Vanguard ETFs in Australia are VAS, VTS, VEU, and VDHG. These four ETFs provide a wide range of exposure and aim to track the Australian and world markets. Vanguard is a not-for-profit company which helps minimise fees. The distribution of returns for all Vanguard funds is done quarterly.
VAS aims to track the S&P/ASX 300 index. VAS provides a low cost (0.10% p.a fees) while having a fund size of $10.06 Billion. Vanguard suggest that “VAS is good for buy and hold investors who want exposure to the Australian market for long-term capital growth”. Since inception, the average return is 9.65%, and the distributions have the tax advantage of franking credits.
VTS holds 4070 U.S companies seeking to track the CRSP US Total Market Index. The fund is U.S Domiciled and therefore is at higher risk of currency fluctuations. It currently has a fund size of $2.96 billion, with the most significant sector being Technology at 27.7%. It has a minimal annual fee of 0.03% and an average return of 15.62% since inception.
VEU seeks to track the return of the FTSE All-World ex-US Index. This provides an extensive range of companies (3597) across the developed world while excluding the US. As with VTS, it is US-domiciled and is at risk of currency fluctuations. Vanguard state that “This fund is suitable for those wishing to buy and hold for long-term capital growth, some income, and international diversification while having a higher risk tolerance”. Management fees are a low 0.07% p.a with a fund size of $2.32 billion. The most considerable exposure by region is Europe at 40.6% and by sector is Financials at 20.0%. Performance since inception comes in at 7.30%.
Vanguard Diversified High Growth Index ETF (VDHG)
VDHG is an all-in-one ETF tracking various indices across the world. It offers a broadly diversified range of ETFs within the fund, across multiple asset classes with a low fee of 0.27% p.a. VDHG targets a 10% allocation to income-producing assets and a 90% allocation to growth assets. The total return since inception has been 9.32%.
Which is the most popular?
VAS is the most popular ETF on the ASX for Aussie investors. According to The Motley Fool, the four main reasons VAS is so popular include;
Simplicity – It’s not flashy, an old-school index fund that tracks the top 300 companies on the ASX rather than only the top 200.
Costs – VAS has a meager management fee of 0.01% p.a, being some of the cheapest management fees of a Vanguard product. That’s just $10 for every $10,000 invested!
Performance – VAS regularly performs in accordance with the top 300 companies of the ASX, which it is meant to do! It has averaged 9.65% since its inception in May 2009; while not massive returns, it reflects the performance of the ASX over the years and significantly beats inflation.
The “Vanguard effect” – Vanguard has an incredible reputation across the globe. Vanguard has been kept as a not-for-profit company since Jack Bogal created it in the 1970s. This means it can put the profits back into the company and lower its fees. Although this isn’t strictly the case for Australian users – as it is an American owned company.
Which has the highest return?
Since its inception, VTS has had the highest return of these four funds, with a return of 15.62%. However As of (May 2022), VTS has a year to date return of -8.46% due to a sharemarket correction. This reiterates that the share market poses some risks, and when choosing a fund, your risk tolerance needs to be taken into consideration. As a long-term investor, the general plan is to ride the highs and lows as they come. Generally speaking, the short term volatility is the price we pay for admission into the stock market and long term performance.
Where is the best place to buy Vanguard ETFs?
Any professional broker or online brokerage platform can buy and sell Vanguard ETFs. For ease of use and automation, I use Pearler. With a flat $5.50 brokerage fee you can buy shares under your own HIN and use the automation feature for set and forget. It integrates with the reporting in Sharesight for quick and easy reports come tax time. There are of course other options for online brokers such as CommSec and Self Wealth, and currently the cheapest brokerage at $3 per trade is Stake (which I enjoyed using for trading but I am now focusing on automated long term investing with Pearler) .
Examples of online brokerage platforms that I have reviewed include;
- CommSec Share trading
- Stake US Share Trading
- CMC Markets
- IG MarketsGroup
Conclusion – Best Vanguard ETF Australia
There is a whole range of ETFs provided by Vanguard, and they all track different markets or products around the world. When choosing the best Vanguard ETF in Australia, it’s always important to take into consideration your risk tolerance and financial situation and know that returns are not guaranteed, nor is past performance an indicator of future performance. What is the most popular may not suit your risk or your needs. VAS, VTS, VEU, and VDHG are some of Vanguard’s more popular and well-known index funds. More information for Vanguard funds can be found on the Vanguard website.
Financial Disclaimer: CaptainFI is NOT a financial advisor and does not hold an AFSL. This is not financial Advice!
I am not a financial adviser and I do not hold an Australian Financial Services Licence (AFSL). In this article, I am giving you factual, balanced information without judgment or bias, to the best of my ability. I am not giving you any general or personal financial advice about what you should do with your investments. Just because I do something with my money (or use a particular service or platform) doesn’t mean it is automatically appropriate for your personal circumstances. I do not recommend nor endorse any financial or investment product, and my usage or opinion of any product should not be interpreted as an endorsement, advertisement, or intent to influence.
I can only provide factual information based on my journey to Financial Independence, and that is provided for general informational and entertainment purposes only. I make no guarantee about the performance of any product, and although I strive to keep the information accurate and updated as it changes, I make no guarantee about the correctness of reviews or information posted.