Earlier this year one of my heroes passed away. On the 16th of January 2019 finance industry icon John (Jack) Bogle was laid to rest in his hometown of Bryn Mawr, Pennsylvania.
In 1975 Mr Bogle, via his organisation Vanguard, launched its first index fund. When it launched, the fund raised a mere $17 million in its first 5 years. In the past decade, however, index investing has grown from insignificance to become a major finance force that is literally changing the industry (for the better).
In honour of my hero, I will be discussing my favourite Vanguard ETF, Vanguard Australian Share ETF (ASX: VAS). The investment objective of VAS is to track the return of the S&P/ASX300 (INDEXASX: XKO) Index before fees and expenses. It is also one of the widest held ETFs in Australia and should be a consideration in any portfolio (I am a current shareholder).
Ease of investment:
The great thing about an index fund is that it gives investors exposure to a wide range of shares in one single transaction. VAS invests in the ASX 300, meaning you get exposure to 300 different companies, these include star Australian stocks such as CSL Limited (ASX: CSL) and Amcor Limited (ASX: AMC).
Low Fee Structure:
In my opinion organisations like Vanguard are effectively a not-for-profit business, VAS only has an annual management fee of .14% per annum – this is incredibly low when compared to other investment managers. And remember the golden rule: lower fees means more in your pocket.
Autopilot investing:
VAS provides investors with market returns with an incredible low time investment. Properly analysing shares takes a very long time. With Exchange Traded Funds or ETFs you don’t have to spend your night reading company reports or searching for the next ‘hot stock’. Another benefit is that investing in ETF ensures your portfolio is spread over several high-quality companies. This means your investment risk is spread and you could be protected against some potential downturns.
Dividends:
The ASX is renowned for its generous dividend-paying companies. Companies like National Australia Bank Ltd
(ASX: NAB) and ANZ Bank (ASX: ANZ) have high dividend yields for everyday investors. Based on its September 2018 figures, VAS currently yields 4.1% before franking credits. This yield is far more attractive than any term deposit currently doing the rounds.
Tell me the bad stuff
The Australian share market is heavily weighted towards resource companies like BHP Group Ltd (ASX: BHP) and banks like Westpac Bank (ASX: WBC). This presents a risk that any downside in these major indices will result in a negative return for current holders.
In conclusion, I think anyone wanting to get exposure to the Australian share market would do well with this ETF. Over time small companies will grow to become major players which would boost the overall index’s growth profile.
Our #1 ETF Right Now
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At the time of publishing, Anthony owns shares/units of the VAS ETF.
