Could the Vanguard Australian Shares Index ETF (ASX: VAS) be the best exchange-traded fund (ETF) on the ASX?
That's a hard question to answer. What makes an ASX ETF 'the best'? In terms of popularity, Vanguard Australian Shares ETF wins hands down. It's currently the largest ETF on the ASX by funds under management, with roughly $10 billion inside it.
But VAS doesn't even come close to the ASX's best-performing ETF of 2021. That honour went to the BetaShares Geared US Equity Fund (ASX: GGUS), with a 66.25% return last year. In stark contrast, VAS made a healthy but still-incomparable 17.64% or so return over 2021.
VAS isn't even the cheapest ASX index ETF. That distinction is owned by the BetaShares Australian 200 ETF (ASX: A200). This fund charges an annual management fee of 0.07%, which is below VAS's current fee of 0.1%.
Image source: Getty Images
Why do ASX investors think VAS is the best ETF on the share market?
So what makes VAS so special in the eyes of Aussie investors? Well, it could be the fact that VAS is the only index fund on the ASX boards that tracks the S&P/ASX 300 Index (ASX: XKO). Most other ASX index funds, including A200, track the S&P/ASX 200 Index (ASX: XJO). There are also a few funds out there that narrow it down even further. For example, the SPDR S&P/ASX 50 Fund (ASX: SFY) only follows the top 50 companies out of the ASX 200.
But there are no peers to VAS when it comes to the ASX 300. As you might imagine, the ASX 300 includes every company in the ASX 200 index, plus an additional 100 smaller-cap shares. This provides more direct diversification, as well as providing exposure to some of the smaller, lesser-known companies on the ASX.
This has historically worked to VAS's slight advantage. Over the past 10 years (to 31 December 2021), VAS has given investors an average return of 10.69% per annum. In contrast, the iShares Core S&P/ASX 200 ETF (ASX: IOZ), which of course is an ASX 200 ETF, has returned an average of 10.53% per annum over the same period.
So perhaps it is VAS's unique structure that makes it the best ETF on our market in the eyes of the investors of the ASX. Investors are certainly voting with their money this way, going off of VAS's significant lead in funds under management.
