What's so special about the Vanguard Australian Shares Index ETF (ASX: VAS)? It's no secret that ASX exchange-traded funds (ETFs) have ballooned in popularity over the last decade or two. When the ETF vehicle came to the ASX, the only funds available were index funds, covering broad-based indexes like the S&P/ASX 200 Index (ASX: XJO). But in 2021, you can find an ETF on the ASX that covers almost anything. There are now ETFs that track gold, bank shares, mining shares, crude oil futures or the stock market of South Korea.
But one ETF is the undisputed king of the ASX ETF hill. That would be this Vanguard Australian Shares ETF. Recent research from Stockspot found that this VAS ETF remains at the top of the ASX ETF pile in terms of both size and fund inflows. VAS currently has $8.5 billion in funds under management, and, according to Stockspot, managed to attract almost $3.6 billion in net fund inflows in the 12 months to 31 March 2021. Both of those metrics beat out every other ASX ETF.
So why do ASX investors like the Vanguard Australian Share Index ETF so much? There might be a few reasons:
Why is VAS so popular on the ASX?
Simplicity
Unlike the flashy, thematic ETFs we touched on above, VAS is your typical old-school index fund. It does have a twist though. Instead of tracking the ASX 200 like most other ASX index funds, VAS instead tracks the S&P/ASX 300 Index (ASX: XKO).
This index included the 200 shares on the ASX 200, but also adds another 100 smaller cap shares. It's the only ASX index fund to do so. This increases the diversification of VAS compared to other ASX 200 index funds, whilst reducing the heavy concentration towards ASX banks and miners that the ASX 200 is so infamous for.
We've also looked at the small but still present performance gap between the ASX 200 and the ASX 300 before on the Fool. This might well further add to the attractiveness of VAS for ASX investors.
Cost
This Vanguard ETF currently charges a management fee of 0.1% per annum. That figure represents a theoretical cost of $10 per year for every $10,000 invested.
This isn't the lowest fee ETF on the ASX, or even the lowest fee from a fund tracking ASX shares. The BetaShares Australia 200 ETF (ASX: A200) for example, charges 0.07% per annum. But 0.1% is still vastly cheaper than what your typical managed fund or active ETF will charge. And even if some investors might quibble about whether to pay $7 or $10 for every $10,000 invested, a 0.1% fee is evidently low enough for Vanguard's customers.
The 'Vanguard effect'
Vanguard is a US-based fund manager, but one with a global reputation. It has one of the most trusted names in finance, mostly due to the philosophies and reputation of its late founder Jack Bogle. Bogle founded Vanguard back in the 1970s, and ever since its inception, kept Vanguard as a not-for-profit company.
So instead of taking the cream off the top of its revenues, Vanguard is able to cycle that excess cash back into lower and lower fees for its products. This has lead to a very powerful brand advantage that extends across all Vanguard products.
When Mr Bogle died in 2019, the great investor Warren Buffett said he had done more for the average investor than possibly anyone else on the planet. It's that high praise that epitomises Vangaurd's appeal.
Performance
The Vanguard Australian Shares Index ETF has returned 28.46% over the past 12 months, and has averaged 11.2% per annum over the past 5 years, and 9.72% per annum since its inception in 2009.
Now while those performance figures might not impress some thrill-seeking investors out there, the reality is that it almost perfectly reflects the performance of the entire Australian share market over more than a decade. Robust, inflation-smashing returns.
For many investors who might just follow a 'buy and hold' strategy using this Vanguard ETF, it has certainly delivered far more than what leaving the cash in the bank would have yielded.
