The Vanguard Australian Shares Index ETF (ASX: VAS) is the ASX's most popular index fund, and by quite a distance. At its most recent update, this exchange-traded fund (ETF) had more than $16.4 billion in assets under management.
So it goes without saying that there are quite a few ASX investors that like to hold this index fund. And fair enough. Index funds can be a great way to invest easily and simply. Many Australians who don't have the time or interest to research investing in individual stocks love the uncomplicated nature of an ETF, as well as its inbuilt diversity.
The VAS ETF has had a very successful year on the ASX over the past 12 months. Over the year to 31 August, this fund returned 14.63% (growth and dividends). That compares to its 10-year average return of 7.93%.
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Thank the banks for this ETF's gains
VAS's ASX investors have the big four banks to thank for most of these gains. All four have had stunning years, particularly compared to that other VAS heavyweight BHP Group Ltd (ASX: BHP).
Commonwealth Bank of Australia (ASX: CBA) shares have increased in value by more than 33.4% since this time last year. Westpac Banking Corp (ASX: WBC) has fared even better, rocketing by more than 50% over the same period.
National Australia Bank Ltd (ASX: NAB) and ANZ Group Holdings Ltd (ASX: ANZ). haven't done quite as well, but are both up by just over 20% and 27% respectively.
Banks have always been a major component of the Vanguard Australian Shares ETF. They usually occupy four of the largest six spots in the S&P/ASX 300 Index (ASX: XKO) after all (including CBA in the top spot). But these monstrous gains have made it even more so.
Today, ASX financial shares take up a whopping 32.1% of the entire VAS portfolio. The next-largest sector is mining shares at 19.7%, followed by healthcare stocks at 10%.
So the banks are a big deal here. The big four alone account for 21.98% of VAS' current ASX portfolio.
Is this too much for investors?
Is the ASX's VAS ETF too bank heavy right now?
Well, at the end of the day, this question is up to individual investors to decide. ASX index funds like VAS have always been heavy on bank exposure. Yes, they are more so than average right now. But this has happened before, most recently in 2015.
It is worth considering that if the banks have a bad year, VAS units will probably follow suit. But many investors like having banks in their ASX index funds, thanks to the large dividends they provide.
So there's no right or wrong answer here. The important takeaway here is that anyone who buys the Vanguard Australian Shares ETF should know exactly what they're investing in.
