Fees can make a large impact on investment returns over the long run. This is why it is important for investors to be aware of what they are actually paying for professionals to manager their assets. Vanguard index funds are synonymous with low cost index funds. Vanguard Australia runs some of the most popular exchange traded funds on the ASX.
We have selected Top 4 funds that are of most interest for investors. These exchange traded funds are liquid and traded daily on the ASX. The indexed funds returns track the performance of the underlying index which means that the investment manager does not pick or winners. The returns are their respective market returns.
We have only focused in on those that are relatively liquid where total size of the listed fund is larger thank $500 million. Note that there are wholesale and unlisted versions as well as additional investment options provided by Vanguard.
Vanguard Australian Fixed Interest Index Fund (ASX VAF)
VAF is a fixed income fund tracking the Bloomberg Australia Bond Composite Index. It is designed for investors that are looking for a pure low cost fixed income ETF. Usually fixed income exposure is critical for investors looking for a balanced portfolio. However given the low interest rate environment, fixed income returns will be depressed going forward from 2 side.
Firstly, income yield will be low due to current low interest rates. Bond prices moves inverse to rate moves so when rates eventually rises. Higher rates would lead to losses in capital value of the bond. The longer the bond duration (term of the bond), the more sensitive the bond is to rise in rates.
Vanguard Australian Shares Index Fund (ASX VAS)
We have also written in detail about ASX VAS. It is a traditional passive index fund tracking the S&P/ASX 300 Index. The ASX 300 index captures the largest 300 companies listed on the Australia Stock Exchange. It is designed as the default market index. Investment advisers would usually make this the largest index fund exposure in the portfolio due to its diversified nature. However it is important to note miners and banks make up more than half of the index.
Vanguard Australian Property Securities Index Fund (ASX VAP)
Vanguard Australian Shares High Yield Fund (ASX VHY)
ASX VHY tracks the FTSE ASFA Australia High Dividend Yield Index. It is designed for those that are looking are looking for yield.
Vanguard Index Fund Returns
Chart below highlight the return year to date of the 4 index funds above.