Fees can make a large impact on investment returns over the long run which is why it is important for investors to be aware of what they are actually paying when professional manages their assets. Vanguard index funds are synonymous with low cost index funds and is designed as a hand off passive index fund to track the market rather than trying to beat it and is now running some of the most popular exchange traded funds on the ASX.
We have selected Top 10 funds that are of most interest for investors. The key selection criteria are asset class exposure and liquidity with some of these being the most liquid ETFs on the ASX. The indexed funds are designed to track the performance of the underlying index, the investment manager does not pick or winners but aim to mimic the return of the underlying benchmark and limit the tracking error. Note that there are wholesale and unlisted versions as well as additional investment options provided by Vanguard.
The suite of funds can be separated into 3 distinct categories, Australian, US and International Equities and Fixed Income index funds.
Vanguard Index Fund Returns
|Fund Type and Name||ASX Symbol||YTD||6 Months||1 Year|
|Vanguard Australian Index Funds|
|Vanguard Australian Shares Index ETF||VAS||-12.61%||-13.31%||-8.36%|
|Vanguard Australian Shares High Yield ETF||VHY||-15.77%||-15.86%||-15.73%|
|Vanguard Australian Property Securities Index ETF||VAP||-22.55%||-24.67%||-23.01%|
|Vanguard US and Global Index Funds|
|Vanguard MSCI Index International Shares ETF||VGS||-5.09%||-3.96%||8.62%|
|Vanguard MSCI Index International Shares (Hedged) ETF||VGAD||-8.90%||-5.90%||5.56%|
|Vanguard FTSE Emerging Markets Shares ETF||VGE||-12.21%||-9.48%||-3.35%|
|Vanguard US Total Market Shares Index ETF||VTS||-3.02%||-1.87%||13.10%|
|Vanguard All-World ex US Shares Index ETF||VEU||-10.74%||-9.86%||-1.67%|
|Vanguard Fixed Income Index Funds|
|Vanguard Australian Fixed Interest Index ETF||VAF||2.35%||0.42%||2.35%|
|Vanguard Australian Government Bond Index ETF||VGB||2.82%||0.71%||2.94%|
Vanguard Australia Index Funds
Vanguard Australian Shares Index Fund (ASX VAS)
This is a traditional passive index fund which tracks the S&P/ASX 300 Index. The ASX 300 index captures the largest 300 companies listed on the Australia Stock Exchange and is designed as the default market index for those that want exposure to large cap equities.
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 while it is diversified with 300 positions, mining companies and financials (banks) still make up a large portion of the index.
Vanguard Australian Shares High Yield ETF (ASX VHY)
ASX VHY is a high dividend ETF and tracks the FTSE ASFA Australia High Dividend Yield Index. The fund is focused on companies listed on the ASX which has higher than average dividend yield relative to the rest of the market. Interestingly REITs are excluded in the fund.
Vanguard Australian Property Securities Index Fund (ASX VAP)
ASX VAP is designed for investors that are looking for direct exposure to a portfolio of listed property trusts. The underlying benchmark is the S&P/ASX 300 A-REIT Index which comprises of all of real estate investment trusts that are included in the ASX 300 index.
Vanguard International Index Funds
Vanguard MSCI Index International Shares ETF (ASX VGS)
One of the largest international ETFs excluding Australian companies. It aims to provide global diversified equity exposure with more than 1,500 companies in developed countries. The investments in the fund are unhedged which means that owners of the fund will be exposed to changes to the Australian dollar. ASX VGAD is the hedged version designed for those that want direct equity exposure without the exchange rate risk overlay.
Vanguard FTSE Emerging Markets Shares ETF (ASX VGE)
ASX VGE is an Emerging Market ETF in which the investment criteria is investing across multiple emerging market countries with over 4,000 positions in the fund.
Vanguard US Total Market Shares Index ETF (ASX VTS)
The fund is designed to track the performance of the US stock market. The underlying benchmark has a strong correlation to the Standard and Poor’s 500 index.
Vanguard All-World ex US Shares Index ETF (ASX VEU)
Global ETF variation which invests across developed and emerging market excluding the US equities.
Vanguard Bond Index Funds
Vanguard Australian Fixed Interest Index Fund (ASX VAF)
VAF is a fixed income fund tracking the Bloomberg Australia Bond Composite Index which is made up of Australian government (state and federal issuers). It is designed for investors that are looking for a pure low cost government fixed income ETF.
Vanguard Australian Government Bond Index ETF (ASX VGB)
ASX VAF vs ASX VGB – the main difference between VAF and VGB is that VAF invest in BBB- or investment grade onwards while VGB only focus on AA or higher. Therefore while the return for VGB will be expected to be lower but so should the risk.
It is important to note that as bond prices moves inverse to interest rate moves so when rates eventually rises the 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.