This article will explore ten of the best Vanguard ETFs.
A quick reminder: This article contains general advice only and doesn’t take into account your personal circumstances. Always do your own research or talk to a financial adviser before investing.
John Bogle was the founder of Vanguard. He created the first-ever index fund to give more people a simple, low-cost, and diversified way to invest. He once said, “Don’t look for the needle (stock); buy the haystack (ETF).” This philosophy embodies Vanguard’s mission.
Even Warren Buffett, one of history’s greatest investors, is a fan of ETFs and index funds. In fact, he made a million-dollar bet with a hedge fund on Wall Street, believing a simple, low-cost, diversified ETF would outperform a hedge fund over ten years. And guess what? He won!
Before you begin investing, you need to do two important things.
🚑 Emergency Fund
First, build an emergency fund covering three to six months of living expenses. This fund needs to be saved in a high-interest savings account. Things happen, and it’s important to have money readily available for a rainy day. Emergency funds also prevent you from having to sell investments during market downturns.
💰 Tackle Debt
Second, pay down high-interest debt above 8%.
Disclaimer
Just a quick disclaimer before you continue reading: this article is not financial advice. Vanguard ETFs are incredibly popular and offer a variety of options. The ETFs mentioned here are selected based on factors such as low fees, suitability for long-term investors, and rankings within Pearler’s investing community. However, they may not suit your specific needs, and that’s perfectly fine—there are plenty of ETFs available, and you don’t have to choose Vanguard!
Ok, I’m done with the disclaimers—let’s dive into the ETFs 🥳!
The Vanguard Australian Shares ETF (VAS)
VAS invests in the top 300 companies on the Australian Stock Exchange, making it one of Australia’s most popular ETFs. Its top holdings include Commonwealth Bank, BHP, CSL, NAB, Westpac, and more. VAS has a low management fee of 0.07% and is ideal for long-term investors (7+ years).
If you had invested $10,000 five years ago in VAS, you would have $14,742 today. However, keep in mind past performance isn’t indicative of future results.
Another benefit of VAS is its high dividend yield due to the nature of a lot of Australian companies. Additionally, the ETF has a lot of franking credit attached to it.
Franking Credit Explained
So, what exactly is a franking credit and how does it work?
When a company in Australia distributes dividends to shareholders, it pays tax on the dividends at a 30% company tax rate. Shareholders receive franking credits, representing the tax already paid by the company. For example, if you receive a $1,000 dividend with franking credits, it’s more beneficial than receiving $1,000 from an international company, which doesn’t include these credits. This system prevents double taxation on Australian dividends and is a unique advantage of investing in Australian companies.
The Vanguard Ethically Conscious Australian Shares ETF (VETH)
VETH is like VAS but focuses on ethical investing by screening out companies that don’t meet certain ethical standards, Investing in 240 companies instead of 300. Its management fee is higher at 0.16%. Top holdings include Commonwealth Bank, CSL, NAB, Westpac, Wesfarmers, and more.
If you had invested $10,000 three years ago, you would have $11,807 today.
The Vanguard Msci International Shares ETF (VGS)
VGS invests in 1,500 companies from developed countries, excluding Australia. Many investors pair it with VAS to complement Australian holdings. Top holdings include global giants like Apple, Microsoft, NVIDIA, Amazon, Meta, and more. While the management fee is higher at 0.18%, this ETF offers access to a broad range of international companies.
If you had invested $10,000 five years ago, you would have $18,523 today.
The Vanguard Ethically Conscious International Shares ETF (VESG)
VESG focuses on companies that meet ethical standards by excluding those involved in fossil fuels, alcohol, tobacco weapons, and more. Top holdings include Apple, Microsoft, Nvidia, Amazon, Meta, and more. The management fees are 0.18%. Since the ETF excludes Australian companies, many investors pair VESG with VETH.
If you had invested $10,000 five years ago, you would have $18,656 today.
The Vanguard US Total Market Shares Index AUD ETF (VTS)
VTS invests in 3,656 companies listed on US stock exchanges, providing broad exposure to the US market. Many investors pair VTS with other ETFs, like VEU or VAS, for diversification. Top holdings include Apple, Microsoft, NVIDIA, Amazon, and Meta. The management fee is very low at 0.03%.
If you invested $10,000 into this ETF five years ago, you would have $20,066 today.
Vanguard FTSE All World ex US ETF (VEU)
VEU excludes US companies, making it a popular pairing with VTS for global diversification. This ETF invests in about 3,840 companies across developed and emerging markets. Top holdings include Taiwan Semiconductor Manufacturing Company, Novo Nordisk, Tencent, Nestlé, and more. The management fee is 0.07%, which is competitive compared to other ETFs.
If you invested $10,000 into this ETF five years ago, you would have $14,548 today.
The Vanguard Diversified High Growth ETF (VDHG)
VDHG has a combination of different ETFs in it. VDHG asset class is made up of 36% Australian shares, 26% international shares, small-cap companies, emerging markets, and fixed interest. It is composed of 90% growth assets and 10% income-producing bonds. VDHG has a total of 16,000 companies. Its management fee is 0.27%. This ETF is ideal for those who prefer a ready-made portfolio without managing individual investments.
If you invested $10,000 into this ETF five years ago, you would have $15,405 today.
The Vanguard Australian Property Securities ETF (VAP)
VAP allows you to invest in property with just $500. It invests in real estate investment trusts (REITs) that own various properties like residential, office, retail, and industrial assets. The top holdings include Goodman Group, Scentre Group, Stockland, GPT, Vicinity, and more. The management fee is 0.23%, which is higher but could add diversity to your portfolio.
If you invested $10,000 into this ETF five years ago, you would have $12,833 today.
The Vanguard Australian Shares High Dividend Yield ETF (VHY)
VHY invests in Australian companies expected to provide higher-than-usual dividends. It ensures diversification by capping individual companies at 10% and industries at 40%. VHY excludes Australian REITs. Top holdings include Commonwealth Bank, BHP, Westpac, ANZ, and Woolworths. Dividends are not double taxed in Australia due to the franking credit system.
If you invested $10,000 into this ETF five years ago, you would have $15,896.
VDHG has a combination of different ETFs in it. The ETF is composed of 90% growth assets and 10% income-producing bonds. This ETF is ideal for those who prefer a ready-made portfolio without managing individual investments. If you invested $10,000 into this ETF five years ago, you would have $15,405 today.
VAS, VETH, VGD, VESG, VTS, and VDHG are some of Australia’s most popular Vanguard ETFs.
Vanguard’s philosophy is to provide investors with simple, low-cost, and diversified investment options. John Bogle founder of Vanguard, once famously said, “Don’t look for the needle (Stock); buy the haystack (ETF).”
ETFs are cost-effective, diversified, and easy to manage. This appeals to investors who are focused on ETFs that have long-term growth and low management fees.
