Hey there, savvy investors! If you’re keen on diving into the Australian stock market, you’ve likely heard the buzz around VAS and A200. These aren’t just random letters and numbers; they’re two of the most popular Exchange-Traded Funds (ETFs) that give you a slice of the Aussie market. But with both options looking so tempting, how do you choose? Well, that’s exactly what we’re going to explore today. So grab your favourite brew, and let’s get started!
Company Profiles
Before we jump into finding out which one of these ETFs is the best, let’s first take a look at their company profiles and see what they are each about.
Vanguard Company Overview
Jack Bogle, the founder of Vanguard and legendary investor revolutionised the investment world with his idea that index investing could be cheaper and more effective than actively managed funds. His belief has led to becoming one of the largest ETF providers in the world with over 7 Trillion dollars (USD) assets under management. This success can largely attributed from utilising passive strategies which have outperformed fund managers almost 100% of the time.
Vanguard is like the granddaddy of investment firms. Founded in the United States in 1975, it’s been around long enough to see market ups and downs, recessions, and booms. And through it all, it’s stood its ground, offering investors a wide range of low-cost investment options. In Australia, Vanguard has become a go-to choice for many investors, especially those who prefer a more traditional, tried-and-tested route.
BetaShares Company Overview
Vanguard is like the granddaddy of investment firms. Founded in the United States in 1975, it’s been around long enough to see market ups and downs, recessions, and booms. And through it all, it’s stood its ground, offering investors a wide range of low-cost investment options. In Australia, Vanguard has become a go-to choice for many investors, especially those who prefer a more traditional, tried-and-tested route.
Vanguard VAS
What is Vanguards VAS ETF?
VAS, or the Vanguard Australian Shares Index ETF, aims to replicate the performance of the S&P/ASX 300 Index. Now, if you’re new to the investment game, that might sound like a bunch of jargon. But in simple terms, it means that when you invest in VAS, you’re essentially buying a tiny piece of the top 300 companies listed on the Australian Securities Exchange (ASX). It’s like owning a mini-portfolio of Australia’s business landscape, all wrapped up in a single investment.
VAS has been a popular choice for investors for several reasons. First off, it’s backed by Vanguard, a company with a long-standing reputation for reliability and low fees. Secondly, it offers a broad exposure to various sectors, from finance and healthcare to mining and technology. So, if you’re looking to diversify your investments without the hassle of picking individual stocks, VAS could be your ticket.
VAS Returns
When it comes to returns, VAS has a track record that speaks for itself. Over the years, it has provided investors with steady growth, making it a solid choice for those looking for long-term investment options. While past performance is not a guarantee for future returns, the consistent growth pattern of VAS does offer some level of assurance.
One of the key advantages of the VAS ETF is that it is mostly franked. This means that investors receive a tax credit for the company tax that has been paid by the companies in the fund. For example, if a company in the VAS ETF has paid 30% tax on its profits, and then distributes 70% of those profits to shareholders as a dividend, the shareholder will receive a 30% tax credit. This effectively reduces the tax rate on the dividend to 0%. Pretty neat hey?
VAS Fees
Now, let’s talk money—specifically, fees. One of the standout features of VAS is its low management fee, which sits at a mere 0.07% per annum. To put that into perspective, if you invest $10,000 in VAS, you’d only be paying $7 a year in fees. That’s less than the cost of a good cup of coffee in Sydney! Vanguard recently slashed its fees from 0.10% to 0.07%, making it an even more attractive option for cost-conscious investors.
But it’s not just the low fees that make VAS a compelling choice. The ETF also offers dividend reinvestment plans, allowing you to automatically reinvest your dividends back into the fund. This can be a great way to compound your returns over time, turning a small investment today into a significant nest egg down the line.
BetaShares A200
What is Betashares A200 ETF?
Moving on to A200, the BetaShares Australia 200 ETF. Unlike VAS, which aims to mirror the top 300 companies on the ASX, A200 focuses solely on the top 200. It’s a more concentrated bet, but one that still offers a good level of diversification across various sectors. If VAS is like a buffet with a wide range of dishes, A200 is more like a curated tasting menu—fewer options, but each carefully selected.
A200 has been gaining traction for its ultra-low management fee of just 0.04% per annum. That’s right, invest $10,000 in A200, and you’re looking at an annual fee of just $4. It’s almost like BetaShares is challenging Vanguard in a race to the bottom of the fee ladder, and investors are the ones reaping the benefits.
A200 Returns
Since its inception in 2018 A200 has provided an annual return of 7.41%. Just like VAS these come off the strong performance of the blue chip stocks such as Commonwealth Bank and BHP.
Due to A200 being a relatively new kid on the block the inception figures don’t look that impressive but when we compare the same time period of 5 years A200 and VAS come very close to even in their returns. VAS returning 8.34% and A200 providing 8.35% in the past 5 years.
A200 Fees
The management fee for A200 is 0.07% making it one of the cheapest ETFs on the ASX. When you compare this to the 0.10% fees of the Vanguard Australian Shares Index ETF (VAS) it’s not a huge difference but when we are talking about investing over the very long term and compounding our accounts into the hundreds of thousands if not millions, every little bit counts.
Liquidity and Trading Volume
One aspect that often gets overlooked when choosing an ETF is liquidity. In simple terms, liquidity refers to how easily you can buy or sell shares of an ETF without affecting its market price. Both VAS and A200 score well in this department, thanks to their high trading volumes on the ASX.
High trading volumes mean that there’s a healthy interest in these ETFs, making it easier for you to execute trades at a price close to the market rate. This is particularly important if you’re planning to trade frequently or if you’re investing a large sum of money.
VAS, being the older and more established of the two, generally sees higher trading volumes. However, A200 is quickly catching up, thanks in part to its aggressive fee structure and growing popularity among Australian investors. So, whether you’re looking to make a quick trade or planning for the long haul, both VAS and A200 offer excellent liquidity.
VAS vs A200
Holdings
When it comes to holdings, VAS offers a broader range of investment options by tracking the top 300 companies on the ASX. This gives you exposure to a wider array of sectors, from finance and healthcare to energy and technology. A200, on the other hand, focuses on the top 200 companies, offering a more concentrated bet on Australia’s leading firms. While both ETFs provide a good level of diversification, your choice here would depend on whether you prefer a wider or more focused range of holdings.
Performance
Performance is often the make-or-break factor for many investors. VAS has the advantage of a longer track record, providing a sense of reliability and consistency. A200, while newer, has been showing promising returns, especially in the short term. If you’re the type who likes to look at past performance as an indicator for future gains, VAS might be more up your alley. But if you’re willing to take a chance on a rising star, A200 could be an exciting option.
Fees
We’ve touched on fees earlier, but let’s recap. VAS comes with a management fee of 0.07%, while A200 beats it with a fee of just 0.04%. While the difference might seem minuscule, it can add up over time, especially if you’re investing a significant amount. If cutting costs is a priority, A200 has the edge. But if you’re looking for a fund with a longer history and are willing to pay a slightly higher fee for that peace of mind, VAS is a solid choice.
Frequently Asked Questions
Where can I buy VAS / A200?
VAS & A200 can be bought through any online broker such as Pearler, SelfWealth or CommSec. We recommend Pearler as they provide the cheapest brokerage fees at just $5.50 per trade no matter the size. They also have all the built in features such as Auto investing which is a great way to keep you on track with your investing journey.
Is VAS better than A200?
Ah, the million-dollar question! The answer, as you might have guessed, isn’t straightforward. Both VAS and A200 have their merits and drawbacks. VAS offers a broader range of holdings and has a longer track record, making it a reliable choice for long-term investors. A200, with its lower fees and promising performance, is an attractive option for those looking to minimize costs. Your choice between the two will ultimately depend on your investment goals, risk tolerance, and personal preferences.
The Wrap
So, there you have it, folks—the ultimate showdown between VAS and A200. We’ve delved into the companies behind these ETFs, dissected their key features, and even touched on liquidity and trading volumes. Both options offer a convenient way to invest in the Australian market, each with its own set of advantages and limitations.
If you’re after a well-established fund with a broad range of holdings, VAS is a solid bet. But if you’re looking to cut costs and are willing to take a chance on a newer fund, A200 could be your match made in investment heaven.
At the end of the day, the choice between VAS and A200 boils down to what you’re looking for in an investment. So take your time, weigh your options, and choose wisely. After all, investing is a marathon, not a sprint.