Vanguard is the largest ETF provider in Australia when measured by total funds under management (FUM) and they currently have 29 ASX ETFs available. Here is my top Vanguard ETF pick.
ETFs have been gaining traction quickly in Australia over the last few years following the exponential growth of ETFs in the US. There are many reasons to buy ETFs over individual shares or managed funds, but one of the main benefits of an ETF is the diversification benefit.
ETFs provide investors with exposure to a ‘basket’ of assets, which could be shares, bonds, commodities, or just about any other traded product. It has only been recently though that ETFs have emerged in Australia which offer exposure to multiple asset classes with a single purchase.
These diversified ETFs typically provide exposure to shares and bonds, and sometimes other asset classes, and they are essentially a whole diversified portfolio in a single purchase. Diversified ETFs are the second-fastest-growing sector of ETFs after commodities ETFs and Vanguard is the dominant player in this new sub-sector.
Vanguard has four offerings in this space: Vanguard Diversified Conservative Index ETF (ASX: VDCO); Vanguard Diversified Balanced Index ETF (ASX: VDBA); Vanguard Diversified Growth Index ETF (ASX: VDGR); and Vanguard Diversified High Growth Index ETF (ASX: VDHG).
Each of these ETFs offers exposure to a different mix of growth and defensive assets by building a portfolio of other Vanguard ETFs and managed funds. This is sometimes referred to as a “fund-of-funds”.
All four of the ETFs pay quarterly distributions and have a management fee of 0.27% per year. If I had to pick one, I would lean towards the Growth Index ETF (VDGR) which is split 70% growth assets and 30% defensive assets, but the range of options means there is something for almost any investor.
More recently, BetaShares has also moved into this space with four ETFs of its own so the field of diversified ASX ETFs is quickly growing. It is an exciting area of growth for Australian ETFs and opens up new possibilities for structuring a balanced portfolio.
So, my top Vanguard ETF pick would be VDGR (or one of their diversified ETFs) because of its low fees and high diversification, and because it represents a new and exciting direction for ASX ETFs as a whole.