How the VHY ETF could be used in portfolios
The Vanguard VHY ETF provides exposure to the largest dividend-paying Australian shares, based on market capitalisation and forecast dividend yield. It tracks the FTSE Australian High Dividend Yield Index. The index excludes real estate investment trusts (REITs) and caps the total exposure to any sector/industry at 40%.
VHY could be used by ASX investors to get exposure to a mostly diversified portfolio of Australia’s largest public companies. These companies are likely to pay regular tax-effective dividends to their shareholders, including franking credits.
VHY exceeds our minimum market cap (FUM) criteria
The Vanguard VHY ETF had $2307.04 million of money invested when we last pulled the monthly numbers. Given VHY’s total funds under management (FUM) figure is over $100 million, the ETF has met our minimum criteria for the total amount of money invested, otherwise known as FUM. We draw the line at $100 million for ETFs in the Australian shares sector because we believe that relative to smaller ETFs, achieving this amount of FUM de-risks the ETF.
VHY’s fees & costs explained
Vanguard charges investors a yearly management fee of 0.25% for the VHY ETF. This means that if you invested $2,000 in VHY for a full year, you could expect to pay management fees of around $5.00.
For context, the average management fee (MER) of all ETFs covered by Best ETFs Australia on our complete list of ASX ETFs is 0.51% or around $10.20 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years.
Bottom line
This is just a quick overview of the VHY ETF. Before ‘testing the depth of the water with both feet’ so to speak, be sure to read the VHY ETF’s Product Disclosure Statement (PDS), available on the Vanguard website, or speak to your financial adviser. For another handy resource, take a look at our Vanguard VHY report. You can also use our complete list of ASX ETFs to search for a few different ETFs in the sector and conduct a side-by-side comparison using everything you’ve learned here.
