Comparing Vanguard ETFs: VAS vs VHY

Vanguard Australian Shares Index ETF (VAS) and Vanguard Australian Shares High Yield ETF (VHY) are two popular ETFs with different focuses. VAS is a market-wide fund with a lower management fee of 0.07% per annum, while VHY focuses on dividend income-producing shares and has a higher fee of 0.25% per annum. VAS has returned an average of 8.82% per annum over the past five years and 7.45% per annum over the past ten years, while VHY has returned 10.98% per annum over the past five years and 6.77% per annum over the past ten years. VHY pays out a higher dividend distribution yield of 6.05% compared to VAS's 3.58%.

The Australian ETF market is home to a diverse range of investment vehicles, two of which are the Vanguard Australian Shares Index ETF (VAS) and the Vanguard Australian Shares High Yield ETF (VHY). While both ETFs provide exposure to the Australian market, they differ significantly in their investment objectives, fees, and returns.

VAS, with a lower management fee of 0.07% per annum, is a market-wide fund that tracks the performance of the MSCI Australia IMI Index. The index covers approximately 85% of the free float-adjusted market capitalization in Australia. Over the past five and ten years, VAS has delivered an average return of 8.82% and 7.45%, respectively [1]. Although VAS has a lower yield of 3.58%, it offers investors a cost-effective way to gain exposure to the Australian market.

On the other hand, VHY, with a higher management fee of 0.25% per annum, is a dividend-focused ETF that tracks the performance of the FTSE RAFI Australia High Dividend Yield Index. The index selects stocks based on their high dividend yields, value, and growth characteristics. Over the past five and ten years, VHY has returned an average of 10.98% and 6.77%, respectively [1]. With a higher dividend distribution yield of 6.05%, VHY offers investors a more attractive income stream compared to VAS.

Despite their differences, both VAS and VHY have their merits. Investors seeking broad exposure to the Australian market with a lower cost and a focus on capital growth may prefer VAS. In contrast, investors looking for higher income and a focus on dividend-paying stocks may find VHY more suitable.

It is essential to note that past performance is not indicative of future results, and investors should consider their investment objectives, risk tolerance, and financial situation before making any investment decisions.

References:
[1] Pearler. (n.d.). Compare shares and ETFs on the ASX that you can trade on Pearler. Retrieved January 28, 2023, from https://pearler.com/explore/invest/au-shares/compare/VAS-vs-QUAL/performance