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Guide to Trading Vanguard Australian Shares Index ETF (VAS)


Guide to Trading Vanguard Australian Shares Index ETF (VAS)

Guide to Trading Vanguard Australian Shares Index ETF (VAS)

Vantage Updated Updated Wed, November 16 05:33

Exchange Traded Funds (ETFs) are a hugely popular investment vehicle that allow investors and traders to gain exposure to certain sectors or build a diversified portfolio at low transaction costs. For example, an ETF may invest in more than 100 different stocks yet only charge the trader one brokerage fee. One such ETF is the VAS ETF, which is the largest index ETF in Australia. In this article we are going to focus on this ETF, how it works, its top holdings and why this product should be kept on your watchlist.

What is the Vanguard Australian Shares Index ETF?

The Vanguard Australian Shares Index ETF, or VAS for short, provides investors with exposure to the top 300 companies listed on the Australian Stock Exchange. According to Vanguard, “VAS aims to deliver the same return as the Australian share market by seeking to track the return of the S&P/ASX 300 before taking into account fees, expenses and taxes”. The ETF does this by investing in around 300 different Australian-centric stocks, weighted by market capitalization. Meaning that the larger market cap companies are more heavily weighted within the fund.

VAS ETF Top Holdings

The top holdings of the VAS ETF are as follows:

  1. BHP Group (9.8% of net assets)
  2. Commonwealth Bank of Australia (7.8% of net assets)
  3. CSL Limited (6.9% of net assets)
  4. National Australia Bank (4.6% of net assets)
  5. Westpac Banking Corporation (3.6% of net assets)
  6. Australia & New Zealand Banking Group (3.4% of net assets)
  7. Woodside Energy (3% of net assets)
  8. Macquarie Group (2.8% of net assets)
  9. Wesfarmers (2.5% of net assets)
  10. Telstra (2.3% of net assets)

Sector Breakdown for the VAS ETF

Given that the VAS ETF tracks the top 300 companies listed on the ASX, it should come as no surprise to see that most of its sectoral allocation is in Financial and Materials companies, which combined account for more than half of the funds invested assets. The full breakdown of the ETFs allocation is listed below:

  • Financials = 28.1%
  • Materials = 25.9%
  • Health Care = 8.9%
  • Consumer Discretionary = 7%
  • Real Estate = 6.9%
  • Industrials = 5.7%
  • Consumer Staples = 4.7%
  • Communication Services = 3.9%
  • Energy = 3.8%
  • Information Technology = 3.8%
  • Utilities = 1.3%

Why trade VAS?

There are a multitude of reasons that make ETF advantageous instruments to invest in and trade, especially when compared to individual stocks. Let’s touch on some of the major benefits of trading ETFs in general.

1. Cost Effectiveness

As mentioned in the introduction to this article, one of the major benefits of ETF investing is that it is much cheaper than trading individual stocks. For example, the chosen ETF may invest in upwards of 100 different stocks, allowing the investor to gain exposure to all of them while only having to pay one brokerage fee.

2. Diversification

Every investor knows that building a diversified portfolio is of the utmost importance, to ensure that you lower your risk, and that one market event can’t impact the entirety of your portfolio. ETF investing essentially diversifies your portfolio for you, giving you exposure to different sectors and minimising positive correlation between assets.

3. Convenience and Transparency

ETF list their holdings on a daily basis, ensuring investors know exactly what they’re purchasing or selling. As these instruments trade like common stocks, you can buy and sell throughout market hours.

As with all investment products, however, there are some risks associated with trading exchange traded funds.

i.  Tracking Discrepancy

Although the ETF states that it endeavours to track the top 300 companies listed on the ASX, it is highly unlikely that the fund will exactly match the returns of the index.  

ii. Volatility

Investing in the VAS ETF will not make your portfolio immune to volatility, meaning that you can still suffer losses in a bear market – which usually results in most equities decreasing in value.

How to Trade Vas

Direct Buying and Selling

Just like any other equity, the VAS ETF can be bought and sold directly on the ASX using a brokerage or share-trading account. Generally, longer-term investors will utilise this strategy to gain exposure to the market over an extended period and without the use of leverage.

Using Options

Again, like any other share, equity or index, ETFs can be traded using various options strategies. For example, a plain vanilla call option can be purchased by a trader who believes that the price of the ETF will increase over a certain timeframe. On the other hand, if the trader believes that the ETF will decrease in value, they would purchase a put option. Options give the trader the right to buy or sell the underlying asset at a stated price within a specified time period. More complex options strategies can also be utilised but will not be touched on in this article.

Using CFDs

CFD trading allows you to speculate on the price movement of a company’s shares without actually taking ownership of them. Utilising CFDs to trade ETFs can be a great strategy for a variety of reasons. First and foremost, CFDs allow you to trade with leverage, meaning you only need a portion of the notional value of your trade to open a position, reducing your capital requirements. Secondly, the use of leverage can maximise your potential profits and losses. Third and finally, CFDs allow you to go both long and short the VAS ETF, giving you the opportunity to express either a bullish or bearish view on the market as a whole.

Trade ETFs with Vantage Now!

Vantage have recently launched new ETF CFDs that you can start trading now. Trade the VAS ETF and other global ETFs with 5:1 leverage and go long or short  today. To learn more click here. You can follow these links to find information on CFD indices, including CFD indices trading and CFD trading strategies.

Disclaimer: The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our client. No representation or warranty is given as to the accuracy or completeness of this information and therefore it shouldn’t be relied upon as such. Any research provided does not have regard to specific financial situations, needs or investment objectives. Vantage accepts no responsibility for any use that may be made of these comments and for any consequences that result. Consequently, any person acting on it does so entirely at their own risk. We advise any readers of this material to seek professional advice where necessary. Without the approval of Vantage, reproduction or redistribution of this information isn’t permitted.

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