Investing In A Vanguard Fund

What Is Vanguard?

Whether you’ve been in the business for 20 years or you’re a first-time investor you’ve likely heard of the Vanguard Group but who are Vanguard? What is a Vanguard fund and why are they so popular? Founded in 1975 by legendary investor Jack Bogle, the Vanguard Group is an American registered investment advisor who at the time of writing this manage over $5.3 trillion, that’s trillion with a ‘T’, in assets.

Given their popularity, you might be surprised to learn that the Vanguard group’s reputation has not been built on fantastic returns. It has been built on their ability to generate market returns and maintain low fees with an asset class they created, the Index fund.

Why Are Fees Significant?

Let’s assume you’re existing asset manager charges you 2.0%. That sounds pretty good. What you may not know is that an investment of $80,000 earning 7% for 25 years will become approximately $260,000. You’ve just made $180,000 or over 300%, still sounds pretty good. What if I told you that if that 2% fee was 0.5% fee your account would be worth $380,000 or $120,000 more? Doesn’t sound quite as good anymore. Thanks to its size Vanguard is now able to offer fees as low as 0.03% (VTS). Imagine what you could do with the extra money that fund returns over 25 years!

Vanguard Mutual Funds

Index funds are a sub-category of an investment type known as ‘Mutual funds’. The idea of a mutual fund that many investors can pool their money to save on fees while investing in hundreds or even thousands of individual assets that have been hand-picked by professionals.

Vanguard Investor Cash Plus Fund (VAN0100AU)

Vanguard describes the goal of this fund as follows:

Vanguard Investor Cash Plus Fund aims to deliver regular income and a total return that exceeds that of the Bloomberg AusBond Bank Bill Index in two out of every three years, before taking into account fees, expenses and tax.

It charges a management fee up to 0.7% (depending on account value) and accepts a minimum investment of $5,000 to open an account, and over the past 10 years, it has returned 2.53% per year compared to its benchmark of 2.82%.

Vanguard Index Funds

Much like Mutual funds Index funds are designed to enable multiple investors to pool their money to achieve the best results at the lowest price. Unlike Mutual funds Index funds are not actively managed, where a Mutual fund has a professional investor selecting which assets to purchase an Index fund tracks an index such as the ASX 200 or S&P500. To buy into an index or mutual fund, you will need to create a Vanguard account. Once the initial investment has been made, you can make regular investments of as little as $100 at no additional cost.

Vanguard High Yield Australian Shares Fund (VAN0017AU )

Investment objective:

Vanguard High Yield Australian Shares Fund seeks to track the return of the FTSE Australia High Dividend Yield Index before taking into account fees, expenses and tax.

Costs start from 0.9% and decrease for larger accounts with a minimum initial investment of $5,000. Over the past 10 years, this fund has return 7% per year after fees.

Vanguard LifeStrategy Balanced Fund (VAN0124AU)

Investment objective:

Vanguard balanced index fund seeks to track the weighted average return of the various indices of the underlying funds in which it invests, in proportion to the Strategic Asset Allocation, before taking into account fees, expenses and tax.

Costs start from 0.9% and decrease for larger accounts with a minimum initial investment of $5,000. Over the past 10 years, this fund has return 7.25% per year after fees.

Vanguard LifeStrategy High Growth Fund (VAN0015AU)

Investment objectives:

Vanguard Australian shares index fund seeks to track the return of the S&P/ASX 300 Index before taking into account fees, expenses and tax.

Costs start from 0.75% and decrease for larger accounts with a minimum initial investment of $5,000. Over the past 10 years, this fund has return 7.13% per year after fees.

Vanguard Exchange Traded Funds (ETFs)

For smaller investors who may not be able to provide an initial $5,000 investment, there are Vanguard ETFs. An ETF is much like an index fund, but it trades on an exchange. This means that it has no minimum initial investment, but the price of the ETF can change with the market.

Vanguard Australian Shares Index ETF (ASX:VAS)

Investment objective:

Vanguard Australian Shares Index ETF seeks to track the return of the S&P/ASX 300 Index before taking into account fees, expenses and tax.

The VAS ASX exchange-traded fund features a management fee of 0.1% this fund has returned 7.73% after fees over the past 10 years.

Vanguard Australian Shares High Yield ETF (ASX:VHY)

Investment objective:

Vanguard Australian Shares High Yield ETF seeks to track the return of the FTSE Australia High Dividend Yield Index before taking into account fees, expenses and tax.

The VHY ASX exchange-traded fund features a management fee of 0.25% this fund has returned 2.71% after fees over the past 5 years.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

Investment objective:

Vanguard international shares index fund seeks to track the return of the MSCI World ex-Australia (with net dividends reinvested), in Australian dollars Index, before taking into account fees, expenses and tax.

The VGS ASX exchange-traded fund features a management fee of 0.18% this fund has returned 10.29% after fees over the past 5 years.

Vanguard U.S. Total Market Shares Index ETF (ASX: VTS)

Investment objective:

Vanguard US Total Market Shares Index ETF seeks to track the performance of the CRSP US Total Market Index, providing investors with exposure to a broadly diversified collection of securities that, in the aggregate, approximates the full Index in terms of key characteristics.

The VTS ASX exchange-traded fund features a management fee of only 0.03% this fund has returned 16.24% after fees over the past 10 years.

Vanguard MSCI Index International Shares (Hedged) ETF (ASX: VGAD)

Investment objective:

Vanguard international shares index fund hedged seeks to track the return of the MSCI World ex-Australia (with net dividends reinvested), hedged into Australian dollars Index, before taking into account fees, expenses and tax.

The VGAD ASX exchange-traded fund features a management fee of 0.21% this fund has returned 6.88% after fees over the past 5 years.

Vanguard Bond Funds

Vanguard also allows you to cheaper diversify your portfolio with a range of bond funds available across the index and exchange-traded fund categories.

Vanguard Index Diversified Bond Fund (VAN0101AU)

Investment objective:

Vanguard Index Diversified Bond Fund seeks to track the return of a tailored diversified index representing a 30% allocation to the Bloomberg AusBond Composite 0+ Yr Index and a 70% allocation to the Bloomberg Barclays Global Aggregate Float-Adjusted and Scaled Index hedged into Australian dollars before taking into account fees, expenses and tax.

Costs start from 0.75% and decrease for larger accounts with a minimum initial investment of $5,000. Over the past 10 years, this fund has return 5.48 % per year after fees.

Vanguard Australian Fixed Interest Index ETF (ASX: VAF)

Investment objective:

Vanguard Australian Fixed Interest Index ETF seeks to track the return of the Bloomberg AusBond Composite 0+ Yr Index before taking into account fees, expenses and tax.

The VAF ASX exchange-traded fund features a management fee of only 0.2% this fund has returned 4.28% after fees over the past 5 years.

Vanguard Property Funds

If you’ve ever dreamed of owning a home but don’t have the deposit to get started, then Vanguard has the answer. Vanguard REITs come in both index and EFT form and offer another opportunity to further diversify your portfolio at a low cost.

Vanguard Australian Property Securities Index ETF (ASX:VAP)

Investment objective:

Vanguard Australian Property Securities Index ETF seeks to track the return of the S&P/ASX 300 A-REIT Index before taking into account fees, expenses and tax.

The VAP ASX exchange-traded fund features a management fee of only 0.23% this fund has returned 10.87% after fees over the past 5 years.

Vanguard Index Australian Property Securities Fund (VAN0012AU)

Investment objective:

Vanguard Index Australian Property Securities Fund seeks to track the return of the S&P/ASX 300 A-REIT Index before taking into account fees, expenses and tax.

Costs start from 0.90% and decrease for larger accounts with a minimum initial investment of $5,000. Over the past 10 years, this fund has return 11.79 % per year after fees.

You can find information to all available Vanguard funds HERE.

How To Buy A Vanguard ETF In Australia

ETFs tend to be cheaper than their mutual and index fund brothers; however, it is essential to remember that as they are exchange-traded, you will need a brokerage account to purchase them. These purchases will incur Vanguards management fee as well as any relevant brokerage fee as per your trading account. Unlike Index and Mutual funds which allow for regular investments as low as $100 at no cost, you are best to buy ETFs in bulk to avoid brokerage costs if relevant to your account.

Kyle Schache
Kyle Schache
Like many, I wasn't as good with money as I should have been in my late teens and early twenties. Now in my late twenties and the holder a bachelor and masters degree both specialising in finance I spend my time optimising my investments and providing general advice to others.
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