VAS vs VHY vs VAP
Vanguard is a popular ETF provider in Australia. In this article I’ll compare three of their popular ETFs.
ETFs we’ll be discussing
Vanguard Australian Shares Index ETF (VAS)
Vanguard Australian Shares High Yield ETF (VHY)
Vanguard Australian Property Securities Index ETF (VAP)
Summary
Vanguard Australian Shares Index ETF (VAS)
The broadest ETF that covers all the key companies in Australia (300+). There is a long tail of companies you’ve never heard of though.
Returns are composed of both capital growth and income (dividend returns). Generally includes franking credits.
Approximately 60% Growth and 40% Income returns split
High level of overlap with VHY in terms of companies like banks and miners.
There is a reason why this is a “popular ETF” in terms of the amount of money invested in it.
Vanguard Australian Shares High Yield ETF (VHY)
This ETF has around 66 companies with a focus on high and steady income paying companies.
REIT’s have been intentionally excluded.
Generally high income paying companies are “mature” companies that have steady cashflows. That being said miners are often included in these which tend to have cashflows move up and down with the commodity cycle.
Returns are typically composed of 60% Income and 40% Growth (but can obviously vary).
Vanguard Australian Property Securities Index ETF (VAP)
The narrowest ETF with only 32 holdings, focused on “property” but not residential realestate.
Commercial property like business buildings, warehouses, shopping centres. These underlying companies generally manage the properties while collecting rent. Anything they don’t use to maintain the properties, or buy another property, they’ll distribute out to you as a shareholder (via the ETF).
There is overlap between VAS and VAP, but not with VHY.
Interestingly 61% of the returns are from Growth while only 39% is from Income (distributions). I was expecting it to be the other way around considering REITs are usually quite income focused.
The lack of miners and banks in this ETF makes it different exposure profile to what you get with VHY.
When I’m trying to compare these 3 ETFs, the key question for me is, where do I think the economy is going over the next few years and which sectors might benefit more than others? But at the end of the day, VAS has a relatively high level of coverage of the companies, so I’d usually be happy with VAS - because I’m just lazy.
Key figures/tables/screenshots from the video
Market cap as of February 2022 for each ETF. I use this as an indicator of how popular these ETFs are. The higher they are the money money is invested in them.
Key differences in fees and actual ETF holdings, no ESG filters
Source: Vanguard ETF factsheets
ETF returns VAS, VHY, VAP
Source: Vanguard website