Young & Invested: What we think about the biggest ETFs on the ASX
The latest insights on popular picks from our Morningstar analysts.
Mentioned: Vanguard Australian Shares ETF (VAS), iShares S&P 500 ETF (IVV), Vanguard MSCI Intl ETF (VGS), BetaShares Australia 200 ETF (A200)
Welcome to my column, Young & Invested, where I discuss personal finance and investing for Gen Z and Millennials.
This column aims to be a resource for young investors navigating an ever changing financial, political and social landscape as they try to build wealth. Tune in every Thursday for the latest edition.
Edition 58
Over the Easter long weekend, I found myself somewhere between the Biscoff‑filled eggs and other new‑age monstrosities I definitely didn’t need to inhale my body weight in. It was a useful reminder that not everything on the shelf deserves a place in your basket. After all, the classics are classics for a reason.
The ETF market isn’t much different. In the spirit of rejecting the latest thematic fever dream, I looked at some of the biggest ETFs on the ASX and what our analysts think of them.
Our Medalist rating
The Morningstar medalist rating is a forward-looking system that aims to predict funds’ performance versus a relevant Morningstar Category average (peer group).
The top three ratings of Gold, Silver, and Bronze all indicate that our analysts expect the rated investment vehicle to beat the Morningstar Category index or category median over the long term.
Vanguard Australian Shares ETF VAS
- Medalist rating: Bronze
- Net assets: $24.23 B
- Aim: Track the performance of the ASX 300 Index
VAS is one of those ETFs that just about everyone who’s ever Googled ‘how do I start investing in Australia?’ has come across. Tracking the ASX 300, it provides broad exposure to the biggest names on the ASX at a reasonable fee of 0.07% p.a.
The fund is dominated by the financials and resources sector, and therefore closely tied with the Australian and Chinese economy. As I’ve previously discussed, market concentration is incredibly high in Australia and thus, we can observe this in the top-heavy portfolio where the big four banks and BHP appear to be doing most of the heavy lifting (~35% of holdings). The top 10 names make up around half of the portfolio.
Notably, VAS also emphasises a more significant tilt (4.57%) towards small and micro-cap companies than the category index (2.75%), which might appeal to investors who want a touch more exposure to the smaller end of the market without venturing into a dedicated small-cap product. This weighting isn’t enough to change the character of the fund, but it does give VAS a marginally broader reach across the Australian equity spectrum.
Our analyst believes the concentration of VAS creates plenty of room for active managers to potentially add value, but in practice the index has still been tough to beat after fees. Because the ASX 300 and ASX 200 overlap so heavily, VAS’ long‑term performance ends up looking very similar to its category benchmark. Over the past five years, VAS has delivered 8.46% annualised. The fund remains a fine option for investors seeking Australian equity exposure.
Vanguard MSCI Index International Shares ETF VGS
- Medalist rating: Gold
- Net assets: 14.4 B
- Aim: Track the performance of the MSCI World ex Australia Index
VGS stands out as the largest Gold-rated, passively managed ETF. It tracks the MSCI World ex Australia Index through a full replication strategy, which involves buying all the underlying securities in the parent index. With over 1200 constituents across 22 developed markets, the index aims to cover 85% of the adjusted market capitalisation of each country.
This approach naturally tilts the portfolio toward the largest and most established companies, many of which carry Morningstar Economic Moat Ratings that indicate durability and a competitive edge. While this can lead to regional or sector concentration, it largely reflects the investable universe.
The index is dominated by the US which accounts for around 71% of assets, though the footprint of US multinationals means the underlying economic exposure is far broader than the headline may suggest. Our concerns around concentration are eased by the often diversified business structure of index constituents that does not find itself reliant on a single product, service, or market to determine success
With more than 1,200 holdings, stock‑level diversification is strong, and the top 10 positions represent only about a quarter of the portfolio. Vanguard’s execution further supports tight tracking. The team manages trading around rebalances to avoid unnecessary costs, uses futures to keep cash fully invested, and returns all securities‑lending revenue to investors which not only adds incremental value but also a point of differentiation from many peers.
Recent performance has been driven largely by US tech, particularly from AI-related enthusiasm where active managers have been underweight. While short‑term results may fluctuate as sentiment shifts, we think the strategy should serve patient investors. Our analyst believes that this fund provides efficient exposure to global equities at a compelling price of 0.18%.
iShares S&P 500 ETF IVV
- Medalist rating: Gold
- Net assets: $11.8 B
- Aim: Track the performance of the S&P 500 Index
As the name implies, this fund tracks the flagship S&P 500, which selects 500 of the largest US stocks, comprising ~80% of the US equity market and weights constituents by market cap. Our analysts see this fund as the best-in-class option for large-cap US stock exposure.
The portfolio typically holds around 500 companies, though like the index itself it is dominated by a handful of mega‑cap technology names, which currently account for roughly a third of the fund. Its market‑capitalisation‑weighted approach is well suited to the highly efficient US market where new information is rapidly priced in.
Market-cap weighting naturally adjusts to price changes without frequent rebalancing, generating lower trading costs. Further, low fees such as the 0.04% p.a. for IVV, give large-blend index funds like this a long-term performance advantage over most actively managed peers. Carving out an edge here is highly difficult.
The nature of its concentration means the strategy tends to excel when the largest companies are driving market returns and may lag when smaller stocks outperform. Even so, the combination of broad diversification, minimal cash holdings, and a very low fee has supported strong long‑term results, with the U.S. version delivering more than 15% annualised over the past decade. While concentration risk is an inherent feature of the modern U.S. market, IVV’s disciplined, rules‑based structure ensures investors capture the market’s overall growth without relying on active stock selection.
Our analyst believes the fund is well-positioned to reap the rewards if the US market continues to produce solid long-term gains.
Betashares Australia 200 A200
- Medalist rating: Bronze
- Net assets: $9.3 B
- Aim: Track the performance of the Solactive Australia 200 Index
A200 ETF tracks the lesser known Solactive Australia 200 Index. While niche, there is little to separate this benchmark from the ASX 200. Investors seeking the familiarity of better-known benchmarks will find negligible differences between the two. A200’s appeal lies in its simplicity and efficiency at capturing the Australian equity opportunity set. It also comes at a management fee of 0.04%, making it the cheapest Aussie equity ETF in the market.
Much like VAS ETF, A200’s portfolio is heavily shaped by the structure of the local market, with financials and basic materials accounting for more than half of assets and the top 10 holdings. This concentration, combined with the index’s strong tilt toward cyclical sectors, means performance is closely tied to the domestic economy and those it relies on. Approximately 85% of the portfolio is typically exposed to cyclical and sensitive sectors.
A200 leans slightly more toward giant-cap companies than the category average with almost 45% of assets in the very largest names vs 35% for the category. There is also a notable difference on the tail end as A200 holds noticeably less in small and micro‑caps than the category average, keeping it more tightly focused on established, liquid companies.
Betashares has delivered efficient execution, with tight spreads and low costs, with performance since inception proving a significant hurdle for Morningstar Category peers to beat on a net-of-fees basis. Our analysts believe A200 is a compelling core option for investors seeking straightforward, cost‑effective market coverage.
