Exchange-traded funds (ETFs) seem to be the go-to choice for a lot of regular investors these days.
And why not? Studies have proven that not many investors have the skill or asset mix to outperform the share benchmark over the long-term and short-term.
One of the world leaders of providing ETFs is Vanguard, which has been going for more than 40 years. Millions of investors around the world have picked Vanguard as their ETF provider.
Vanguard likes to point out that every dollar that you pay in management fees is a dollar less of potential returns. It’s run for the benefit of its members, meaning any cost savings it can create from scale or technology are passed on with lower annual management fees.
With that in mind, here are two Vanguard ETFs worth considering:
Vanguard Australian Property Securities Index ETF (ASX: VAP)
This ETF looks to track the S&P/ASX 300 A-REIT Index before fees, expenses and tax.
As the name might suggest, it invests in 29 of the ASX’s real estate investment trusts (REITs). Some of its biggest holdings include Scentre Group (ASX: SCG), Goodman Group (ASX: GMG), DEXUS Property Group (ASX: DXS) and GPT Group (ASX: GPT).
The REITs are spread across different sectors including retail, industrial and office, so you’re getting a good mix of the listed property options.
Since inception in October 2010 it has delivered an average return per annum of 11.5%.
In terms of charges, its total cost is only 0.24% per annum. It’s trading with a price/book ratio of exactly 1x and has an income yield of nearly 4.7%.
Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE)
This is my favourite Vanguard ETF at the moment. Asia is an interesting share market because the ongoing trade war between the US and China has hurt valuations across the continent.
With this ETF we get exposure to quality Asian business like Tencent, Samsung and Taiwan Semiconductor Manufacturing for a management fee of only 0.4% per annum.
The Vanguard Asia ETF is valued with a price/earnings ratio of 11, a dividend yield of 2.9% and a return on equity (ROE) ratio of 15.8%. Those numbers look attractive compared to most US-focused ETFs.
Many believe this century will be the one where Asia takes the lead, which should benefit the businesses listed there. That’s why I think every investor should have a bit of exposure to Asia.
With there still being a decent chance of rising interest rates, I’m still not optimistic about property. So that’s why out of the two, I’d go for the Vanguard Asian ETF at the current levels.
The problem is that you don’t get an income boost from franking credits with foreign shares, that’s why these top ASX shares could be more attractive for Australian investors.
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Motley Fool contributor Tristan Harrison owns shares of VANGUARD FTSE ASIA EX JAPAN SHARES INDEX ETF. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019