When it comes to building a diversified long-term portfolio, many investors eventually find themselves comparing two of the most popular ETFs on the ASX — the Vanguard Australian Shares Index ETF (ASX: VAS) and the Vanguard US Total Market Shares Index ETF (ASX: VTS).
Both offer low-cost exposure to hundreds (or thousands) of companies, and both are backed by one of the most respected names in index investing.
But while they share some similarities, they are designed to do very different things — and the right one for you may come down to your personal goals, portfolio mix, and where you think the best opportunities lie.
The VAS ETF tracks the S&P/ASX 300 Index, giving investors exposure to a broad basket of Australian companies — including large, mid, and small caps. That means you're getting names like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), and Woolworths Group (ASX: WOW), along with a long tail of smaller businesses across various sectors.
One of the key attractions of the Vanguard Australian Shares Index ETF is income. Australian companies are known for paying relatively high dividends, and many come with franking credits attached. That makes the VAS ETF particularly appealing to income-focused investors, retirees, and anyone building a portfolio that leans toward dividends.
The VTS ETF offers exposure to over 4,000 US-listed companies — from global giants like Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Amazon (NASDAQ: AMZN) to smaller businesses that are powering innovation in tech, healthcare, and clean energy. This makes it a good way to gain access to the world's largest economy.
Furthermore, the US has historically delivered strong returns thanks to its innovation-driven culture, deep capital markets, and homegrown multinationals with global reach.
The VTS ETF may suit investors who are already heavily invested in Australian shares and are looking to diversify offshore.
Both the VAS ETF and the VTS ETF have a place in a long-term portfolio — and many investors hold both.
VAS might make more sense if you value franking credits, local income, and feel more confident on the outlook of the Australian economy. Whereas VTS could be better suited to investors looking to diversify away from the Australian economy, tap into global megatrends, or gain access to companies that simply don't exist on the ASX.
Ultimately, it comes down to your goals, risk profile, and current portfolio mix.
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