VAS vs VGS: Which Vanguard ETF Is Right for Your Portfolio?

VAS and VGS are the two most widely held ETFs in Australia. Combined, they form the backbone of more Australian retail investor portfolios than any other pair of funds. The question of how much to hold in each — or whether to hold both — is the most common portfolio construction question for Australian ETF investors.

The short answer: most evidence and most practitioners recommend holding both, with a tilt toward international (VGS). The typical split is 30–40% VAS and 60–70% VGS. Here's why, with the actual numbers.

What each ETF holds

VAS — Vanguard Australian Shares Index ETF (ASX: VAS)

Tracks the S&P/ASX 300 index (Australia's 300 largest listed companies)
MER: 0.07% per year (among the cheapest ETFs in Australia)
Geographic exposure: 100% Australia
Sector concentration: heavily weighted to financials (~32%) and materials (~20%)
Top holdings: BHP, CBA, ANZ, NAB, Westpac, CSL, Rio Tinto, Wesfarmers

VGS — Vanguard MSCI Index International Shares ETF (ASX: VGS)

Tracks the MSCI World ex-Australia index (~1,500 stocks across 23 developed countries)
MER: 0.18% per year
Geographic exposure: USA (~72%), Japan (~6%), UK (~4%), Canada, France, and others
Sector concentration: technology (~23%), financials (~15%), healthcare (~13%), industrials
Top holdings: Apple, Microsoft, NVIDIA, Amazon, Meta, Alphabet, Eli Lilly, JPMorgan

The fundamental difference: VAS gives you Australia. VGS gives you the developed world ex-Australia, dominated by US technology and healthcare companies.

Performance comparison

Over the past 5 years (to June 2026), VGS has meaningfully outperformed VAS. The primary driver: US technology stocks (Apple, Microsoft, NVIDIA, and the rest of the Magnificent 7) have delivered exceptional returns, and they make up roughly 50%+ of VGS via US market weighting.

Period	VAS (total return, AUD)	VGS (total return, AUD)
1 year (to Jun 2026)	~10.5%	~18.2%
3 years (annualised)	~8.1%	~14.6%
5 years (annualised)	~9.4%	~17.1%
Since inception (VGS: 2014)	~10.2%	~16.8%

Returns are approximate total returns in AUD, including distributions reinvested. Past performance is not a reliable indicator of future returns.

VGS's outperformance over the past decade largely reflects US tech dominance. Whether this continues is uncertain — and the case for VAS (and Australian diversification) doesn't rest on matching VGS returns.

Distribution yield: how VAS and VGS compare

VAS distributes more income — but VGS's distributions are more tax-efficient in some contexts.

	VAS	VGS
Approximate annual distribution yield	~3.1%	~2.6%
Franking credits	High (~70–80% franked on cash distribution)	Minimal to none
Foreign tax credits	Minimal	Some (on foreign income)
Distribution frequency	Quarterly	Quarterly

The franking credit advantage of VAS

Franking credits are arguably VAS's biggest hidden advantage for Australian taxpayers. When VAS distributes $100 in income, roughly $30 of that comes as attached franking credits (representing company tax already paid at 30%). For investors with a marginal tax rate below 30%, franking credits generate a tax refund. For those at exactly 30%, they're fully offset. For those above 30%, they reduce the net tax payable on the distribution.

Example: You receive $1,000 in VAS distributions with $300 in franking credits attached. Your gross distribution is $1,300. You pay marginal tax on $1,300, then subtract the $300 credit. At a 32.5% rate: $1,300 × 32.5% = $422 tax − $300 credit = $122 net tax on $1,000 received. Effective yield is enhanced significantly.

At a 0% rate (e.g., inside super in pension phase): you receive the $1,000 cash plus a $300 refund — $1,300 effectively. This makes VAS exceptionally efficient inside self-managed super funds in pension phase.

VGS distributions carry minimal franking — income is from foreign companies, taxed overseas (partially offset by foreign tax credits, but not equivalent to Australian franking).

Use our ETF Calculator to model the long-run growth of a VAS/VGS portfolio at your target split and contribution level.

The diversification case for VGS

Why holding only VAS is risky:

Australia represents approximately 2% of global market capitalisation. Holding only VAS means:

100% AUD currency exposure
No exposure to Apple, Microsoft, NVIDIA, Amazon, or any US technology leader
Heavy concentration in the four big banks and two major mining companies
Your portfolio rises and falls primarily with commodity prices, iron ore demand, and Australian banking profitability

This is called home bias — the tendency of investors to overweight their home market. Decades of research show home bias reduces diversification and, over most long periods, performance.

Why VGS delivers better diversification:

1,500+ companies across 23 countries
True sector diversification (technology, healthcare, industrials, consumer discretionary all meaningfully weighted)
Exposure to currencies that may appreciate against AUD
No structural concentration in two sectors

The tax efficiency question: which is better where?

Account type	Preference
Taxable brokerage account	VAS slightly preferred (franking credits reduce net tax)
Super accumulation (15% tax)	VAS strongly preferred (franking credits may be fully offset at 15%)
Super pension phase (0% tax)	VAS very strongly preferred (franking credits generate a cash refund)
Inside a company or trust	Depends on tax rate and ability to use franking credits

For Australians with significant taxable investments and super, VAS's franking advantage is most valuable inside super and least valuable in high-marginal-rate taxable accounts.

CGT considerations

Selling within the ETF: Both VAS and VGS are distributed ETFs — they don't sell holdings internally to generate cash. Capital gains pass through as "capital gains components" in distributions (relatively rare in index ETFs), not as internal events you control. Selling your units on the ASX triggers CGT in your hands.

2027 CGT changes: From 1 July 2027, the CGT discount changes for assets newly acquired — CPI indexation replaces the 50% discount for new assets. This affects both VAS and VGS units acquired after the relevant date. For existing holdings, the 50% discount is grandfathered. For long-term investors, the practical impact is modest (CPI indexation and the 50% discount have similar outcomes at moderate growth rates over long holds).

The typical portfolio split

Most practitioners and the evidence suggests a 30/70 or 40/60 split (VAS/VGS) for most Australian investors:

Portfolio	VAS	VGS	Rationale
100% VGS	0%	100%	Maximum global diversification, no home bias. Suitable for investors who don't value franking credits (low income, corporate accounts).
30% / 70%	30%	70%	Common recommendation. Retains meaningful Australian exposure and franking, while being globally diversified.
40% / 60%	40%	60%	Slightly higher Australian weighting — suitable for investors who highly value franking credits or draw income from their portfolio.
50% / 50%	50%	50%	Equal split. Arguably overweights Australia but is a simple rule to implement and rebalance.
100% VAS	100%	0%	Full home bias. Not recommended for most investors — significant concentration risk.

The "right" split doesn't exist. What matters is choosing a split you'll stick to through market volatility and rebalancing consistently.

VAS vs VGS vs other options

VAS and VGS are not your only options for Australian and international exposure:

A200 (BetaShares) tracks the ASX 200 with a 0.04% MER — cheaper than VAS with similar exposure but lower fund size and shorter history
BGBL (BetaShares Global Sustainability ETF) offers global developed market exposure at 0.08% — cheaper than VGS but with an ESG screen and smaller fund
DHHF / VDHG are all-in-one diversified ETFs that already include both Australian and international allocations — useful if you want a single-ETF portfolio

Frequently asked questions

Which has better returns, VAS or VGS?

Over the past 5 years and most trailing periods, VGS has outperformed VAS significantly — primarily due to US technology stock dominance. However, past performance doesn't predict future returns, and the Australian market has periods of significant outperformance (particularly during commodity booms). Most investors hold both to avoid the risk of missing whichever outperforms.

Can I hold just VGS and skip VAS?

Yes — and some investors do. VGS is more diversified and has delivered better long-run returns in most recent periods. The main things you give up: franking credit benefits (significant for higher-tax-rate and super investors), Australian market exposure, and some AUD hedging. If franking credits don't benefit you much, a 100% VGS approach is defensible.

Is VAS or VGS better inside super?

VAS is generally more tax-efficient inside super, particularly in pension phase (0% tax rate). Franking credits generate a cash refund on top of distributions — effectively a tax bonus. VGS distributions have minimal franking. For most super investors, holding a meaningful VAS allocation (30–50%) inside super maximises the franking benefit.

How often do VAS and VGS pay distributions?

Both pay quarterly. VAS typically pays in March, June, September, and December. VGS follows a similar schedule. Distribution amounts vary each quarter based on dividends received from the underlying holdings.

What is the MER difference between VAS and VGS?

VAS: 0.07% per year. VGS: 0.18% per year. On a $100,000 portfolio, the annual fee difference is $110 — negligible. Both are extremely cheap compared to actively managed funds (typically 0.8%–1.5%). Don't let the MER difference drive the decision — portfolio construction and tax efficiency matter far more.

ETF performance data and distribution yields are approximate as at mid-2026. Past performance is not a reliable indicator of future returns. The 2027 CGT changes described apply to assets newly acquired after the relevant legislative date. This article is general information only and does not constitute financial advice. Consult a licensed financial adviser for personalised portfolio recommendations.