VAS vs IOZ: best Australian shares ETF on the ASX

VAS and IOZ are the two most popular Australian shares ETFs on the ASX. Both give you broad exposure to the Australian stock market, but they track different indexes, charge different fees, and come from different providers. Here is how they compare.

Disclaimer: This article is for informational purposes only and does not constitute financial or tax advice. Consult a qualified financial adviser before making investment decisions. Fees and other figures cited below are approximate and change over time. Verify current figures before investing.

Quick comparison

VAS: the broader option

VAS tracks the S&P/ASX 300 index, which covers the 300 largest companies listed on the ASX. With an MER of 0.07%, it is one of the cheapest ways to get broad Australian market exposure.

The extra 100 stocks beyond the ASX 200 are small-cap companies. These add a small amount of diversification, though their impact on overall returns is minimal because the top 200 stocks account for the vast majority of the index's total market capitalisation.

VAS has been available on the ASX since 2009, giving it a long track record and high liquidity.

Best for: Investors who want the broadest possible Australian market coverage in a single ETF, including some small-cap exposure.

IOZ: the cheapest option

IOZ tracks the S&P/ASX 200 index, covering Australia's 200 largest listed companies. At 0.05% MER, it is the cheapest broad Australian market ETF on the ASX.

BlackRock (through the iShares brand) is the world's largest asset manager. IOZ is a straightforward, no-frills fund that does one job: track the ASX 200 as cheaply as possible.

Best for: Fee-conscious investors who want the lowest cost Australian market exposure and are not concerned about missing the smallest 100 stocks.

ASX 300 vs ASX 200: does the extra 100 stocks matter?

In practice, the difference is small. The ASX 200 already captures the overwhelming majority of the Australian market's total capitalisation. The extra 100 stocks in the ASX 300 are small companies that individually represent a tiny fraction of the index.

Over time, VAS and IOZ have delivered very similar returns. The performance gap between the two indexes has historically been negligible. If small-cap exposure matters to you, VAS provides it. If it does not, IOZ gives you essentially the same market exposure at a lower cost.

How much do they overlap?

The overlap between VAS and IOZ is very high. Every stock in the ASX 200 is also in the ASX 300, which means all of IOZ's holdings are contained within VAS.

Check the exact overlap: VAS vs IOZ overlap

There is no benefit to holding both VAS and IOZ. They cover the same market, so picking one is sufficient for your Australian allocation.

Fee comparison

The fee difference between VAS and IOZ is small in absolute terms:

IOZ is cheaper, but the difference only becomes meaningful at larger portfolio sizes. For most investors, the fee gap is not significant enough to be the deciding factor on its own.

Tracking difference matters more than MER

As with international ETFs, MER is not the full picture. Tracking difference measures how closely the fund's actual returns match its benchmark index after all costs (not just the management fee).

Securities lending income, dividend handling, and operational efficiency all affect tracking difference. A fund can outperform or underperform its MER suggests. Check each fund's annual report for tracking difference data over multiple years before deciding based on fees alone.

Which should you pick?

Lowest fees: IOZ at 0.05% MER is the cheapest option. If minimising costs is your priority, IOZ wins.

Broadest coverage: VAS tracks the ASX 300, giving you exposure to 100 additional small-cap stocks. If you want the widest Australian market coverage in a single fund, VAS is the choice.

Longest track record: VAS has been available since 2009, giving it more history to evaluate.

For most investors, the difference between VAS and IOZ is small enough that either is an excellent choice. The Australian market is heavily concentrated in the top 20 stocks (banks and miners), so whether you hold 200 or 300 stocks, your returns will be driven by the same large companies.

Pairing with international exposure

Both VAS and IOZ are domestic Australian ETFs. Most investors also want international exposure to reduce concentration in the Australian market. Popular international ETF options include VGS, BGBL, and IWLD.

For a comparison of international ETFs, see our guide on VGS vs BGBL vs IWLD.

If you prefer a single all-in-one fund instead of managing separate Australian and international allocations, see DHHF vs VDHG vs BGBL.

For a deeper look at what happens when your ETFs hold the same stocks, read our guide on how to check ETF overlap in your portfolio.

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