Is VDIF a good ETF?
VDIF is the Vanguard Diversified Income ETF from Vanguard. We classify it under AU, Intl, and Dividend. With about $47 million in assets it is a relatively small fund (worth checking spreads and liquidity before buying).
On a total-return basis, VDIF has delivered 9.96% a year over 1 year (ranked 131st of 308 ETFs we track).
The management fee of 0.32% is reasonable. That's cheaper than the typical 0.43% for similar ETFs. If cost is your priority, VDCO (0.27%) cover similar ground for less. It pays a healthy 5.48% yield, attractive if you want regular income. Bear in mind distributions are taxed each year at your marginal rate, so a high yield is less tax-efficient for higher earners and during the accumulation phase, though 35% franking softens the blow for Australian residents.
Portfolio turnover is low at about 15% a year — it trades only a small slice of its holdings each year, so trading costs and tax on realised gains stay modest — typical of a passive index strategy.
Strengths
- Low-cost: a 0.32% management fee keeps more of the return in your pocket.
- Pays a useful 5.48% income yield.
Things to watch
- Cheaper alternatives exist: VDCO.
Good to know
- Distributions are 35% franked, a tax bonus for Australian residents.
- Australian focus means franked dividends and no currency risk, but heavy concentration in banks and miners.
What VDIF's categories mean for you
How each category this ETF belongs to tends to behave across market cycles.
Australian shares. Home-market familiarity, fully franked dividends and no currency risk for local investors — but very concentrated in banks and miners, which dominate the index.
- Market regime
- Sensitive to commodity prices, Chinese demand and domestic interest rates. Generous income, but narrow sector diversification.
- In a portfolio
- A natural core for Australian investors thanks to franking, but should be paired with global exposure so you aren't over-reliant on a handful of banks and resource giants.
Global and international shares from outside Australia — broadening you into thousands of companies and the sectors (tech, healthcare) the local market lacks.
- Market regime
- Essential diversification away from the bank-and-resources-heavy ASX. Unhedged versions carry currency risk; hedged versions remove it at a small cost.
- In a portfolio
- A core holding for almost every long-term Australian portfolio.
Targets higher-yielding, cash-generative companies. Popular with retirees and income investors, and in Australia often comes with valuable franking credits.
- Market regime
- Tilts toward 'value' sectors such as banks, resources and utilities. Can lag in growth-led bull markets and concentrate risk, but tends to be more defensive when markets fall.
- In a portfolio
- Good for investors who want income now. Note the higher distributions are taxable each year, which is less efficient for those in higher brackets and in the accumulation phase.
General information only, generated from the fund's published data — not personal financial advice. Past performance is not a reliable indicator of future returns. Consider your own circumstances or seek licensed advice before investing.