One thing we can be sure of as we move forward — volatility will remain with us for the foreseeable future. That’s why the Vanguard Value Index Fund (VIVAX) is a great choice now.
VIVAX will keep you focused on your long-term goals of growth and income, and give you broad exposure to some of the best stocks in the market today. And you get all that with a minimum investment of $3,000 — less than it would cost to buy 100 shares of AT&T (T), one its top holdings.
In this kind of market, some investors try to time purchases of the stocks they want to own for the long haul. But the problem is, some of the stocks you want may not come down to where you want them, and others may fall so fast you’ll worry that there is more downside left than you expected and never pull the trigger.
This is one of those times when it’s a good idea to allow a seasoned fund manager to make those choices for you. And one of the best things about Vanguard’s family of funds is you get a great manager for a bargain price.
VIVAX’s expense ratio is a mere 0.23%. That’s $23 a year for every $10,000 you have invested. And if you deal directly with Vanguard, there are no sales or redemption fees.
VIVAX Makes Investing in Value Stocks Simple
Another reason I like VIVAX is its broad diversification across all market sectors. Its top five holdings are blue-chip plays in their respective asset classes: Microsoft (MSFT) in technology, Exxon Mobil (XOM) in energy, Johnson & Johnson (JNJ) in pharmaceuticals, General Electric (GE) in industrials and Wells Fargo (WFC) in financials.
VIVAX is a value hunter’s paradise. Growth stocks have held sway in the markets since the summer of 2013. Historically, value stocks and growth stocks generally exchange leadership, and there are a growing number of factors that point to value making a move for leadership in coming quarters.
VIVAX’s yield is higher than the S&P 500 average, which also is helpful. The dividends add up handsomely if you stick with the fund for the long haul. And you can reinvest them, as well as add funds on a monthly basis, to allow you to dollar-cost average into the fund and its holdings. This allows you to avoid some of the market volatility by allowing you to buy fewer shares when the prices are high and more shares when the prices are low.
This is not a market timing vehicle. This fund works when you buy and hold. That’s even true for its own portfolio — the turnover ratio is a mere 6%.
But this doesn’t hamper its performance. Its three-year performance — and remember, value stocks were not top performers for most of this period — was nearly a 12% annualized return. For five years, it was 12.5%.
Bottom Line
In a market that is becoming increasingly uncertain, VIVAX is a great choice for solid, reliable returns. That is precisely why it gets a top four-star rating from Morningstar, and why it has been one of my long-time holdings in both my Vanguard All in the Family Portfolio and the alternative funds choice to my Growth & Income Plays in my Total Return Portfolio.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation. As of this writing, he is long VIVAX.
