In what is turning out to be another astounding year of growth for the exchange-traded funds (ETFs) industry, Vanguard is, once again, flexing its leadership muscles. At the end of November, exchange-traded products listed in the U.S. had a record combined $2.47 trillion in assets under management.
Last month, investors added nearly $9.7 billion in new money to Vanguard ETFs, a total exceeded by just two other issuers, according to ETF research firm ETFGI. Year to date through the end of November, Vanguard ETFs had hauled $76.23 billion in new capital, a total exceeded by only BlackRock Inc.’s (NYSE:BLK) iShares unit, notes ETFGI.
Indeed, investors continue embracing Vanguard ETFs and the Pennsylvania-based issuer rewards that faith. For example, just days before Christimas, Vanguard announced another round of fee cuts, this time pertaining to 11 ETFs, among other funds offered by the company.
“In 2004, when Vanguard managed $6 billion in ETF assets, the average expense ratio for Vanguard’s ETFs was 0.22 percent,” Vanguard said in a statement. “Today, Vanguard manages $593 billion in U.S. ETF assets. The average expense ratio of the firm’s ETFs is 0.12 percent, or less than one-third that of the 0.53 percent industry average.”
Those data points confirm Vanguard ETFs are almost always among the industry’s least expensive, but hunting for the best one of the bunch is more than just a grab at the very cheapest ones.
Here are some ideas for the best Vanguard ETFs heading into 2017.
The 3 Best Vanguard ETFs to Buy: Vanguard Mid-Cap Value ETF (VOE)
Expenses: 0.08%, or $8 annually on every $10,000 invested
Among the many themes that revealed themselves this year in equity markets have been the resurgence of value stocks and the leadership of mid-caps. One intersection of that trade is the Vanguard Mid-Cap Value ETF (NYSEARCA:VOE).
Confirming the rewards of the mid-cap value trade, this Vanguard ETF is higher by 16.6% year to date, an advantage of 420 basis points over the Vanguard Mid-Cap ETF (NYSEARCA:VO). Confirming that it is one of the best Vanguard funds to own for the long term, VOE has topped VO by 400 basis points over the past three years.
VOE keeps with the tradition of Vanguard ETFs being cost-efficient. With an annual fee of just 0.08%, VOE is less expensive than 93% of competing funds, according to issuer data.
At a time when the U.S. dollar is expected to continue surging, potentially delivering problems for multi-national large-caps, mid-caps with more domestically-oriented revenue streams can continue thriving. VOE, which holds 210 stocks, allocates over 42% of its combined weight to financial services consumer goods stocks.
The 3 Best Vanguard ETFs to Buy: Vanguard Dividend Appreciation ETF (VIG)
Many income investors are already acquainted with the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG). After all, this Vanguard ETF is the largest U.S. dividend ETF, but it is not heft that makes VIG alluring.
With dividend growth slowing, investors need to ensure their dividend ETFs lever them to consistently-rising payouts. This Vanguard ETF does that. VIG tracks an index that mandates member firms have at least 10 consecutive years of rising payouts.
What makes VIG one of the best Vanguard ETFs is the combination of dependable dividends and low fees. With an expense ratio of just 0.09% per year, VIG is one of the cheapest dividend ETFs on the market. This Vanguard ETF is home to such venerable dividend growth stocks as Johnson & Johnson (NYSE:JNJ) and The Coca-Cola Co (NYSE:KO).
VIG also has a new international equivalent for investors to consider as well.
The 3 Best Vanguard ETFs to Buy: Vanguard International Total Bond ETF (BNDX)
Vanguard has an expansive lineup of fixed income ETFs and one of the more overlooked members of that roster is Vanguard International Total Bond ETF (NASDAQ:BNDX). The current environment is conducive to owning a bond fund like this Vanguard ETF, potentially indicating BNDX’s growth trajectory could soon improve.
This fund charges just 0.15% per year, which is 85% lower than the average of rival funds, according to Vanguard data.
BNDX possesses more important perks, notably its currency hedge, meaning this is one of the best Vanguard ETFs for a strong dollar environment. Credit quality is not a concern with International Total Bond, as about 80% of its holdings are rated AAA, AA or A.
BNDX holds 4,134 bonds with an average duration of 7.8 years.
As of this writing, Shriber was long JNJ.