Compared to rivals such as iShares and State Street’s SPDR brand, Vanguard’s lineup of exchange-traded funds (ETFs) is small.
While Vanguard is the second-largest U.S. ETF issuer by assets, its total roster of just under 80 funds, while healthy, is not massive, comparatively speaking.
A big lineup is nice. After all, that trait gives investors plenty of choices, but what matters more is potency and quality of that lineup. Fortunately, many Vanguard ETFs offer those traits and do so with nominal fees.
With approximately ETFs in its house, Vanguard has plenty of funds for conservative buy-and-hold investors to consider, spanning both equities and fixed income. Consider some of the following funds for your Vanguard buy-and-hold portfolio.
Vanguard ETFs: Vanguard Dividend Appreciation ETF (VIG)
Expense ratio: 0.08% per year
Home to $27.1 billion in assets under management at the end of the first quarter, the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG) is the largest dividend ETF in the world. VIG is one of several compelling income options in the Vanguard lineup.
VIG is a favorite among dividend investors for a couple of reasons. First, its 0.08% annual fee makes it cheaper than 92% of competing strategies. Second, this Vanguard fund focuses on steady dividend growers.
“VIG, which tracks a Nasdaq US Dividend Achievers index that requires ten years of dividend increases, recently had a 14% weighting in the technology sector. Accenture, Microsoft and Texas Instruments are some of the larger holdings, joined by industrials (30% of assets),” according to CFRA Research.
While VIG components are required to have dividend increase streaks of at least 10 years, many of its holdings, such as Johnson & Johnson (NYSE:JNJ) and PepsiCo Inc. (NASDAQ:PEP), have payout increase streaks that can be measured in decades.
Vanguard ETFs: Vanguard Small-Cap Value ETF (VBR)
Annual fee: 0.07%
Over long holding periods, one of the most efficacious factor combinations is small size and value. In fact, some academic research and historical data points suggest the small-cap value combination is the best factor play over the long term. Investors can tap that theme with the Vanguard Small-Cap Value (NYSEARCA:VBR).
VBR tracks the CRSP US Small Cap Value Index and holds nearly 900 stocks. As a value play, this Vanguard ETF sports lower valuation metrics than traditional diversified small-cap funds, but investors should also note the median market cap of VBR components is $3.8 billion, well into mid-cap territory.
VBR allocates 31.30% of its weight to financial stocks and another 19.70% to industrials. Consumer services and technology names combine for 19.20%.
Vanguard ETFs: Vanguard Value ETF (VTV)
Expense ratio: 0.06% per year
Keeping with the value theme, the Vanguard Value ETF (NYSEARCA:VTV) is the large-cap answer to the aforementioned VBR and one of the largest value ETFs in the U.S. This Vanguard ETF tracks a large-cap index, but it is inching toward mega-cap territory with a median market value of $98.6 billion on its 337 components.
VTV shares a trait with many of its value rivals: a large allocation to financial services stocks. That sector represents over a quarter of the fund’s weight. Perhaps surprisingly, VTV’s second-largest sector weight is technology at 14.50%, indicating mature tech companies such as Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC) are not as richly valued as their growthier peers.
Investors considering VTV right now, or any value strategy for that matter, should note the value factor has lagged growth and momentum for several years. However, that condition will not be permanent, which could mean VTV could be a solid idea for long-term investors.
Vanguard ETFs: Vanguard FTSE Developed Markets ETF (VEA)
Annual fee: 0.07%
Vanguard has plenty of offerings for globe-trotting investors and one of the most prominent is the Vanguard FTSE Developed Markets ETF (NYSEARCA:VEA). This Vanguard ETF is ideal for investors looking broad-based exposure to ex-U.S. developed markets as it holds over 3,900 stocks spanning large, mid- and small cap.
Regionally speaking, VEA devotes 91% of its combined weight to Europe and developed Asia-Pacific. The fund competes with MSCI EAFE strategies, but there is a significant difference between VEA and MSCI EAFE tracking funds: VEA includes Canada on its roster, but the MSIC EAFE Index does not.
VEA sports a price-earnings ratio of just 14, a significant discount to the S&P 500. That very likely is one reason why this Vanguard fund was one of 2017’s top asset-gathering ETFs, a status it is retaining in 2018.
Vanguard ETFs: Vanguard Total Corporate Bond ETF (VTC)
Annual fee: 0.07%
The Vanguard Total Corporate Bond ETF (NASDAQ:VTC) is one of Vanguard’s newest ETFs, having debuted late last year, so its $45.4 million in assets should not be viewed as an indictment. Actually, VTC makes life easy on income investors.
This Vanguard ETF is comprised of the issuer’s other corporate bond exchange-traded funds, giving investors exposure to over 5,000 high-grade corporate bonds across myriad durations. VTC’s average duration is 7.6 years and its average effective maturity is 11.3 years.
VTC has a 30-day SEC yield of 3.28%, below the 3.86% found on the largest corporate bond ETF, according to Morningstar data.
Vanguard ETFs: Vanguard Extended Market ETF (VXF)
Expense ratio: 0.08% per year
The S&P 500 is a useful index. It provides investors with exposure to just over 500 of the largest U.S. companies. The thing is there are way more than 500 publicly traded companies listed in the U.S. The Vanguard Extended Market ETF (NYSEARCA:VXF) fills in the ex-S&P 500 gaps for investors.
As indicated by VXF’s massive roster of over 3,260 stocks, the ex-S&P 500 gap is significant. Conservative investors looking for an alternative to traditional small-cap funds may want to give VXF a look because of the fund’s median market value of $4.5 billion, putting it in the less volatile mid-cap category.
Oft-overlooked relative to other Vanguard equity ETFs, VXF has $5.8 billion in assets under management, so it is by no means small. This Vanguard fund allocates 19.6% of its weight to tech stocks and almost a third of its combined weight to the financial services and consumer discretionary sectors.
Vanguard ETFs: Vanguard International High Dividend Yield ETF (VYMI)
Annual fee: 0.32%
The Vanguard International High Dividend Yield ETF (NASDAQ:VYMI) is the international counterpart to the popular Vanguard High Dividend Yield ETF (NYSEARCA:VYM). This Vanguard ETF is ideal for income-seeking investors looking for ex-U.S. dividend-payers with the chance of reduced volatility, particularly with emerging markets stocks.
That’s right, VYMI allocates 21.40% of its weight to emerging markets companies, so it can be used in unison with a fund like VEA. The combination of developed and developing markets exposure makes VYMI look tantalizingly inexpensive on valuation. Its price-earnings ratio of just over 12 is far below that of the S&P 500 and even below the comparable metrics on broader developed markets benchmark’s.
VYMI devotes 25.4% of its weight to the U.K. and Switzerland, two dependable dividend growth markets. Japan, an inexpensive market with tremendous dividend growth potential, is the fund’s third-largest country weight at 7.6%. This Vanguard ETF has a trailing 12-month dividend yield of 3.28%, which compares favorably with broad developed and emerging markets benchmarks.
As of this writing, Todd Shriber was long shares of VEA.
