Vanguard is one of the most important asset managers, offering a wide range of low-cost mutual funds and exchange-traded funds (ETFs). As of January 2021, Vanguard had around $7.2 trillion in global assets under management. According to Statista, that sum is “larger than the GDP of countries like Japan, Germany and the U.K.” Vanguard ETFs are known for their high intraday liquidity, low transaction costs and expense ratios.
Wall Street considers Vanguard’s founder, John Bogle, a pioneer of index investing. In a 2016 letter to shareholders, Warren Buffett once remarked, “If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle.”
Vanguard recently released its 2022 market outlook on the global economy. It projects that economic growth will slow down to 4% in both the U.S. and Europe. The asset manager also forecasts inflation will trend higher, then ease as 2022 comes to a close.
While a return to 1970s-style stagflation is not anticipated, Vanguard projects the Federal Reserve will need to increase interest rates to at least 2.5% by the end of the new year to fight rising inflation.
Joe Davis, global chief economist of Vanguard and co-author of the report, remarked:
“The road ahead for investors promises to be a challenging one … Global markets will test investors’ discipline as they navigate the risks of unwinding monetary policy support, slower growth, and rising real rates.”
With that information, here are seven Vanguard ETFs that could add long-term growth and diversification to investor portfolios in 2022:
- Vanguard Communication Services Index Fund ETF Shares (NYSEARCA:VOX)
- Vanguard Consumer Discretionary Index Fund ETF Shares (NYSEARCA:VCR)
- Vanguard Dividend Appreciation ETF Shares (NYSEARCA:VIG)
- Vanguard Energy Index Fund ETF Shares (NYSEARCA:VDE)
- Vanguard Financials Index Fund ETF Shares (NYSEARCA:VFH)
- Vanguard FTSE Developed Markets ETF Shares (NYSEARCA:VEA)
- Vanguard Russell 1000 Growth Index Fund ETF Shares (NASDAQ:VONG)
Vanguard ETFs: Vanguard Communication Services Index Fund ETF Shares (VOX)
52-Week Range: $116.85 – $151.27
Dividend Yield: 0.62%
Expense Ratio: 0.1% per year
The Vanguard Communication Services ETF Shares invests in companies offering telephone, data transmission, cellular and wireless communication services.
VOX, which has 115 holdings, tracks the returns of the MSCI US IMI Comm Services 25/50 Index. Since its inception in September 2004, net assets have soared to $4.3 billion.
Regarding the sub-sectoral breakdown, the interactive media and services segment accounts for the largest portion with 47.7%. It’s followed by movies and entertainment with 15.6%, then cable and satellite with 9.9%.
The fund’s top 10 names account for nearly 69% of assets. The leading stocks in the roster include Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG), Meta Platforms (NASDAQ:FB) and Walt Disney (NYSE:DIS).
In other words, this ETF has a high concentration of leading stocks that have significantly benefited from pandemic lockdowns. VOX gained 13.8% in 2021. Trailing price-to-earnings (P/E) and price-to-book (P/B) ratios stand at 18.6x and 3.3x, respectively.
Vanguard Consumer Discretionary Index Fund ETF Shares (VCR)
52 Week Range: $264.51 – $360.54
Dividend Yield: 1.37%
Expense Ratio: 0.1% per year
The Vanguard Consumer Discretionary ETF Shares offers exposure to consumer discretionary stocks, which tend to be sensitive to economic cycles. For instance, on the manufacturing side, we see names from the household durable goods, automotive, apparel and leisure equipment sectors.
Launched in January 2004, VCR has 304 holdings and tracks the Consumer Discretionary Spliced Index. Net assets under management total $8.2 billion.
Shares of internet & direct marketing retailers lead the fund with 25.4%, followed by automobile manufacturers at 17.8%, home improvement retail at 10% and restaurants at 8.3%.
The largest 10 holdings account for 60.9% of the fund. Amazon (NASDAQ:AMZN) and Tesla (NASDAQ:TSLA) have the highest weighting, with 22.2% and 15%, respectively. Thus, volatility in these two names will impact the fund. Other leading stocks on the roster include Home Depot (NYSE:HD), Nike (NYSE:NKE) and McDonald’s (NYSE:MCD).
VCR surged around 24.9% in 2021. Trailing P/E and P/B ratios stand at 28.5x and 7.3x, respectively. A potential decline toward $330 would improve the margin of safety.
Vanguard ETFs: Vanguard Dividend Appreciation ETF Shares (VIG)
52 Week Range: $136.02 – $172.87
Dividend Yield: 1.48%
Expense Ratio: 0.06% per year
The Vanguard Dividend Appreciation ETF Shares offers exposure to large-capitalization (cap) shares with consistent dividend growth. If you are looking for passive income, this fund deserves your attention.
VIG is one of the largest ETFs stateside, with net assets that exceed $77.4 billion. It was launched in April 2006 and tracks the returns of the S&P U.S. Dividend Growers Index.
The fund consists of 268 U.S.-based companies. Industrials make up the largest portion with 20.7%, followed by consumer discretionary at 16.4%, financials at 15% and technology at 14.6%. The leading 10 names in the fund account for more than 30% of net assets.
Among the top holdings are Microsoft (NASDAQ:MSFT), JPMorgan Chase (NYSE:JPM) and UnitedHealth (NYSE:UNH).
VIG has soared 23.6% over the past year. Trailing P/E and P/B ratios stand at 23.7x and 4.8x, respectively. A potential fall toward the $165 level or below would offer a better entry point.
Vanguard Energy Index Fund ETF Shares (VDE)
52 Week Range: $54.01 – $84.58
Dividend Yield: 3.29%
Expense Ratio: 0.1% per year
The Vanguard Energy Index Fund ETF Shares invests in energy businesses that explore and produce oil, natural gas and coal. VDE, which has 104 holdings, tracks the returns of the Vanguard Equity Index. The fund started trading in 2004, and net assets stand at $7 billion.
More than 66% of its funds are in the top 10 shares. In terms of sub-sectors, integrated oil and gas heads the list with 40%. It’s followed by oil and gas exploration and production at 30.2%, then oil and gas storage and transportation at 11.4%.
Energy giants like Exxon Mobil (NYSE:XOM), upstream crude oil groups like EOG Resources (NYSE:EOG), and the oil and gas exploration and production group Pioneer Natural Resources (NYSE:PXD) are among the top names on the roster.
Oil stocks have seen strong returns in 2021. For instance, the Dow Jones Oil & Gas index returned close to 48% in 2021. Moves in stock prices of oil companies primarily mirror moves in the price of crude oil. Analysts concur that oil demand is expected to stay robust in the near future.
VDE returned more than 58% in 2021 and hit a multi-year high in late October. The fund briefly declined afterward, primarily due to the emergence of the new omicron variant, but it has since surpassed its October high.
Investors expecting a rebound in oil prices may use this ETF to dip into the industry. In addition, VDE provides income investors with a generous dividend yield at current prices.
Vanguard ETFs: Vanguard Financials Index Fund ETF Shares (VFH)
52 Week Range: $71.47 – $101.26
Dividend Yield: 1.75%
Expense Ratio: 0.1% per year
The Vanguard Financials Index Fund ETF Shares invests in a diversified range of stocks that provide financial services stateside. The fund was first launched in January 2004, and net assets currently stand at $12.2 billion.
VFH, which has 400 holdings, tracks the Vanguard US IMI Financials 25/50 Benchmark. Its main segments include diversified banks at 23.5%, regional banks at 14.90% and asset management and custody banks at 10.4%. Financial exchanges and data come in at 9.3%, and investment banking and brokerage makes up 8.8%.
Over 41% of its net assets are in the largest 10 stocks. The top names on the roster include JPMorgan Chase (NYSE:JPM), Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) and Bank of America (NYSE:BAC).
January means a new earnings season is beginning, with financial companies reporting early on. As a result, we are likely to see some volatility in short-term prices.
Wall Street is also wondering when the Fed will start to raise interest rates. Bank shares usually perform well when interest rates increase. Therefore, despite potential choppiness in the weeks ahead, many analysts are still bullish on the financial sector.
VFH gained 35.2% in 2021 and hit an all-time high in early November. It is currently trading close to its high, so buy-and-hold investors could consider investing around 5% below its peak value. Trailing P/E and P/B ratios stand at 11.2x and 1.6x, respectively.
Vanguard FTSE Developed Markets ETF Shares (VEA)
52 Week Range:$46.66 – $53.49
Dividend Yield: 2.49%
Expense Ratio: 0.05% per year
Our next fund takes us overseas. The Vanguard FTSE Developed Markets ETF provides a convenient way to invest in a diverse group of companies based in developed economies outside the U.S. VEA has 4,088 holdings, and the top 10 account for 10.2% of its net assets of $158.8 billion.
In terms of sectoral weightings, companies based in Europe account for 53.9% of the fund, followed by the Pacific region with 35.9% and North America with 9.5%.
Swiss consumer goods giant Nestle (OTCMKTS:NSRGY), South Korean technology conglomerate Samsung Electronics (OTCMKTS:SSNLF) and chip-making equipment manufacturer ASML (NASDAQ:ASML) are some of the biggest names in the fund.
VEA returned around 11.5% in 2021. Trailing P/E and P/B ratios stand at 15x and 1.7x. Prudent investors who would like to diversify internationally but refrain from investing in emerging markets could consider VEA a long-term growth opportunity.
Vanguard ETFs: Vanguard Russell 1000 Growth Index Fund ETF Shares (VONG)
52 Week Range: $58.33 – $80.19
Dividend Yield: 0.64%
Expense Ratio: 0.08% per year
Our final fund in this list of Vanguard ETFs, the Vanguard Russell 1000 Growth Index Fund ETF Shares offers exposure to growth stocks in large-cap U.S. firms. VONG, which has 502 holdings, tracks a wide range of high-growth businesses from the Russell 1000 Growth Index, which comprises 1,000 of the largest public firms nationwide.
The 10 largest stocks in VONG account for almost half of its net assets of $11.7 billion. Technology is at the top of the list with 49.6%, followed by consumer discretionary at 22.5%, industrials at 11.6% and health care at 8.1%. Among the leading names are Apple (NASDAQ:AAPL), Microsoft, Amazon, Alphabet and Tesla.
The fund returned 27.5% in 2021 and hit a record high of $80.19 in late November. Trailing P/E and P/B ratios stand at 34.8x and 13.4x, respectively.
Most names in the fund will release quarterly earnings soon. Therefore, investors should be ready for choppiness ahead. However, the ETF offers significant long-term growth potential and diversification benefits to most retail portfolios.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.