Under The Hood: A Value Proposition

There is always going to be some debate in the world of investing between value and growth. Some argue that value stocks outperform growth stocks, but naysayers will question the time periods in which it takes for value plays to outshine growth stars. Years? Decades? Longer? Obviously, growth stocks present their own set of problems. Finding dividends here is hard to say the least and for every Apple AAPL and Google GOOG, there are 1,000 companies that were supposed to be the "next Apple" that have fallen off the face of the earth. So having some value stocks in your portfolio, regardless of your age, is a good idea and we have the perfect ETF for you with today's Under The Hood candidate, the Vanguard Value ETF VTV. VTV doesn't just imply value with its title. It really is a good value. Seriously. With an expense ratio of just 0.14%, VTV has lower fees than 89% of the ETFs out there with comparable holdings, according to Vanguard's Web site. That makes VTV an ideal play for investors with long-term time horizons or those looking to do some retirement planning. VTV, which holds 415 stocks and has $15.6 billion in assets under management (this fund is rock-solid and is in no danger of disappearing), has been a winner as large-caps have led the recent market rally. That scenario has helped VTV jump 15% in the past six months, a performance that is basically in-line with VTV's peer group though the ETF has bested comparable funds such as the PowerShares Dynamic Large Cap Value ETF PWV and the Schwab U.S. Large-Cap Value ETF SCHV. The knock on VTV is this: Financials account for more than 24% of the sector weight and three, JPMorgan Chase JPM, Bank of America BAC and Wells Fargo WFC, are found in VTV's top-10 holdings. Fortunately, energy and industrials, two market leadership groups, account for over 28% of VTV's sector weight, but until U.S. banks return to dividend normalcy, VTV's weight to financials is a tad high. Yes, some banks are getting their dividend acts together, but they're still a long way from pre-crisis levels. Speaking of dividends, VTV is chock full of companies with lengthy streaks of dividend increases. Procterg & Gamble PG, Exxon Mobil XOM and Johnson & Johnson JNJ to name a few. At the end of the day, VTV is a conservative investors dream and the ideal way for the investor that is considering multiple value stocks to ease the burden of decision-making.