Best Vanguard ETFs

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Among the top asset managers in the world, Vanguard's exchange-traded funds (ETFs) are renowned for their excellent quality, wide diversification and cheap fees. Vanguard provides investors with an extensive range of options to achieve their investing targets, with a variety of ETFs available.

With consistent returns, a stable performance and a successful track record, many investors consider Vanguard ETFs as a strong investment option. 

This article examines some of the best Vanguard ETFs to diversify your investment opportunities and help you achieve your goals.

Best Vanguard ETFs to Invest in

Best Vanguard ETFs Overview

• Vanguard S&P 500 ETF (VOO): The Vanguard S&P 500 ETF seeks to track the performance of the S&P 500 Index. It is one of the largest and most popular ETFs in the world, tracking 500 of the biggest publicly traded companies. 
• Vanguard Total Stock Market ETF (VTI): The Vanguard Total Stock Market ETF tracks the performance of the CRSP U.S. Total Market Index, a broad market index that measures the entire U.S. stock market, including large-, mid-, small- and micro-cap stocks.
• Vanguard Total International Stock ETF (VXUS): The Vanguard Total International Stock ETF tracks the FTSE Global All Cap ex U.S. Index. This index is a broad market index that looks at all publicly traded stocks outside of the United States, including developed and emerging markets.
• Vanguard Total World Stock ETF (VT): This ETF closely tracks the FTSE Global All-Cap Index, which looks at the performance of all publicly traded stocks in the world. 
• Vanguard Growth ETF (VUG): The Vanguard Growth ETF tracks the performance of the CRSP US Large Cap Growth Index, made up of the largest growth companies in the United States.
• Vanguard Value ETF (VTV): The Vanguard Value ETF tracks the performance of the CRSP US Large Cap Value Index.
• Vanguard High Dividend Yield ETF (VYM): The Vanguard High Dividend Yield ETF aims to emulate the FTSE High Dividend Yield Index, made up of large and mid-sized company stocks in developed and emerging markets that pay dividends.
• Vanguard Dividend Appreciation ETF (VIG): The Vanguard Dividend Appreciation ETF has consistently tracked the performance of the S&P U.S. Dividend Growers Index, an index made up of large-cap U.S. companies with a history of increasing their dividends.
• Vanguard Information Technology ETF (VGT): The Vanguard Information Technology ETF has closely followed the MSCI U.S. Investable Market Information Technology 25/50 Index.
• Vanguard Communication Services ETF (VOX): The Vanguard Communication Services ETF tracks the performance of the MSCI U.S. Investable Market Communication Services 25/50 Index, which invests in large, mid- and small-cap US companies in the communication services sector.

What Are Vanguard ETFs?

ETFs track a basket of securities and are traded on the stock market. Vanguard offers ETFs to investors that can be purchased like a regular stock.

Vanguard’s ETFs track a particular market or index fund. Due to their similarity with regular stocks, Vanguard ETFs can be traded throughout the day by investors.

Vanguard offers various ETFs for investors to choose from, each with benefits depending on your investment plan.

Advantages of Vanguard ETFs

Let's look at the main advantages of investing in Vanguard ETFs.

• Low costs: Vanguard ETFs have some of the lowest expense ratios. This factor is highly beneficial to an investor, especially as the size of your position continues to grow. Investors can keep more money and produce more robust returns over the long term.
• Diversification: Diversification is the key to a successful portfolio. Vanguard offers a variety of ETFs, ranging from stocks and bonds to commodities, across many geographic locations. Broadening your portfolio can reduce risk, maximize returns and help achieve your goals. It is important to identify what ETFs will help best maximize these benefits.
• Ease of entry: Vanguard ETFs trade on the stock market each day, making it easy to get in and out of the position. Vanguard ETFs trade with more liquidity and reduce the spread costs.

Risks of Investing in Vanguard ETFs

Now while there are great benefits of Vanguard ETFs, investing in them also has a potential downside.

• High volatility: Although ETFs can be easily bought and sold, this factor may cause fluctuations in price and become an issue for longer-term investors.
• Higher costs: Despite lower expense ratios and lower costs in comparison to trading other funds, investing in Vanguard ETFs may be more expensive than investing in a stock. Additionally, some Vanguard ETFs may have larger spreads, resulting in slightly higher costs.
• Dividends: Several Vanguard ETFs pay a dividend to investors; however, the yield can be much lower than investing in an individual stock. Therefore, your returns are reduced in this market and investing in ETFs for dividends may not be optimal.

Factors to Consider When Choosing Vanguard ETFs

The pros of investing in Vanguard ETFs seem to outweigh the negatives, but there are still several factors to consider first.

Investment Objectives

Your investment objectives will be a key measure of how you trade and which Vanguard ETFs to buy. Whether you are looking to build long-term wealth, save for the future or achieve fast returns, your choice of Vanguard ETF will be vital to attain your objectives.

Brokerage Account

Another critical factor involves your brokerage account. You will need a brokerage account to invest in Vanguard ETFs. However, not all brokers offer Vanguard ETFs as an option, or your choices may be limited. Many brokers, including Trading212 and eToro, offer Vanguard ETFs for investing.

Risk Tolerance

ETFs offer access to various asset types, such as bonds, commodities and equities. The most significant possible rewards are found in stocks and other asset classes, but they also carry risks. Although they tend to offer lower returns than stocks, bonds are less risky. Your risk tolerance will be a vital decision in your investment journey.

Investment Horizon

Your investment timeline will correlate with your strategy. Whether it is achieving fast growth, consistent returns or something different, your investment horizon is essential.

Historical Performance

As with any stock or investment opportunity, it is important to evaluate an ETF's historical performance. Although this is not definitive to its future performance, it is a crucial indicator. You can identify key trends and patterns and compare them to multiple other ETFs to further cement your decision.

Best Brokers for Vanguard ETFs

If you are convinced that Vanguard ETFs are the right choice, you may want to consider setting up with a broker. Not all brokers will be suitable for you, but the best brokers for Vanguard ETFs are listed below.

Considerations for Portfolio Construction

ETFs have a significant impact on portfolio construction and should be considered by investors. For one, ETFs provide investors with a convenient and affordable way to diversify their portfolios. A single ETF can expose investors to a broad range of stocks, bonds or other assets, depending on the ETF's investment objective. Vanguard ETFs are flexible and transparent, they trade just like any stock, and their performance can easily be tracked.

However, it is essential to consider your prior investments and how Vanguard ETFs will fit in your portfolio to ensure diversification is achieved.

Vanguard ETFs — What’s Not to Like?

Vanguard ETFs can be a benefit to any portfolio, regardless of your investment strategy. Investors can diversify and build exposure safely across a number of markets. There is a Vanguard ETF out there for almost every investor, but it is essential that you consider your strategy and what you want to achieve before jumping in.  

Frequently Asked Questions