Vanguard offers one of the best selection of index funds to choose from. It can be an excellent choice for retirement investment or for taking advantage of large sector moves, such as moves in the financial sector, technology or utilities.
Top Vanguard funds
I compared 76 Vanguard exchange-traded funds (ETFs) in terms of one-, five- and ten-year return. I also compared the dividend yield and the expense ratio to choose the six ETFs that stood out from the rest.
Keep in mind that positive past performance doesn’t always mean a fund will continue to do well in the future, and there’s no foolproof way to predict how an ETF will perform.
1. Vanguard Energy ETF (VDE)
- Fund category: Equity, energy sector companies
- Assets under management: $7 billion
- Notable holdings: Exxon Mobil Corp (XOM), Chevron Corp (CVX), ConocoPhillips (COP) and Kinder Morgan (KMI).
- Yield: 47% one-year return as of January 2022
- Expense ratio: 0.10%
- Why it made our list: This ETF has had one of the best runs last year, beating most Vanguard ETFs in one-year returns. It seems the energy sector will get another push higher from rising oil and gas prices. If that happens, the VDE will perform even better.
2. Vanguard Financials ETF (VFH)
- Fund category: Equity, financial companies
- Assets under management: $12.2 billion
- Notable holdings: JPMorgan Chase, Berkshire Hathaway, Bank of America, Wells Fargo and Citigroup.
- Yield: 31% one-year return as of January 2022
- Expense ratio: 0.10%
- Why it made our list: The Vanguard Financials ETF owns large companies with a proven track record. What’s more, this ETF consistently returned 16% each year in the past 10 years.
3. Vanguard S&P 500 ETF (VOO)
- Fund category: Large blend
- Assets under management: $827 billion
- Notable holdings: Apple, Microsoft, Alphabet, Amazon, Facebook, Tesla, NVIDIA and Berkshire Hathaway.
- Yield: 21.16% one-year return as of January 2022
- Expense ratio: 0.03%
- Why it made our list: This ETF closely tracks the S&P 500 index, meaning it moves the same as the index. Because of that, it has had a solid performance in the past, and it’ll likely keep growing.
4. Vanguard High Dividend Yield ETF (VYM)
- Fund category: Large value
- Assets under management: $50.4 billion
- Notable holdings: JPMorgan Chase, Johnson & Johnson, Home Depot, Bank of America, Pfizer and Cisco Systems.
- Yield: 20.55% one-year return as of January 2022
- Expense ratio: 0.06%
- Why it made our list: This is a dividend ETF with the highest dividend of all Vanguard equity funds. What’s more, the fund also has had an excellent run with around 13% average annual return in the past 10 years.
5. Vanguard Total World Stock ETF (VT)
- Fund category: World stock
- Assets under management: $33.6 billion
- Notable holdings: Apple, Microsoft, Taiwan Semiconductor Manufacturing Co, NVIDIA and Facebook.
- Yield: 10% one-year return as of January 2022
- Expense ratio: 0.08%
- Why it made our list: This is one of the top-performing Vanguard ETFs with an annual average return of 12% in the past 10 years. What makes it unique, though, is that it helps investors diversify into other markets, including Europe, Emerging Markets and the Pacific.
3 types of Vanguard investors
Vanguard offers over 70 ETFs, making it convenient to choose the one that best suits your investment needs and goals. Vanguard ETFs can be a solid choice for:
- Retirement investors. Aside from the standard S&P 500 funds, you get to choose bond ETFs and Treasury Inflation-Protected Securities funds. These are often low-risk, low-reward investments that protect your portfolio against inflation and can provide income in the form of interest.
- Sector investors. Investors who want to invest in particular sectors without handpicking stocks may find Vanguard’s selection to be more than enough. Choose from funds that are entirely made up of financial stocks, technology stocks, healthcare, utilities, communication services and more.
- Bond investors. If you don’t want to buy bonds individually, you can scoop up Vanguard ETFs and enjoy the benefit of owning multiple bonds without directly owning any. These didn’t perform well during the COVID pandemic except for the TIPS funds. However, in the long run, these could be decent low-risk, low-reward investments.
Vanguard funds advantages and drawbacks
Vanguard funds come with some perks, including a low expense ratio. But there are some downsides as well.
- Low expense ratio (i.e. annual fee)
- Wide selection of funds
- Most funds pay out dividends
- Most ETFs have a mutual fund version
- No disruptive technologies funds
- No cryptocurrency funds
How to invest in Vanguard funds
You can invest in Vanguard funds if you have a brokerage account. Here’s how to do it:
- Open a brokerage account if you don’t have one.
- Log in and search for the ticker symbol of the fund you want to invest in, for example, “VT.”
- Enter the number of shares you want to buy and at what price.
- Review your order and submit it.
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Alternatives to Vanguard funds
Vanguard isn’t the only provider of index funds. Other companies that offer ETFs include:
- Goldman Sachs
- Charles Schwab
Vanguard offers a high selection of ETFs, including the S&P 500 index, technology sector ETFs and bond funds. But if none of these seem appealing enough, consider other ETFs.
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