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ETFs
If you’ve researched investing methods and explored the possibility of using ETFs (exchange-traded funds) or index funds, you’ve likely come across Vanguard. The company’s funds are often recommended as the best place to start if you’re looking to invest in low-cost ETFs and funds.
However, when you start digging into Vanguard’s offerings, it can still feel a little overwhelming and confusing. So, we’re going to break everything down and run you through some of the best Vanguard ETFs to buy and all the essential details UK investors need to know about the company.
What is Vanguard?
This company was founded in 1975 by Jack Bogle, and the firm was the first to introduce the idea of index funds. This is where a single investment is used to track the performance of an entire market instead of picking out individual stocks and shares.
Besides developing the concept of index-tracking funds, Vanguard also has quite a unique company structure. Shareholders own most investment companies. This means that the majority of them have to prioritise shareholders over clients who invest. What makes Vanguard different is that the company is owned by its funds. This means that investors in Vanguard funds are part owners of the company.
For this reason, you will often see Vanguard funds and ETFs being the best in terms of low costs and cheap fees. Instead of paying out dividends to shareholders, Vanguard is able to use its profits to lower its fees, because you and the company have a shared interest. When you make more money, they make more money.
Types of ETFs Vanguard offers
The choice of Vanguard exchange-traded funds available to UK investors is continuously expanding. To give you a better idea of the Vanguard ETFs you can buy, here is a list of the main types of options available:
- Passive ETFs
- Global equity ETFs
- ESG ETFs
- Developed market ETFs
- Emerging market ETFs
- Individual country ETFs
- Dividend ETFs
- Bond ETFs
- Money market ETFs
Right now, there are no Vanguard gold ETFs available in the UK. However, an active fund is available to American investors called the ‘Vanguard Global Capital Cycles Fund (VGPMX)’ which invests at least 25% into precious metals and mining. This isn’t yet available in an ETF format for UK investors. But perhaps in the future, it will be.
Best performing Vanguard ETFs
If you want to check out the top-performing Vanguard ETFs, take a look at the Vanguard ETF list below. Just keep in mind that these aren’t necessarily the best Vanguard ETFs to buy today. Past performance doesn’t dictate future results, so the under-performers may do well over the next few years.
Table: sorted by 5-year performance based on data from JustETF.com
| Icon | Fund | 5-year performance | YTD performance (to March 2023) | Link to invest |
|---|---|---|---|---|
 | Vanguard S&P 500 UCITS ETF (VUSA) | 79.35% | 2.93% | Invest with FreetradeCapital at risk |
| Vanguard FTSE North America UCITS ETF Distributing (VNRT) | 77.19% | 3.23% | Invest with FreetradeCapital at risk |
| Vanguard FTSE Developed World UCITS ETF Distributing (VEVE) | 57.70% | 3.73% | Invest with BestInvestCapital at risk |
| Vanguard FTSE All-World UCITS ETF Distributing (VWRL) | 50.86% | 3.31% | Invest with FreetradeCapital at risk |
| Vanguard FTSE Developed Europe ex UK UCITS ETF Distributing (VERX) | 39.22% | 7.83% | Invest with IGCapital at risk |
How to invest in Vanguard ETFs
One of the great things about ETFs is that you can invest in them through many different share dealing platforms. So, if you’re in the UK and want to get started investing in the best Vanguard ETFs, here’s a simple step-by-step guide:
- Research Vanguard ETFs. It’s important to take some time to find the right Vanguard ETF to invest in. Finding the best Vanguard ETF for your individual investing goals will be a personal decision.
- Find a platform. Only some brokers will give you access to the whole range of Vanguard ETFs. So, it’s worth checking to see which investing platform will let you invest in the particular Vanguard ETF you want to buy.
- Fund your account. Once you’ve picked a fund that suits your investing strategy and found a suitable trading platform to buy your ETF, deposit funds is next.
- Buy the Vanguard ETF. With funds ready in your account, it’s time to buy your chosen ETF. The great thing about ETFs is that you get exposure to a whole basket of investments in one single transaction. This can save you a lot of money if your brokerage charges you a commission for buying shares.
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Are Vanguard ETFs a good investment?
It depends on the specific Vanguard ETF you buy. The performance of each exchange-traded fund can vary wildly because each one will have different aims and track various investments.
That being said, Vanguard ETFs are sometimes better value to buy than competitor ETFs tracking the same indices or investments. And this is because of Vanguard’s extremely low fee structure.
No investment is guaranteed to perform. But, you will give yourself a good chance of success with Vanguard ETFs because in most cases, you can broadly diversify while paying low ongoing charges.
Are Vanguard ETFs safe?
Yes. In the UK, Vanguard is authorised and regulated by the FCA (Financial Conduct Authority). The company is also covered by Financial Services Compensation Scheme (FSCS), so deposits of up to £85,000 will be returned should something happen to Vanguard (this doesn’t cover your investment choices losing value).
All Vanguard ETFs in the UK comply with the UCITS (Undertakings for Collective Investment in Transferable Securities) regulation. This was a regulatory framework set out by the EU that the UK has kept post-Brexit. However, this is why you might see that some US Vanguard ETFs aren’t available in the UK.
On top of this, Vanguard is the second largest asset manager in the world. The firm has over 8 trillion dollars worth of assets under management (AUM). It’s important to remember that although you’re investing in assets through a Vanguard ETF, you’re the person that legally owns the investments held within the fund you buy.
Pros and cons of Vanguard ETFs
Pros
- Low cost
- Wide choice of equity ETFs
- A reputable company that invented index funds
Cons
- Lack of thematic or commodity-based ETFs
- Not always the cheapest
- You can’t find them on every platform
Bottom line
Using Vanguard’s ETFs is one of the best ways to put your money to work as a passive investor. The selection of exchange-traded funds available with Vanguard offers one of the cheapest ways to own a diverse basket of investments with just a single trade. They have their drawbacks, for example – the lack of thematic ETFs or those focused on commodities (e.g. gold and precious metals). But overall, these are market-leading options.
Finding the best Vanguard ETF to buy for your portfolio shouldn’t take long because the company has a core selection (rather than thousands of ETFs to choose from). The low ongoing charges make these ETFs an excellent place for beginners to start, or act as a solid foundation within the portfolio of more experienced UK investors.
Compare platforms to buy ETFs
Table: sorted by promoted deals first
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Frequently asked questions
Can you lose money investing in Vanguard ETFs?
Yes. Like with any investment, returns are never guaranteed. The benefit of using an ETF is that it’s easier to diversify, which can reduce volatility and, in some cases – minimise losses (but not always).
Do Vanguard ETFs pay dividends?
Some do. It depends on the ETF you choose, but you can read about this in the KID (Key Information Document) for the investment. Another thing to be aware of is that some Vanguard ETFs will be accumulation (meaning dividends are rolled back into the fund), and others are distribution (meaning dividends will be paid out into your account as cash).
Are there any ethical ETFs on offer?
Yes, Vanguard has a growing selection of ethical ETFs. These ETF products are all marketed with ‘ESG’ in the titles.
How many ETFs does Vanguard have?
At the moment, there are a total of 29 Vanguard ETFs available in the UK.
Are Vanguard ETFs good for beginners?
It depends on which ETF you choose, but generally speaking – the broad market ETFs offered by Vanguard are some of the best investments for beginners. Because, they’re easy to understand, cheap, and a useful way to passively invest (minimising how much research you need to do).
Can you buy ETFs directly from Vanguard?
You can. Through the Vanguard UK website, you can buy both ETFs and index funds. However, it may not be the best place to buy the ETFs because Vanguard does charge a £7.50 fee if you want to buy or sell ETFs at the live price.
Are Vanguard ETFs actively managed?
No. Vanguard offers some actively managed funds, but all the ETFs available to UK investors are passively managed which is part of the reason why ongoing costs are so low.
What’s the best Vanguard ETF?
Based on its 5 year performance, Vanguard S&P 500 UCITS ETF (VUSA).
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