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What Are Vanguard Exchange-Traded Funds?
Let me explain Vanguard exchange-traded funds (ETFs) directly: these are funds from Vanguard that blend the diversification of mutual funds with lower entry costs. You get real-time pricing, and they trade just like individual stocks.
Key Takeaways
Vanguard ETFs are simply a category of funds from Vanguard. Their underlying indexes span sectors like materials and energy, plus domestic and international ones. These ETFs can include thousands of stocks or bonds in one fund, giving you more portfolio options. Professionals manage them, and they're commission-free.
Understanding Vanguard Exchange-Traded Funds
Right now, Vanguard has over 50 ETFs trading on U.S. exchanges like the NYSE or Nasdaq, just like regular shares. They cover sectors such as materials and energy, along with domestic and international indexes.
These were once called Vanguard Index Participation Receipts (VIPERS). Today, they track their indexes tightly and let you trade throughout the day.
Vanguard created these low-cost funds to extend their passive management expertise into ETFs.
With thousands of stocks or bonds in one ETF, you gain flexibility. They deliver index fund benefits but give you more control as an investor.
Types of Vanguard Exchange-Traded Funds
Let's break down the types starting with U.S. Stock ETFs. Vanguard provides ETFs focused on U.S. stocks, divided by company size: large-cap, mid-cap, or small-cap. They also sort by performance—growth ETFs target stocks with high growth, value ETFs go for undervalued companies, and blend ETFs mix both.
Take the Vanguard Dividend Appreciation ETF: it invests in large-cap blends of value and growth stocks, with a 0.06% expense ratio as of May 24, 2024, and a 1.74% dividend yield as of October 31, 2024.
Next, International Stock ETFs. Vanguard offers global, international, and emerging markets versions. Global ones include worldwide stocks, even U.S. ones; international exclude the U.S.; emerging markets focus on developing countries.
For instance, the Vanguard International High Dividend Yield ETF targets international markets, with a 0.22% expense ratio as of February 27, 2024, and a 4.59% dividend yield as of October 31, 2024.
Then there are Vanguard Sector ETFs. These stock-based funds track specific economic sectors like telecom, energy, materials, IT, and healthcare. You can target a sector without picking individual companies, reducing your risk and research.
If you believe banking will do well soon, consider the Vanguard Financials ETF: expense ratio of 0.10% as of December 22, 2023, and dividend yield of 1.68% as of October 31, 2024.
Finally, U.S. Bond ETFs. For balancing stocks and bonds by age, Vanguard has 15 bond-focused ETFs in categories like government bonds, investment-grade corporate, blends of those, and tax-exempt. Government bonds offer low yields but low default risk; corporates pay more but with higher risk; tax-exempt suit high-tax-bracket investors in taxable accounts.
Exchange-Traded Funds (ETFs) vs. Stocks vs. Mutual Funds
Owning an ETF is like holding a mutual fund; it provides diversification and low costs similar to stocks or bonds. Plus, you can trade them like stocks.
ETFs carry less risk and require less upkeep than stocks and bonds. Vanguard's preselected mixes mean a poor performer gets offset by others, and you let pros handle selections.
Both ETFs and mutual funds are safer than individual investments and offer variety for goals. But ETFs stand out with professional management, no commissions, lower minimums, and real-time pricing—unlike mutual funds priced only at day's end.
What Is Vanguard?
Vanguard is a major investment firm offering low-cost products like mutual funds and ETFs.
What Do Vanguard Indexes Cover?
They cover sectors like materials and energy, plus domestic and international indexes.
Who Manages Vanguard’s ETFs?
Portfolio professionals manage them, and they're commission-free.
The Bottom Line
Vanguard ETFs are funds from Vanguard that merge mutual fund diversification with lower minimums.
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