What Are Vanguard Exchange-Traded Funds?
Vanguard exchange-traded funds (ETFs) are a class of funds offered by Vanguard. Exchange-traded funds combine the diversification of mutual funds with a lower investment minimum required. Vanguard also offers real-time pricing. ETFs are traded the same way that individual stocks are traded.
Understanding Vanguard Exchange-Traded Funds
As with other shares, Vanguard exchange-traded funds are traded on U.S. stock markets, including the Nasdaq and the New York Stock Exchange (NYSE). Currently, there are more than 50 such funds available. Their underlying indices include local and international indexes and specific industries like materials and energy.
Previously, the Vanguard ETFs were referred to as VIPERS or Vanguard Index Participation Receipts. Currently available, Vanguard ETFs provide the flexibility of intraday trading while closely tracking their underlying indices.
Vanguard aimed to extend its established dominance in the passive management industry to the exchange-traded fund (ETF) market by creating this category of affordable funds.
Because ETFs allow thousands of stocks or bonds to be included in a single fund, they provide portfolios with more flexibility. They give the client greater control while offering all the advantages of an index fund.
Vanguard Exchange-Traded Fund Types
U.S. Equities ETFs
Vanguard provides a selection of ETFs with an emphasis on U.S. equities. These ETFs may be further categorized as large-cap, mid-cap, or small-cap based on the size of their target firms. The performance of the businesses where this money is invested may also be examined. Growth ETFs make investments in equities that grow faster than average. Value ETFs make investments in businesses that are valued less than average. Lastly, mixed ETFs combine investments in value and growth ETFs.
For instance, the Vanguard Dividend Appreciation ETF makes investments in large-cap firms. Value and growth equities are combined in this fund. As of September 30, 2021, it has a 1.71% dividend yield and a 0.06% expense ratio.
International ETFs for Stocks
International ETFs from Vanguard come in three varieties: global, international, and developing markets. ETFs for global equities invest in stocks from around the globe, including the United States. ETFs for international equities invest in stocks from around the globe, except the United States. ETFs focused on emerging markets only purchase equities from developing nations.
One ETF that makes investments abroad is the Vanguard International High Dividend Yield ETF. As of September 30, 2021, its dividend yield is 4.08% and its cost ratio is 0.28%.
Sector ETFs from Vanguard
The stock-based sector exchange-traded funds (ETFs) offered by Vanguard invest in indexes that follow specific economic sectors. Telecommunications, energy, materials, information technology (I.T.), and healthcare are a few of these industries. Investing in a sector-based exchange-traded fund (ETF) allows investors to focus on a particular market segment without taking on the risk and due diligence associated with selecting individual firms to buy.
For instance, consider investing in the Vanguard Financials ETF if you believe the banking industry will do well in the following months. As of September 30, 2021, it has a 1.69% dividend yield and an expense ratio of 0.10%.
U.S. Bond ETFs Vanguard provides 15 distinct U.S. bond-focused exchange-traded funds (ETFs) for individuals who want to allocate their investing assets to an age-appropriate mix of equities and bonds. They fall into four primary categories:
- Tax-exempt bonds
- Investment-grade corporate bonds
- Government bonds
- A combination of the two
Compared to corporate bonds, dividend yields on government bonds are often lower. They do, therefore, also face a much-reduced default risk. Government bonds are less likely to fail than corporate bonds, notwithstanding the latter’s comparatively high interest rate. Lastly, individuals who keep their assets in taxable brokerage accounts and have relatively high tax rates can succeed with Vanguard’s tax-exempt ETF bond category.
Mutual funds against stocks and exchange-traded funds (ETFs)
having an ETF is comparable to having a mutual fund; low expenses and built-in diversification are features shared by individual stocks and bonds. The funds, like individual equities, are also tradeable.
Conversely, ETFs come with less risk and need less upkeep than equities and bonds. Because of the preselected stock and bond combination used by Vanguard, even if one stock or bond in the fund performs poorly, the others are most likely to do well. Investors may also delegate the task of choosing securities to qualified fund managers.
Unlike buying individual stocks and bonds, mutual and exchange-traded funds (ETFs) are less risky and provide many alternatives to achieve different financial objectives. However, ETFs offer a few distinct advantages over traditional mutual funds that may draw in some investors. For instance, Vanguard offers commission-free ETFs that are professionally managed portfolios.
Furthermore, ETFs have lower initial investment minimums. In addition, they provide intraday, real-time pricing that evaluates minute-by-minute changes whenever they are purchased or sold, in contrast to mutual funds, which only provide pricing at the end of the trading day.
Conclusion
- Vanguard offers a type of assets called exchange-traded funds (ETFs).
- The underlying indices of Vanguard include local and international indexes and specific sectors like energy and materials.
- Because ETFs allow thousands of stocks or bonds to be included in a single fund, they provide portfolios more flexibility.
