10 of the Best Vanguard ETFs to Buy

If you’ve ever encountered a Vanguard mutual fund, likely as part of your 401(k) plan’s offerings, you might be surprised to learn that the firm also boasts a robust lineup of 86 exchange-traded funds (ETFs).

“Overall, Vanguard is highly regarded among professional investors and financial experts, primarily due to its extensive array of offerings,” says Sean August, CEO at the August Wealth Management Group. “The company is renowned for cost-effectiveness, flexibility, transparency and a client-centric approach.”

This ETF lineup has grown steadily over the years, partially due to investor demand but also aided by a unique patent Vanguard filed in 2001 that expired in 2023.

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Essentially, by utilizing a federal tax code loophole, Vanguard was able to launch ETF share classes of some of its most popular mutual funds. This allowed these ETFs to benefit from the in-kind creation and redemption mechanism of ETFs.

The net benefits? An estimated $191 billion saved in potential capital gains taxes through 2018 for end investors.

In addition to the tax efficiency benefits, opting for a Vanguard ETF over a mutual fund also allows you to bypass the $3,000 minimum investment requirements of its Admiral Share class. This makes it easier for more investors to access Vanguard’s low-cost, diversified offerings.

“Benefits unique to ETFs include lower investment minimums, real-time pricing and tax efficiencies due to the creation process and the ability to defer capital gains,” says Lauren Wybar, senior wealth advisor at Vanguard.

Here are 10 of the best Vanguard ETFs to buy today:

ETF Expense ratio
Vanguard S&P 500 ETF (ticker: VOO) 0.03%
Vanguard Total Stock Market ETF (VTI) 0.03%
Vanguard Total International Stock ETF (VXUS) 0.08%
Vanguard Total World Stock ETF (VT) 0.07%
Vanguard High Dividend Yield ETF (VYM) 0.06%
Vanguard International High Dividend Yield ETF (VYMI) 0.22%
Vanguard Dividend Appreciation ETF (VIG) 0.06%
Vanguard International Dividend Appreciation ETF (VIGI) 0.15%
Vanguard Total Bond Market ETF (BND) 0.03%
Vanguard Total International Bond ETF (BNDX) 0.07%

Vanguard S&P 500 ETF (VOO)

“ETFs are a good investment option as they offer diversification, low costs and the ability to trade shares during the trading day,” Wybar says. For instance, if you wanted to trade the S&P 500 index, you can buy VOO for around $510 per share, or less if your brokerage offers fractional trading.

By passively tracking the S&P 500 index, VOO manages to keep portfolio turnover low at just 2.2% annually, making it a very tax-efficient investment. The use of a passive indexing strategy also helps the ETF keep overall costs low, with a 0.03% annual expense ratio and low bid-ask spread.

Vanguard Total Stock Market ETF (VTI)

The S&P 500 index is a popular benchmark when it comes to measuring the performance of the U.S. stock market, but by no means is it the most comprehensive. Its broader counterpart is the CRSP U.S. Total Market Index, which holds around 3,200 more small- and mid-cap stocks.

Still, the market-cap-weighted methodology used by both indices results in very similar top holdings and performance. As such, some ETFs tracking the CRSP U.S. Total Market Index like VTI enjoy identical low portfolio turnover at 2.2%, expense ratios at 0.03% and similar historical performance.

Vanguard Total International Stock ETF (VXUS)

VTI may provide broad exposure to the U.S. stock market, but it falls short when it comes to international exposure. To mitigate this, investors can buy a Vanguard international equity ETF like VXUS, which tracks over 8,500 stocks represented by the FTSE Global All Cap ex U.S. Index.

This benchmark currently includes both international developed and emerging markets. The former includes countries like Japan, the U.K., Canada and France, while the latter includes countries like Brazil, India and China. VXUS charges a 0.08% expense ratio and is currently priced at around $61 per share.

Vanguard Total World Stock ETF (VT)

If you want to simplify the equity side of your allocation even more, an all-world equity ETF like VT can be an excellent replacement for VTI and VXUS. This ETF tracks the FTSE Global All Cap Index, which holds U.S., international developed and emerging market stocks weighted by market capitalization.

Despite holding over 9,800 stocks, VT’s portfolio turnover rate remains fairly low at just 4.3%. This is primarily because its benchmark index does not remove or add constituents very often. For a 0.07% expense ratio, this ETF is one of the easiest ways to obtain the global market’s average return.

Vanguard High Dividend Yield ETF (VYM)

Looking for above-average income from tax-efficient qualified dividends? The Vanguard ETF for this role is VYM, which tracks the FTSE High Dividend Yield Index. This ETF holds dividend stocks that have paid above-average dividends for the previous 12 months, excluding real estate investment trusts (REITs).

VYM’s current income potential can be measured by its 30-day SEC yield, which sits at 2.9% — more than double that of the S&P 500. However, income investors should note that this ETF pays distributions on a quarterly basis, as opposed to monthly. VYM charges a 0.06% expense ratio.

[7 of the Best High Dividend ETFs to Buy Now]

Vanguard International High Dividend Yield ETF (VYMI)

Dividend income investors can diversify internationally as well. For this role, Vanguard offers VYMI, which acts as the global counterpart of VYM by tracking the FTSE All-World ex U.S. High Dividend Yield Index. Currently, it holds over 1,500 international developed and emerging market dividend stocks.

The income potential of this ETF currently sits at a 4.6% 30-day SEC yield, surpassing VYM. However, it is best held inside of a tax-advantaged account like a Roth IRA or health savings account to maximize compounding. It is also significantly more expensive than VYM, with a 0.22% expense ratio.

Vanguard Dividend Appreciation ETF (VIG)

Investors who don’t need high present income may find a dividend growth ETF like VIG more appealing. Compared to VYM, VIG’s income potential is much lower, at a 1.8% 30-day SEC yield. However, it’s historically provided a much higher total return thanks to its greater price appreciation.

For a 0.06% expense ratio, this ETF tracks the S&P U.S. Dividend Growers Index, which requires all holdings to demonstrate at least a 10-year history of consecutively increasing dividends every year. It also eliminates the top 25% highest-yielding stocks to ensure quality. VIG charges a 0.06% expense ratio.

Vanguard International Dividend Appreciation ETF (VIGI)

Just like how VYM has VYMI as an internationally developed counterpart, VIG has VIGI. For a 0.15% expense ratio, this ETF tracks the S&P Global Ex-U.S. Dividend Growers Index. But unlike VIG, VIGI only requires holdings to have at least seven years of consecutive dividend growth.

The best use for ETFs like VIGI or VYMI is as the internationally diversified component of a dividend-oriented portfolio. For example, instead of combining VTI with VXUS, dividend investors can use VYM and VYMI, VIG and VIGI, or even all four to capture both dividend yield and dividend growth styles.

Vanguard Total Bond Market ETF (BND)

Looking to lower volatility while earning monthly income? A low-cost Vanguard bond ETF like BND might do the trick. By buying this ETF, you remove market risk from the equation, but take on credit and interest rate risk. Still, you’re more or less fairly compensated for this with a 4.6% 30-day SEC yield.

BND is one of the most diversified bond ETFs available. By tracking the Bloomberg U.S. Aggregate Float Adjusted Index, it captures over 11,000 government Treasurys, mortgage-backed securities and investment-grade corporate bonds of various maturities for a low 0.03% expense ratio.

Vanguard Total International Bond ETF (BNDX)

Did you know international diversification can be attained on the fixed income side, too? Diversifying a bond allocation globally can expose your portfolio to different interest rate regimes and credit spreads. The Vanguard ETF to use for this role is BNDX, which charges a 0.07% expense ratio.

BNDX tracks the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Index, which is currency hedged to the U.S. dollar to mitigate the volatility from fluctuating foreign exchange rates. At present, the ETF is paying a 3.3% 30-day SEC yield with a monthly distribution frequency.

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10 of the Best Vanguard ETFs to Buy originally appeared on usnews.com

Update 07/09/24: This story was previously published at an earlier date and has been updated with new information.

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