Before investing in one of Vanguard’s renowned mutual funds, it might be worth considering its expansive lineup of 86 exchange-traded funds (ETFs) instead.
“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.”
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But why pivot to ETFs, especially for new investors or those with limited capital? Well, the entry point is a significant factor. Many of Vanguard’s “Admiral Shares” mutual funds require a minimum initial investment of $3,000, which could be a hurdle if you’re just starting out or have limited funds to allocate.
On the other hand, the requirement to invest in an ETF is merely the cost of a single share — often a more affordable option. Plus, if your brokerage offers fractional shares, you can invest even smaller amounts.
There’s also more flexibility in how you can trade ETFs. Unlike mutual funds, which are only priced at the end of each trading day, ETFs trade throughout the day just like stocks.
“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. “ETFs are a good investment option as they offer diversification, low costs and the ability to trade shares during the trading day,” she says.
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 Growth ETF (VUG) | 0.04% |
| Vanguard Value ETF (VTV) | 0.04% |
| 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 S&P 500 ETF (VOO)
VOO is one of Vanguard’s cheapest ETFs. For a 0.03% expense ratio, it provides exposure to the renowned S&P 500 Index. If you invested $10,000 in this fund, you could expect to just pay about $3 a year in fund fees, which is extremely affordable considering how diversified this ETF is.
VOO has also been a stellar performer. Over the past 10 years, the ETF has returned an annualized 12.9%. Since inception, it’s up an annualized 14.6%. At about $524 per share, it is easier to access compared to its mutual fund counterpart, the Vanguard 500 Index Fund (VFIAX), which requires a $3,000 investment and charges a 0.04% expense ratio.
Vanguard Total Stock Market ETF (VTI)
VTI is another popular Vanguard U.S. equity market ETF often used as a tax-loss harvesting partner for VOO. This is because while it tracks the different CRSP US Total Market Index, its overall holdings are similar to the S&P 500 given that both are market-cap weighted, with an emphasis on large-cap stocks.
Over the past 10 years, VTI has delivered a strong 12.3% annualized return, trailing VOO slightly. This is because VTI owns thousands more small-cap stocks that have underperformed recently. But over the long term, this ETF is expected to perform similarly to VOO. VTI charges a 0.03% expense ratio.
Vanguard Total International Stock ETF (VXUS)
Investing in international stocks doesn’t have to be expensive. For a 0.08% expense ratio, investors can access over 8,600 international companies via VXUS, which tracks the FTSE Global All Cap ex US Index. This ETF holds stocks from both international developed and emerging-market countries.
For the former, VXUS features countries like Japan, the U.K., Canada and France. For the latter, countries like Brazil, India and China are represented. As with most Vanguard index ETFs, VXUS is market-cap weighted so that the larger a company is, the greater emphasis it receives.
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Vanguard Total World Stock ETF (VT)
Vanguard’s most diversified equity ETF is arguably VT. This ETF tracks the FTSE Global All Cap Index, which holds small-, mid- and large-cap stocks from U.S., developed and emerging markets. It offers investors a one-ticker solution for global diversification versus combining VTI and VXUS.
The indexing methodology employed by VT results in strong efficiency. With a low turnover rate of just 4.3%, this ETF is rarely buying and selling equities. Thanks to its hands-off nature, expense ratios are also affordably low at 0.07%. This ETF currently costs about $118 per share.
Vanguard Growth ETF (VUG)
Growth investors don’t have to resort to expensive actively managed funds. For this segment, Vanguard offers VUG, which tracks the CRSP US Large Cap Growth Index for a very affordable 0.04% expense ratio. Over the past 10 years, it’s been a strong performer, delivering an annualized 15.1% return.
VUG’s current growth metrics are highly impressive. On average, the 188 holdings in this ETF have an earnings growth rate of 24.4% and a return on equity of 42%. But despite its narrower focus, VUG remains highly efficient. With a 5.3% turnover rate, this ETF is not constantly buying and selling.
Vanguard Value ETF (VTV)
Growth stocks outperformed over the past decade, while value stocks underperformed. Case in point, VUG’s value counterpart, VTV, lagged over the past 10 years with a 10.5% annualized return. Therefore, contrarian investors hunting for a cheap bargain might find this ETF an attractive buy-and-hold option.
VTV tracks the CRSP US Large Cap Value Index. On average, the 341 holdings in this ETF trade at far lower valuations compared to the broad market, with a price-to-earnings ratio of 20.9 and a price-to-book ratio of 2.9. As with VUG, it’s a very affordable holding with an identical 0.04% expense ratio.
Vanguard High Dividend Yield ETF (VYM)
Another way investors can target value stocks is via a high-dividend ETF like VYM. All else being equal, companies trading with a high yield tend to have depressed share prices, which can be a sign of an attractive valuation. VYM offers an easy way to buy a basket of these stocks at a 0.06% expense ratio.
Case in point, VYM’s current basket of 556 holdings shares a 67% overlap with VTV, for a total of 189 shared companies. Valuations also look fairly similar with a price-to-earnings ratio of 19.6 and a price-to-book ratio of 2.8. As a bonus, VYM also pays an above-average 2.6% 30-day SEC yield.
Vanguard International High Dividend Yield ETF (VYMI)
Value-focused investors looking for more income from their international equity allocation can replace VXUS with VYMI. This ETF is basically the international version of VYM, tracking the FTSE All-World ex U.S. High Dividend Yield Index. It is very diversified, with over 1,500 holdings.
As with VXUS, VYMI holds both developed and emerging-market companies. However, it pays a far higher 2.6% 30-day SEC yield. Due to its foreign holdings and higher income potential, investors may want to prioritize this ETF for a tax-sheltered account like a Roth IRA.
Vanguard Dividend Appreciation ETF (VIG)
Investors can also target a “quality” investment style via Vanguard dividend growth ETFs like VIG. This ETF tracks the S&P U.S. Dividend Growers Index, which screens for 10 consecutive years of dividend growth. But it also eliminates the top 25% highest-yielding stocks to cull “yield traps.”
VIG’s 1.7% 30-day SEC yield is higher than the broad market’s but isn’t likely to turn heads. However, the ETF’s total returns have been strong. Over the past 10 years, VIG has returned an annualized 11.9%, versus 9.9% for VYM. As with VYM, VIG charges a 0.06% expense ratio.
Vanguard International Dividend Appreciation ETF (VIGI)
Vanguard has an international equivalent for VYM in the form of VYMI, and unsurprisingly, it also provides VIG with a counterpart in the form of VIGI. This ETF tracks the S&P Global Ex-U.S. Dividend Growers Index, which screens for seven consecutive years of dividend growth.
Compared to VYMI, VIGI is narrower in nature with just 332 holdings. It is also diversified between developed and emerging markets, but underweights the latter compared to VYMI. This ETF has earned a five-star rating from Morningstar for superior risk-adjusted returns in its peer category.
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10 of the Best Vanguard ETFs to Buy originally appeared on usnews.com
Update 09/23/24: This story was previously published at an earlier date and has been updated with new information.
