If managing your investment portfolio is not your top priority, Vanguard's suite of exchange-traded funds (ETFs) might be just what you need. Vanguard has built its reputation on a shareholder-first approach, which translates into a diverse offering of stock, bond, and fixed-income ETFs that come with exceptionally low expense ratios. This investor-friendly fee structure is a significant factor in the company's impressive performance record in the rapidly expanding ETF market.
Vanguard ETFs are tailor-made for the "set-it-and-forget-it" investor. This term describes individuals who prefer a hands-off investment strategy but still expect excellent returns. If this sounds like you, here's a quick look at two Vanguard ETFs that have been favorites among hands-off investors since they hit the market.
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Vanguard Total Stock Market Index Fund ETF Shares
The Vanguard Total Stock Market Index Fund ETF Shares (VTI 0.09%), or VTI, is a comprehensive representation of the investable U.S. stock market, including large-, mid-, small-, and micro-cap stocks across the New York Stock Exchange and Nasdaq. It's designed for the investor who seeks broad market exposure, a low expense ratio, and a solid track record of performance.
NYSEMKT: VTI
Key Data Points
Here are the fund's key traits and suggested portfolio weighting:
- Expense ratio: The VTI sports an expense ratio of just 0.03%, significantly lower than the category average of 0.79%.
- Yield: It offers a yield of 1.35%, providing a steady and reliable income stream.
- 10-year average return: The fund has delivered exceptional long-term returns on capital, with a 10-year average annual return of 11.7%.
- Number of stock holdings: The VTI holds a diversified collection of securities consisting of 3,719 stocks, approximating the full index in terms of key characteristics such as value, growth, income, and market capitalization.
- Long-term outlook: With a history of robust performance and a broad market representation, VTI's long-term outlook remains positive.
- 90% allocation: For investors under 60, a 90% allocation to the VTI is appropriate due to its potential for growth, diversification benefits, and moderate yield. Investors over 60, though, may be wise to start rotating into funds with a heavier focus on dividends -- especially dividend growth stocks -- in order to build a reliable passive income stream ahead of retirement.
Vanguard Total Bond Market Index Fund
The Vanguard Total Bond Market Index Fund (BND 0.07%), or BND for short, provides broad exposure to U.S. investment-grade bonds, including U.S. Treasuries and mortgage-backed securities of all maturities. It's an excellent choice for investors seeking a core bond holding.
NASDAQ: BND
Key Data Points
Here are the fund's key traits and suggested portfolio weighting:
- Expense ratio: The fund's expense ratio stands at 0.03%, which is considerably lower than the average of 0.57% for similar funds.
- Yield: With a 30-day SEC yield of 4.72%, the BND offers an attractive income opportunity.
- 10-year average return: The fund has a 10-year average annual return of 1.19%, which isn't great, especially in a high-inflation environment. However, this bond fund is more designed to provide stable income, capital preservation, and asset diversification in a well-balanced portfolio. As such, its 10-year average rate of return shouldn't be the key reason to buy or sell this bond fund.
- Number of bond holdings: The BND invests in a whopping 11,107 bonds, ensuring broad market coverage.
- Long-term outlook: The fund's strategy of investing across several segments and maturities positions it well for the future.
- 10% allocation: For investors aged 60 and under, allocating 10% to BND can provide stability and income, complementing the growth potential of stock investments like the VTI.
Final thoughts
Vanguard's VTI and BND ETFs stand out as ideal choices for the investor who values ease of management without compromising on returns. Their low expense ratios, solid performance, and broad market coverage make them suitable for a significant portion of one's investment portfolio, particularly for those who prefer a hands-off approach to investing.
