Commanding a staggering $7.2 trillion in assets under management, Vanguard stands as an indomitable force in the mutual fund and exchange-traded fund (ETF) landscape.
For many long-term investors, Vanguard's ETFs and mutual funds are the go-to choices, and there's a good reason why.
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Shareholder-friendly policies and a diversity of options
At the heart of Vanguard's appeal lies its unwavering commitment to shareholders. The fund family's policies are meticulously designed to benefit investors by minimizing fees. After all, low fees translate to more money in your pocket, rather than lining the coffers of money managers.
Another main attraction for long-term investors is the diversity of fund types offered by the fund family. Vanguard's suite of 86 exchange-traded funds offers a comprehensive range of options for investors seeking diversified portfolios and long-term value creation.
While Vanguard's ETFs are a popular choice, they may not all be suitable for the everyday investor. Certain funds are crafted for more sophisticated financial maneuvers like hedging, which contrasts with the straightforward and proven method of dollar-cost averaging that many individual investors prefer for building their wealth.
Armed with this insight, I've sorted through Vanguard's broad ETF portfolio to spotlight 10 of the best stock funds for most Main Street investors. These ETFs sport top levels of performance, ultra-low expense ratios, and exposure to powerful themes like artificial intelligence, weight-loss drugs, an aging global population, and other long-term trends in the marketplace.
Read on to find out more about these top Vanguard stock ETFs.
These Vanguard funds are potent wealth creators
1. Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF (VOO 0.33%) tracks the S&P 500 index, representing 500 of the largest U.S. companies. It comes with an ultra-low expense ratio of 0.03% and a 30-day SEC yield of 1.36%. The VOO is well diversified across economic sectors, despite its top holdings – Microsoft, Apple, Nvidia (NVDA +1.80%), Amazon, and Alphabet – all from the tech sector.
NYSEMKT: VOO
Key Data Points
The primary reason to own VOO is its potential for capital appreciation in a moderately low-risk manner (low-risk for stocks). The VOO, in short, provides exposure to the heart of the American economy, which has been the world's best value creator in recorded history. That's why this Vanguard S&P 500 tracking vehicle often forms the foundation of many professional and non-professional portfolios.
VOO Total Return Level data by YCharts
2. Vanguard Mid-Cap Index Fund ETF Shares
The Vanguard Mid-Cap Index Fund ETF (VO 1.04%) seeks to track the CRSP US Mid Cap Index, offering exposure to mid-capitalization stocks with an expense ratio of 0.04% and a 30-day SEC yield of 1.59%. Its top holdings include Amphenol Corp, Transdigm Group, and Constellation Energy.
VOO Total Return Level data by YCharts
The VO is favored for its balance of risk and return, providing a convenient way to match the performance of medium-sized companies. Although mid-caps have lagged behind the broader markets since 2018 and the performance gap has widened substantially post-pandemic, this equity group has historically delivered excess returns relative to the S&P 500.
A well-balanced portfolio should have some exposure to this group in case a trend reversal takes shape.
3. Vanguard Small-Cap Index Fund ETF Shares
Investors eyeing small-cap companies with promising growth trajectories may find the Vanguard Small-Cap Index Fund ETF Shares (VB 1.47%) a perfect match. This fund is designed to mirror the performance of the CRSP US Small Cap Index. With an expense ratio of just 0.05% and a 30-day SEC yield of 1.45%, it stands out for low fees and a robust yield.
VB Total Return Level data by YCharts
The fund's top three holdings are Targa Resources, Axon Enterprise, and Builders FirstSource. Unlike traditional small-caps, these are all well-established companies with stellar revenue and earnings growth. The VB presents an attractive long-term investment opportunity for those comfortable with higher risk in exchange for the potential of above-average growth.
4. Vanguard Total Stock Market Index Fund ETF Shares
If you're looking for extensive exposure to the U.S. stock market, the Vanguard Total Stock Market ETF (VTI 0.46%) is worth considering. This ETF is specifically designed to mirror the performance of the CRSP US Total Market Index, which includes equities from large-, mid-, and small-cap categories, spanning both growth and value styles.
NYSEMKT: VTI
Key Data Points
What makes the VTI stand out within its category are the following features:
- Low expense ratio: The VTI sports a rock-bottom expense ratio of 0.03%.
- Decent yield: It offers a 30-day SEC yield of 1.35%, which is an average yield among U.S. dividend-paying equities.
- Top holdings: The VTI's top holdings closely resemble those of the S&P 500, with a tilt toward large-cap tech companies.
However, what truly sets the VTI apart is its expansive portfolio. Comprising 3,719 stock holdings, it significantly surpasses the benchmark S&P 500 in terms of size.
This extensive diversification enhances the margin of safety for investors and positions the VTI as a fundamental building block in many investment portfolios.
5. Vanguard International High Dividend Yield Index Fund ETF Shares
For international diversification, the Vanguard International High Dividend Yield ETF (VYMI 1.42%) is a standout pick. It tracks the FTSE All-World ex US High Dividend Yield Index, sports a fairly reasonable expense ratio of 0.22% for an international high-yield fund, a yield of nearly 5%, and provides exposure to foreign stocks forecasted to have above-average dividend yields.
Speaking to this last point, the VYMI's top three holdings, Toyota Motor Corp., Nestle SA, and Shell, all offer yields greater than the S&P 500. Thanks to the high-quality nature of its core holdings, the VYMI also screens as an exceptionally reliable vehicle for dividend income. The fund, however, has lagged behind the S&P 500 since inception:
VYMI Total Return Level data by YCharts
6. Vanguard Value Index Fund ETF Shares
The Vanguard Value Index Fund ETF Shares (VTV 0.98%) stands out as an excellent choice for investors seeking reliable income and capital appreciation. This ETF tracks the CRSP US Large Cap Value Index, focusing on stocks with large market capitalizations and compelling valuations. It's particularly attractive due to its low expense ratio of 0.04% and 30-day SEC yield of 2.30%, which together offer a balance of cost-efficiency and income potential.
The VTV is distinguished by its top holdings, which include some of the most respected companies in the market, known for their strong management teams, solid business models, and consistent performance over the long term. The fund's top three holdings in Berkshire Hathaway, Broadcom, and JPMorgan Chase are a testament to its strategy of investing in high-quality companies that are likely undervalued relative to their intrinsic worth.
The VTV's performance closely mirrored that of the S&P 500 until a small handful of large-cap U.S. stocks, mainly Nvidia and Eli Lilly(LLY 1.23%), drove the group to unprecedented heights in the post-pandemic world:
7. Vanguard Health Care Index Fund ETF Shares
The Vanguard Health Care Index Fund ETF Shares (VHT 0.74%) offers investors a way to keep pace with the MSCI US Investable Market Health Care 25/50 Index. With an expense ratio of 0.10% and a 30-day SEC yield of 1.38%, it's a cost-effective option with a moderate income yield.
The VHT invests primarily in the healthcare sector, with major holdings in industry giants such as Eli Lilly, UnitedHealth Group, and Johnson & Johnson. This ETF is a play on the healthcare industry's well-known durability across market cycles and excellent prospects for long-term growth.
While the VHT is oriented toward growth, its focused exposure to the heavily regulated healthcare sector does introduce a higher level of risk when compared to more diversified funds like the VOO or VTI. However, this healthcare fund is also one of the few that has been able to keep up with the surge in U.S. large-cap stocks since 2020:
8. Vanguard Dividend Appreciation Index Fund ETF Shares
The Vanguard Dividend Appreciation ETF (VIG 0.74%) tracks the S&P U.S. Dividend Growers Index. This ETF focuses on stocks that have consistently increased their dividends year after year--a strategy favored by super-investors like Warren Buffett.
The rationale behind this approach is that dividend growth serves as a reliable indicator of a healthy and robust business. Steadily growing dividends can also form a "snowball", compounding returns over time.
With an expense ratio of 0.06% and a 30-day SEC yield of 1.81%, the VIG screens as a cost-effective option for dividend growth strategists. Its top holdings include Microsoft, Apple, and Broadcom – all of whom have a long track of regular dividend raises. The fund hasn't delivered excess returns relative to the S&P 500 since inception, but it has performed admirably:
9. Vanguard Growth Index Fund ETF Shares
Want market-crushing levels of capital appreciation? The Vanguard Growth Index Fund ETF Shares (VUG +0.17%) is a more concentrated version of the S&P 500 that has been steadily beating this benchmark index over the prior 10 years (see graph below). It caters to growth-oriented investors with an elevated risk tolerance. The VUG tracks the CRSP US Large Cap Growth Index, composed of 199 large-cap growth stocks.
The VUG's expense ratio stands at just 0.04%. However, its 30-day SEC yield is only 0.47%, reflecting the fund's focus on capital appreciation over income generation. The fund's top holdings mirror those of the S&P 500, only with a heavier concentration in top names like Microsoft, Apple, and Nvidia.
10. Vanguard Information Technology Index Fund ETF Shares
Want a shot at life-changing levels of capital appreciation? Your ticket may be the Vanguard Information Technology Index Fund ETF Shares (VGT 0.06%). The VGT focuses on the MSCI US Investable Market Information Technology 25/50 Index, composed of large, medium-sized, and small U.S. companies operating in the information technology sector.
This Vanguard tech fund sports an expense ratio of 0.10% and a 30-day SEC yield of 0.58%. The fund's top three holdings are the same as the VUG, but with an even greater concentration in Microsoft, Apple, and Nvidia, increasing its growth potential and risk profile.
However, given the current surge in the tech sector driven by advancements in artificial intelligence, the perceived risk may be less significant than it appears. Artificial intelligence is set to revolutionize our daily lives, and this trend is expected to propel the tech bull market for years to come.
Parting thoughts
Each of these funds serves a distinct role in portfolio construction, catering to various investor preferences for the asset class, market capitalization, sector focus, and dividend strategy.
Investors can mix and match these ETFs to align with their risk tolerance, capital appreciation goals, and income needs, crafting a well-rounded investment portfolio that stands the test of time.
