Vanguard recently executed its largest cut to investment fees in its roughly five-decade existence. The largest investment management firm in the world lowered the expense ratio on 168 of its mutual funds and exchange-traded funds (ETFs). The expense ratio is paid by investors and helps cover operating costs for running the fund, including management fees (if applicable), marketing and administrative expenses, legal fees, and much more.
The average ETF expense ratio for an index equity ETF in 2023 was 0.15%, although the ratios can vary widely based on factors such as active or passive management and the assets being tracked. With the recent slash in fees, here are two Vanguard ETFs to buy right now.
Vanguard International High Dividend Yield ETF
The Vanguard International High Dividend Yield ETF (VYMI +1.11%) helps investors easily get access to a basket of international stocks with above-average dividend yields. Vanguard dropped the expense ratio on the fund from 0.22% to 0.17%.
The broader benchmark S&P 500 has been on a superb run for nearly 2.5 years and history suggests that investing in the broader benchmark will serve you well. However, with so much of the market concentrated in a dozen or so high-flying tech and artificial intelligence stocks, investors may want to think twice before going in too heavy. Many international stocks have struggled to gain momentum as their economies have struggled much more than the U.S.
However, if investors start to doubt the sky-high valuations in the U.S. they may shift their attention abroad, where many stocks are on sale and economies could recover. The U.S. dollar also continues to trade at elevated levels but that may change if, say, the Fed starts to lower interest rates again, which has historically weakened the dollar -- and a weak dollar has historically led international stocks to outperform.
Roughly 43% of this particular Vanguard ETF is invested in European stocks, 26.4% in stocks in the Pacific, and 21.7% in emerging markets. The fund is also largely invested in large international names with brand recognition like Toyota, Royal Bank of Canada, and Shell. The fund also focuses on dividend payers and as a result has over a 4.6% yield, so investors will be compensated for their time even if rotation into international stocks takes time to play out.
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Vanguard Financials ETF
The Vanguard Financials ETF (VFH +1.40%) tracks financial services companies. For most of the bull market, financials were left for dead thanks to events like March Madness in 2023 when several banks failed and concerns rose over higher regulatory capital requirements, as well as broader market issues like the rising interest rate environment from 2022 to early 2024.
But now, banks are poised to potentially see their largest regulatory reprieve ever. Recently, President Donald Trump appointed Treasury Secretary Scott Bessent as acting director of the consumer watchdog agency the Consumer Financial Protection Bureau (CFPB). Bessent reportedly put the CFPB's work on pause as the administration reconfigures its priorities for the agency. Many also suspect that higher regulatory capital proposals discussed in 2023 and 2024 are now dead as well.
Under former President Joe Biden's administration, bank mergers and acquisitions were looked at with increasing scrutiny and it took longer than ever before to close deals, with some banks abandoning their efforts altogether. Travis Hill, acting chairman of the Federal Deposit Insurance Corp. (FDIC), said one of the FDIC's priorities will be "to ensure that merger transactions that satisfy the Bank Merger Act are approved in a timely way."
Banks should also enjoy a pickup in investment banking activity and see better margins with a steepening yield curve, in which shorter-dated U.S. Treasury bills and notes yield less than longer-dated U.S. Treasury notes and bonds. The Vanguard Financials ETF gives investors exposure to classic banks like JPMorgan Chase and Goldman Sachs, as well as payments and data companies like Mastercard and S&P Global.
