Let's say you have $500 to invest and you're wondering where to park it. That's a great position to be in right now since the overall stock market has slumped, turning many solid stocks into bargain stocks.
I suggest you give some thought to the Vanguard Value ETF (VTV 0.02%). Here's an introduction to it, along with some considerations.
Image source: Getty Images.
Meet the Vanguard Value ETF
As the name says, it's an exchange-traded fund (ETF) -- a fund that trades like a stock. Vanguard is known for low fees, so it shouldn't surprise anyone that the ETF's low expense ratio of 0.04% means you'll pay just $4 per year for each $10,000 you have invested in the fund.
The Vanguard Value ETF is an index fund, tracking the CRSP US Large Cap Value Index, which itself is focused on holding stocks of large and mid-size companies that seem undervalued.
Value investing -- seeking undervalued companies that offer a margin of safety -- is a popular strategy. It tends to favor slower-growing and steadier companies over fast-growing ones that can often be overvalued.
Here are the ETF's recent top holdings:
|
Stock |
Weight in ETF |
|---|---|
|
Berkshire Hathaway |
3.45% |
|
JPMorgan Chase |
3.30% |
|
ExxonMobil |
2.17% |
|
Broadcom |
2.06% |
|
UnitedHealth Group |
1.93% |
|
Walmart |
1.93% |
|
Procter & Gamble |
1.81% |
|
Johnson & Johnson |
1.76% |
|
Home Depot |
1.74% |
|
AbbVie |
1.63% |
Source: Vanguard.com, as of Feb. 28.
There were recently 340 stocks in the fund, with a median market capitalization of $142 billion. They had average annual earnings growth over the past five years of 10% and a recent price-to-earnings ratio (P/E) of 20.2.
In contrast, the also well-regarded Vanguard Growth ETF (VUG 0.41%) recently had an average annual earnings increase for its holdings of 27.2% and a P/E of 27.2.
The Vanguard Value ETF also had an attractive turnover rate of 8.8% as of the end of 2024, meaning that all the buying and selling in the fund represented just 8.8% of its total fund value. The lower the turnover rate, the more the fund is buying and holding.
Fully 22.4% of the ETF's assets were in financial companies, 15.6% in healthcare stocks, 15.1% in industrials, and 8.9% each in consumer discretionary and consumer staples companies.
Why the Vanguard Value ETF?
So, why should you consider investing in the Vanguard Value ETF? Well, for one thing, it's simply a solid ETF, with low fees. But if you, like many people, see a recession looming, you might want to favor value-focused investing. (A recession isn't guaranteed to be around the corner, by the way.)
Growth stocks are often somewhat or very overvalued, because their gains attract lots of investors, and they can have further to fall in a market pullback. They're epitomized by the "Magnificent Seven" stocks -- none of which were recently held in the Vanguard Value ETF, though they can be, depending on their valuations.
Value stocks, on the other hand, tend to be undervalued or perhaps at most fairly valued, and they can be more resilient in market pullbacks.
Is the Vanguard Value ETF right for you?
This ETF -- or any ETF -- isn't necessarily best for all. But it might be well suited to your needs if you're at least a little risk-averse; you expect to remain invested in the fund for at least a few years; and you would welcome being instantly diversified, with your dollars spread across several hundred well-valued stocks.
The Vanguard Value ETF also pays a dividend, and its recent yield of 2.2% is nearly a whole percentage point above the recent 1.3% of the S&P 500. If you're seeking income from your investments, you'll collect $22 from every $1,000 you have invested in the ETF, and that amount is likely to increase over time.
Whether you invest in this ETF or in other promising ETFs or promising stocks, be sure you're saving and investing for retirement.
