Investing in exchange-traded funds (ETFs) is a great way for both new and experienced investors to gain market exposure, and Vanguard is one of the best places to begin, given that the investment firm is known as the low-cost leader. A $1,000 investment is a good starting point, although one key to building wealth is to consistently add to your investments over time through a dollar-cost averaging strategy.
Among the variety of ETFs that Vanguard offers, there's something to fit nearly every investment style and strategy. Let's look at five Vanguard ETFs you can buy right now.
Vanguard S&P 500 ETF
The most popular of its ETFs, the Vanguard S&P 500 ETF (VOO 0.46%), is a solid core holding. It tracks the S&P 500, which consists of 500 of the largest companies in the U.S. and is considered the benchmark for the U.S. stock market. The index is market-cap weighted, meaning that larger companies represent proportionally greater percentages of the index than smaller companies.
The ETF has been a strong performer over the years with an average annualized return of 15.9% over the past five years and 12.8% over the past 10 years, as of the end of May.
Vanguard Growth ETF
Growth stocks have delivered the largest share of the market's gains over the past decade, so it's quite reasonable that investors may want more exposure to these types of stocks. One of the best Vanguard funds on this front is the Vanguard Growth ETF (VUG 0.58%). The fund tracks the CRSP US Large Cap Growth Index, which is essentially the growth side of the S&P 500. It currently includes 166 stocks, though growth stocks dominate the list of the largest companies in the world at this point.
The ETF has nicely outperformed the S&P 500 in recent years. It's produced an average annualized return of 17.1% over the past five years and 15.3% over the past 10 years.
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Vanguard Information Technology ETF
The best-performing Vanguard ETF over the past decade was the Vanguard Information Technology ETF (VGT -0.06%). It aims to replicate the performance of the MSCI US Investable Market Information Technology 25/50 index, which only includes technology stocks.
Given the strengths that the technology sector has shown over the years and the opportunities ahead with artificial intelligence (AI), I think technology is the one sector that investors should overweight in their portfolios. Notably, this ETF is very top-heavy. Its top three holdings -- Nvidia, Microsoft, and Apple -- represent about 45% of the portfolio. As such, I would suggest using the ETF more as a supplement to your portfolio rather than making it a primary holding.
That said, its performance cannot be overlooked. The ETF has had an annualized average return of 19.2% over the past five years and 19.8% over the past 10 years.
Vanguard Mega Cap Value ETF
Growth stocks have long been in favor with the market, but returns on Wall Street tend to be streaky. There were long stretches in the past when value stocks outperformed growth. For investors who anticipate the trends shifting back toward value stocks, the Vanguard Mega Cap Value ETF (MGV 0.34%) is a solid option.
The ETF tracks the investment performance of the CRSP US Mega Cap Value Index, which, as the name implies, invests in very large value stocks. Financial stocks make up more than a quarter of its holdings, while healthcare accounts for over 16%. Its top positions include stocks like Berkshire Hathaway, JP Morgan, and Bank of America in the financial sector, popular retailers like Walmart and Home Depot, energy giant ExxonMobil, and a slew of healthcare companies like UnitedHealth, Johnson & Johnson, and AbbVie.
While the ETF's performance has trailed that of the S&P 500, it has delivered solid gains. It recorded an average annualized return of 13.9% over the past five years and 10.3% over the last ten.
Vanguard International High Dividend Yield ETF
Vanguard's best-performing ETFs so far this year have actually been the ones that track international markets. And among its international ETFs, the Vanguard International High Dividend Yield ETF (VYMI 0.14%) has had the best track record. It's up nearly 18% year to date (as of June 23), and has had an average annualized return of 14.7% over the past five years.
The ETF tracks the FTSE All-World ex US High Dividend Yield Index, which invests in non-U.S. companies that are forecast to have above-average dividend yields. Over 40% of its portfolio is in European stocks, more than a quarter is in Asia-Pacific stocks, and over 20% is in emerging market stocks.
I would still invest the bulk of my portfolio in U.S.-based companies, but this ETF is a nice way to diversify into international markets.
