Vanguard, the second-largest provider of exchange-traded funds (ETFs) after BlackRock (NYSE: BLK), has long been a go-to choice for investors seeking cost-effective, diversified investment options.
Known for its low expense ratios and broad market exposure, Vanguard appeals to a wide range of investors, from those seeking steady passive income to those targeting high-growth opportunities.
While broad-market ETFs like those tracking the S&P 500 remain a popular choice, sector-focused funds often provide a sharper edge, especially when certain industries are primed for growth, while also reducing the risks associated with individual stock picking.
With expense ratios as low as 0.03%, Vanguard ETFs offer a low-cost, efficient way to access high-growth sectors, making them an attractive choice for long-term investors looking to maximize returns without excessive fees eating into their gains.
Vanguard High Dividend Yield ETF (VYM)
The Vanguard High Dividend Yield ETF (NYSEARCA: VYM) seeks to track the investment performance of the FTSE High Dividend Yield Index, which includes U.S. stocks with a history of paying above-average dividends.
The fund is diversified across 530 stocks, with major holdings including Broadcom (NASDAQ: AVGO), JPMorgan Chase (NYSE: JPM), and ExxonMobil (NYSE: XOM), together accounting for 12.27% of the fund’s total allocation.
Over the past decade, the ETF has averaged a 10.11% annual return, maintaining steady growth despite economic cycles. Since its inception in 2006, the fund has delivered an average annual return of 8.83%.
With a year-to-date gain of 2.24% and at a current trading price of $130.45, the fund remains a solid defensive choice, offering a dividend yield of nearly 2.7%, more than double the S&P 500’s average yield.
Beyond its strong yield, VYM’s well-balanced sector distribution makes it an appealing option for investors prioritizing stability. The fund also stands out as a cost-effective investment option, with an expense ratio of just 0.06%, translating to a minimal annual fee of $0.30 for every $500 invested.
The Vanguard Growth ETF (VUG)
The Vanguard Growth ETF (VUG) seeks to track the investment performance of the CRSP US Large Cap Growth Index, providing diversified exposure across multiple industries. With a tech-heavy tilt, the fund’s top holdings—Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and NVIDIA (NASDAQ: NVDA) account for over 32% of its total allocation.
This tech-heavy weighting has helped VUG outperform during bullish tech cycles, but it also leaves the fund vulnerable to volatility when the sector faces headwinds.
Beyond tech, consumer discretionary stocks make up 20.5% of the fund, led by Amazon (NASDAQ: AMZN) and Tesla (NASDAQ: TSLA), while healthcare stocks account for 6%, with Eli Lilly (NYSE: LLY) among the top holdings.
Despite its strong historical track record, VUG has underperformed year-to-date, posting a 5.5% decline as part of a broader market sell-off.
However, over the past year, the ETF has gained over 13%, largely driven by the continued rally in AI, cloud computing, and high-growth stocks, currently trading at $389 per share.
Over the past decade, VUG has delivered a 15.09% annualized return, while since its inception in 2004, it has maintained an average annual return of 11.56%
VUG also stands out as a cost-effective choice, with an expense ratio of just 0.04%. This translates to $0.20 in annual fees for every $500 invested, making it a compelling option for investors seeking exposure to high-growth large-cap stocks.
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