Vanguard: An Overview
The Vanguard Group is among the largest investment companies in the world. At its core is a commitment to providing individual investors with low-cost solutions to gaining wealth. Vanguard is known for its mutual funds and is also a major player in the business of exchange-traded funds (ETFs).
Vanguard manages to keep its low-cost edge across the fund spectrum based on a unique ownership structure despite competition from the likes of other fund companies like Schwab and Fidelity that promise low fees on certain funds.
While many of these other companies are either corporate-owned or owned by third parties, Vanguard is owned by its funds, which are owned by its investors. This means that the profits generated by operating the funds are returned to investors in the form of lower fees. As such, it makes it very difficult for other companies, which are beholden to their shareholders, to compete on price.
Vanguard introduced its suite of ETFs when the investment product gained widespread popularity. The mutual fund operator has since become the second-largest provider of ETFs (by market cap) behind Blackrock. Vanguard’s unique cost structure, the economies of scale it has achieved, and the total number of assets under management (AUM) allow it to offer its ETFs at the lowest cost available in the market. We’ve listed 10 of the firm’s cheapest ETFs by their expense ratio.
Key Takeaways
- Vanguard is a leading provider of low-cost exchange-traded funds.
- The firm is able to keep its low-cost edge across the fund spectrum based on a unique ownership structure.
- Although you can evaluate ETFs based on their expense ratios, their holdings and historical returns should also be considered.
- ETFs that invest in large-cap stocks include Vanguard’s S&P 500 ETF and its Total Stock Market ETF.
- Vanguard also offers ETFs that invest in small-cap stocks, midcaps, value stocks, growth stocks, bonds, and international markets.
The Vanguard S&P 500 ETF (VOO)
The Vanguard S&P 500 ETF is one of Vanguard’s lowest-cost ETFs with a 0.03% expense ratio. It is also among the largest with $1.1 trillion in assets.
The fund seeks to track the performance of the Standard & Poor’s (S&P) 500 Index. The portfolio thus holds the same names as the index. The median market capitalization of companies in the fund is $224.7 billion and the top holdings are:
- Microsoft
- Apple
- NVIDIA
- Amazon
- Meta
The top three sectors invested by the ETF included information technology, financials, and health care.
The Vanguard S&P 500 ETF returned 15.00% annually over the last five years and 29.83% during the past year. Year-to-date (YTD), shares returned 10.55% when based on the ETF’s net asset value (NAV), as of March 31, 2024.
The Vanguard Total Stock Market ETF (VTI)
The Vanguard Total Stock Market ETF is Vanguard’s oldest and largest ETF with $1.6 trillion in AUM. The fund covers the entire U.S. stock market for a rock bottom fee of 0.03%.
The ETF holds more than 3700 stocks in its portfolio, with an average market cap of $159.8 billion. The top three sectors are technology, consumer discretionary, and industrials. Its top holdings are Microsoft, Apple, NVIDIA, Amazon, and Meta.
According to Vanguard, the fund’s 10-year return is 12.27%, its five-year return is 14.25%, and its YTD
return is 9.93%, as of March 31, 2024.
The Vanguard Total Bond Market ETF (BND)
With $319 billion in assets under management, the Vanguard Total Bond Market ETF offers investors broad exposure to the fixed-income market. The expense ratio charged by Vanguard for this ETF is 0.03%.
The fund holds 11,124 bonds in its portfolio, including 46.6% allocated to Treasury/agency bonds, 20% to government mortgage-backed bonds, and 15.4% to industrial bonds.
The fund has returned 0.36% annually over the last five years and 1.51% over the last 10.
The Vanguard Growth ETF (VUG)
The Vanguard Growth ETF invests in stocks of large companies with high-growth potential and charges an expense ratio of 0.04%. The $226.5 billion in assets are weighted towards technology stocks.
Microsoft, Apple, NVIDIA, Amazon, and Meta comprise the top five out of almost 199 holdings.
The fund returned 15.07% annually over the last 10 years, 17.93% over the last five years, and 10.85% year-to-date.
The Vanguard Large-Cap ETF (VV)
The Vanguard Large-Cap ETF invests in stocks representing the largest companies in the U.S. stock market, which ranges from large multinational companies to mid-cap ones. The fund’s expense ratio is 0.04%.
The fund, which has $50.7 billion in assets, holds more than 510 stocks in its portfolio, with an average market cap of $224 billion. Technology, consumer discretionary, industrials, and health care represent the biggest sectors within the fund and the top five holdings include Microsoft, Apple, NVIDIA, Amazon, and Meta.
The fund’s 10-year annual return is 12.80%, its five-year return is 14.91%. It returned 10.30% on a YTD basis.
Asset under management figures, sector weightings, and top holdings for the Vanguard ETFs in this article are as of March 31, 2024.
The Vanguard Value ETF (VTV)
The Vanguard Value ETF invests in large-cap value stocks in the U.S. and comes with an expense ratio of 0.04% This ETF has $170.6 billion in AUM and holds 340 stocks from numerous industry groups: financials, health care, and industrials are the largest sectors.
The average market cap of the companies in the ETF is $126.8 billion. Its top five holdings are:
- Berkshire Hathaway
- Broadcom
- JPMorgan Chase
- Exxon Mobil Corp.
- UnitedHealth
Over the last 10 years, the fund returned 10.44% annually and over five years, 11.53%. Its year-to-date return was 9.69%.
The Vanguard Midcap ETF (VO)
The Vanguard Midcap ETF has an expense ratio of 0.04%, providing investors with low-cost access to a diversified group of medium-sized companies in the U.S. It has $166.7 billion AUM, which is invested in 328 stocks that have a median market cap of $32.2 billion.
Industrials accounts for more than 20.4% of the fund’s portfolio, followed by techonology (13.9%) and consumer discretionary stocks (13%). The top five holdings are Amphenol, TransDigm Group, PACCAR, Cintas, and Constellation Energy.
The fund’s 10-year return is 9.89% and the five-year return is 10.94%. It has returned 7.81% year-to-date.
The Vanguard Small-Cap ETF (VB)
The Vanguard Small-Cap ETF invests in a diversified group of small companies. The fund has an expense ratio of 0.05% and $145.3 billion in assets under management.
VB is invested in 1,413 stocks, with industrials, consumer discretionary, and financials representing the biggest sectors. The fund’s top five holdings are MicroStrategy, Builders FirstSource, Targa Resources, Deckers Outdoor, and Axon Enterprise.
Over the last 10 years, the ETF returned 8.94% annually and, over the last five, 9.98%. Its year-to-date return was 7.42%.
The Vanguard Short-Term Inflation-Protected Securities ETF (VTIP)
With $51.8 billion in AUM and an expense ratio of 0.04%, the Vanguard Short-Term Inflation-Protected Securities ETF gives investors access to bonds backed by the federal government. It also aims to provide protection from inflationary risks or other unexpected inflationary surprises.
The fund is invested in just 26 government-backed bonds. Among the holdings, 20.2% are three to four-year bonds while two-to-three-year bonds comprise 18.2% of the portfolio. The remaining 61.6% consists of bonds with maturities of less than two years and four to five years.
The fund, whose benchmark index is the Bloomberg US 0-5 Year TIPS Index, returned 3.16% annually in five years and 0.86% year-to-date.
The Vanguard FTSE Developed Markets ETF (VEA)
With more than $191.4 billion in AUM, the Vanguard FTSE Developed Markets ETF has become a very popular low-cost way for investors to gain broad exposure to foreign developed economies and markets. The fund’s expense ratio is 0.05%.
The fund invests heavily in the European and Pacific markets and holds almost 4,000 stocks. The median market cap for the fund is $41.5 billion. The top five holdings are Novo Nordisk, ASML Holding, Toyota, Nestle, and Samsung Electronics.
The fund returned 5.05% annually over the last 10 years and 7.4% over the last five years. Year-to-date, it is up 5.3%.
