ETFs
3 No-Brainer Vanguard ETFs to Buy in May
These low-cost Vanguard-indexed funds are currently considered strong buys.
Low-cost index investing has seen a surge in popularity since the 2008 financial crisis. The main driver of this trend is the exceptionally low fees and tax-efficient nature of these funds.
The lower ownership costs of these funds allow investors to retain more of their capital gains, which often results in higher returns than actively managed funds. Actively managed funds typically charge high fees and can generate substantial tax liabilities.
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Vanguard, a renowned fund family, has performed remarkably well. The fund family’s unwavering commitment to the industry’s lowest standards expense ratios and investor-friendly products have been the key to its success.
With this brief history in mind, here are three obvious Vanguard ETFs worth considering this month.
1. Vanguard S&P 500 ETF
THE Vanguard S&P 500 ETF (VOO -0.32%), or VOO for short, aims to monitor the performance of S&P500 index, which represents a broad range of the largest publicly traded companies in the United States.
Why is VOO an obvious choice? Four reasons:
- Low spending rate: VOO charges an ultra low price spending rate by 0.03%, a figure 96.2% lower than the average of similar funds.
- Wide market exposure: By investing in this model of the S&P 500, you can gain exposure to a wide range of high-quality companies operating across all sectors of the economy.
- Historical performance: Over the long term, the S&P 500 index proves extremely difficult to outperform, even for professional money managers. It is precisely for this reason that VOO often serves as the backbone of many passively managed portfolios.
- Liquidity: VOO is one of the most liquid S&P 500 tracking vehicles, allowing you to easily buy or sell stocks.
2. Vanguard Small Cap ETF
The Vanguard Small Cap ETF (V.B. -0.79%), or VB, tracks the performance of the CRSP US Small Cap Index.
The VB stands out as an obvious buy this month for two reasons:
- Low expense ratio: VB has an expense ratio of 0.05%, which is 95% lower than the average for its category.
- Exposure to small caps: Small-cap stocks have historically outperformed large-cap stocks over long periods of time.
Although this trend has not been true since the 2008 financial crisis, the Federal Reserve’s possible pivot in interest rates could trigger a reversal of the trend in the months to come. VB, with its favorable expense ratio and strong historical performance, should prove an ideal vehicle to capture a small-cap resurgence.
3. Vanguard Small Cap Value ETF
THE Vanguard Small Cap Value ETF (VBR -0.57%), also known as VBR, reflects the CRSP US Small Cap Value Index, targeting a portfolio of smaller companies with value-driven growth prospects. However, VBR’s median market cap of $6.9 billion suggests it is moving more into mid-cap territory, making it an attractive option for those seeking mid-cap value exposure. capitalizations.
The appeal of investing in VBR lies in its balanced offering of value and growth at minimal cost. The fund’s expense ratio of 0.07% is more than 93% below its category average.
Additionally, VBR boasts a strong average earnings growth rate of 13.1% and a favorable price-to-earnings (P/E) ratio of 14.5. As a reminder, VOO has a P/E ratio above 26, which highlights VBR’s relative affordability.
Final Thoughts
Investing in Vanguard ETFs may be a no-brainer for long-term investors who value simplicity, cost-effectiveness, and solid performance. Whether you’re interested in large-cap exposure (VOO), small-cap growth (VB), or small-cap value (VBR), Vanguard has profitable options.
George Budwell holds positions in the Vanguard S&P 500 ETF and the Vanguard Small-Cap Value ETF. The Motley Fool has positions in and recommends the Vanguard Index Funds-Vanguard Small-Cap ETF and Vanguard S&P 500 ETF. The Mad Motley has a disclosure policy.