So you might be wondering, what are the Best Vanguard ETFs to buy in 2022? The average Vanguard mutual fund and exchange-traded fund (ETF) expense ratio is 83% less than the industry average.
Vanguard is known for its array of high quality, low cost mutual & exchange-traded funds (ETFs). Also, with an initial investment of $25,000.00, Vanguard investors have saved more than $17,000.00 in fees over a 30-year period.
Best Vanguard ETFs
Vanguard Average Expense Ratio: 0.09%
Industry Average Expense Ratio: 0.54%
As of 2021, Vanguard managed over $7 Trillion in AUM. Below we will present 5 Vanguard ETFs to buy and hold, FOREVER!
1. Vanguard S&P 500 ETF (VOO)
- Assets Under Management: $856 billion
- Expense Ratio: 0.03%
The Vanguard S&P 500 ETF, is an index fund that seeks to track the performance of the S&P 500 Index. This index comprises a basket of the 500 largest U.S. listed companies by market capitalization.
According to Vanguard, the total net assets of the 10 largest holdings comprise a total of 30.4% of the ETF. As of December 31st, 2021, the ETF’s largest holdings in order include: Apple Inc, Microsoft Corp, Alphabet Inc, Amazon Inc, Tesla Inc, Meta Platforms Inc, NVIDIA Corp, Berkshire Hathaway Inc, UnitedHealth Group Inc, and JPMorgan Chase & Co.
Vanguard S&P 500 ETF Portfolio Composition:
Communication Services (10.10%), Consumer Discretionary (12.50%), Consumer Staples (5.90%), Energy (2.70%), Financials (10.70%), Healthcare (13.30%), Industrials (7.80%), Information Technology (29.20%), Materials (2.50%), Real Estate (2.80%), and Utilities (2.50%).
Vanguard’s VOO ETF is appropriate for beginner investors and individuals seeking out long term duration returns. On average, 81% of Vanguard ETFs have beat the returns of their peer-group averages.
VOO offers a high potential for growth, although volatility can be more significant due to the absence of bonds within the ETF. If you’re looking to get started in the stock market with exposure to the 500 largest U.S. listed companies, VOO is definitely an ETF that you should consider.
2. Vanguard Total Stock Market ETF (VTI)
- Assets Under Management: $1.4 trillion
- Expense Ratio: 0.03%
The Vanguard Total Stock Market ETF, is an index fund that seeks to track the performance of the CRSP US Total Market Index. This index comprises a blend of mainly U.S. listed large-, mid-, and small-cap equities.
According to Vanguard, the total net assets of the 10 largest holdings comprise a total of 25.2% of the ETF. As of December 31st, 2021, the ETF’s largest holdings in order include: Apple Inc, Microsoft Corp, Alphabet Inc, Amazon Inc, Tesla Inc, Meta Platforms Inc, NVIDIA Corp, Berkshire Hathaway Inc, UnitedHealth Group Inc, and JPMorgan Chase & Co. Foreign holdings account for only 0.10% of the total fund.
Vanguard Total Stock Market ETF Portfolio Composition:
Basic Materials (2.00%), Consumer Discretionary (16.00%), Consumer Staples (4.70%), Energy (2.80%), Financials (10.90%), Healthcare (12.80%), Industrials (12.80%), Telecommunications (2.60%), Real Estate (3.70%), Technology (29.00%), and Utilities (2.70%).
The VTI fund strategy is a passively managed. The fund’s main investment strategy is to replicate the performance of the underlying index. The fund remains fully invested, meaning that they hold minimal cash-on-hand.
If you’re looking for more broad exposure to the U.S. stock market, VTI is a good place to start for the more aggressive investors.
3. Vanguard Russell 2000 ETF (VTWO)
- Assets Under Management: $7.9 billion
- Expense Ratio: 0.10%
The Vanguard Russell 2000 ETF, is an index fund that seeks to track the performance of small-cap U.S. equities. This index comprises mainly small-cap U.S. listed equities.
According to Vanguard, the total net assets of the 10 largest holdings comprise a total of 3.4% of the ETF. As of December 31st, 2021, the ETF’s largest holdings in order include: AMC Entertainment Holdings Inc, Synaptics Inc, Lattice Semiconductor Corp, EastGroup Properties Inc, BJ’s Wholesale Club Holdings Inc, Tetra Tech Inc, Saia Inc, Ovintiv Inc, Tenet Healthcare Corp, and WillScot Mobile Mini Holdings Corp.
Vanguard Russell 2000 ETF Portfolio Composition:
Basic Materials (3.80%), Consumer Discretionary (14.50%), Consumer Staples (3.00%), Energy (4.60%), Financials (16.00%), Healthcare (17.40%), Industrials (15.40%), Telecommunications (1.90%), Real Estate (7.40%), Technology (13.00%), and Utilities (3.00%).
The VTWO fund offers a high potential for above average returns and is geared to the more aggressive investor. VTWO’s volatility can be more significant due to the absence of bonds within the ETF. A majority of the companies within the fund also have market capitalizations under $20 billion, which too can be seen as riskier.
This can often be due to the fact that some of the companies within the fund are not profitable, or not as established as their larger competitors. If you have more appetite for risk VTWO could be a good place to park your money for longer-term duration returns.
4. Vanguard Real Estate ETF (VNQ)
- Assets Under Management: $91.5 billion
- Expense Ratio: 0.12%
The Vanguard Real Estate ETF, is an index that seeks to track the performance of the MSCI U.S. Investable Market Real Estate 25/50 Index. The index comprises mainly REITs and companies that purchase office buildings, hotels, and other real estate property.
According to Vanguard, the total net assets of the 10 largest holdings comprise a total of 45.6% of the ETF. As of December 31st, 2021, the ETF’s largest holdings in order include: Vanguard Real Estate II Index Fund, American Tower Corp, Prologis Inc, Crown Castle International Corp, Equinix Inc, Public Storage, Simon Property Group Inc, Digital Realty Trust, SBA Communications Corp, and Realty Income Corp.
Vanguard Real Estate ETF Portfolio Composition:
Diversified Real Estate Activities (0.10%), Diversified REITs (3.00%), Health Care REITs (7.30%), Hotel & Resort REITs (2.40%), Industrial REITs (12.60%), Office REITs (6.50%), Real Estate Development (0.30%), Real Estate Operating Companies (0.20%), Real Estate Services (4.80%), Residential REITs (15.00%), Retail REITs (10.50%), Specialized REITs (37.20%).
The VNQ ETF offers a high potential for growth and passive income from REITs within the fund. While the potential for growth can be significant, the absence of bonds within the ETF can result in the shares of the fund rising or falling more persistently.
Finally, diversifying your risk is an extremely important part of your investing journey. Having broad exposure to REITs can help diversify the risk of stocks, bonds and other investments within an investment portfolio. It can also help protect you from downside risk during a bear market.
5. Vanguard FTSE Emerging Markets ETF (VWO)
- Assets Under Management: $110.9 billion
- Expense Ratio: 0.10%
The Vanguard FTSE Emerging Markets ETF, is an index that seeks to track the performance of the FTSE Emerging Markets All Cap China A Inclusion Index. The index comprises mainly of companies located in emerging markets around the world, such as China, Brazil, India, Taiwan and South Africa.
According to Vanguard, the total net assets of the 10 largest holdings comprise a total of 20.7% of the ETF. As of December 31st, 2021, the ETF’s largest holdings in order include: Taiwan Semiconductor Manufacturing Co. Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd, Meituan, Reliance Industries Ltd, Infosys Ltd, China Construction Bank Corp, MediaTek Inc, Housing Development Finance Corp, and Vale SA.
Vanguard FTSE Emerging Markets ETF Portfolio Composition:
Emerging Markets (99.60%) and Europe (0.40%).
The VWO ETF is a fund that gives investors broad exposure into emerging markets. The emerging market fund has high potential for growth. However, may carry higher risk due to potential geo-political concerns and other external factors.
Having broad exposure to emerging markets allows for diversification in your investment portfolio. Diversification across sectors and countries can help improve your risk/return ratio.
Best Vanguard ETFs: Final Takeaway
Since Vanguard’s emergence in the 1970’s, the company has helped millions create wealth in the stock market. Over the past few decades it has grown to the world’s second largest asset manager, with AUM now over $7 Trillion. This number trails behind Blackrock’s $10 Trillion in AUM.
With the US economy in a recession and stocks in a bear market, now is a great time for beginner to advanced investors to take advantage of the discount in ETFs like VOO and VTI.
While investing in the stock market does come with its risks, Vanguard has become the sweet spot for low-cost mutual and exchange-traded funds (ETFs). Finally, before you invest in a stock, mutual fund or ETF, make sure to always do your own research, consult with a registered financial advisor in your area.
