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In terms of top exchange traded fund (ETF) providers I think investors should consider, Vanguard remains a top pick of mine.
I have to say, I’ve tried a few different ETF providers over the years (most of the majors), but Vanguard’s interface as well as its plethora of offerings continues to stand out to me as one of the best of its peer group. And was one of the original ETF providers out there with a long history of performance in providing funds that track broader indices very closely, and doing so with some of the lowest fees in the industry, there’s plenty to like about this provider’s offerings relative to its peers.
That said, with hundreds of offerings available at Vanguard, it may be difficult for investors to choose which such ETFs fit their risk profile and investing goals. For those thinking long-term, here are the three top ETFs I’m watching right now from Vanguard.
Vanguard S&P 500 ETF (VOO)
Investors who have not held any exposure to U.S. stocks have underperformed those who added overweight position sizing to funds like the Vanguard S&P 500 ETF (VOO). That’s a fact most investors can understand, given how impressive the returns most major U.S. markets have provided compared to their global counterparts.
Over the long-term, as investing guru Warren Buffett and others will routinely point out, betting against the U.S. economy is a losing bet. While growth may be slowing, and other headwinds may be picking up (slowing jobs market and inflation ticking higher), it’s also true that the U.S. remains the technology hub of the world. Most of the AI-related innovation we’re seeing is coming out of our back yard.
For investors looking to benefit from these trends, buying the entire S&P 500 is a winning long-term strategy. With an expense ratio of just three basis points (0.03%) reflecting a world-class index/benchmark investors can own for years or decades to come, I think both passive and active investors can likely find some room in their portfolios to own the benchmark and benefit from the long-term capital appreciation the U.S. stock market has historically provided (and will continue to provide into the future).
Vanguard FTSE Developed Markets ETF (VEA)
Of course, I think a healthy dose of exposure to U.S. equities is a good starting point for most investors. However, given where valuations are in the U.S. stock market, and the relative attractiveness of other international blue-chip companies, I’m gravitating toward adding more international exposure in my portfolio right now.
One of the best offerings in this space courtesy of Vanguard is the Vanguard FTSE Developed Markets ETF (VEA). This ETF tracks a broad range of large-, mid- and small-cap stocks in developed markets outside of the U.S. and Canada. So, for investors looking for their global developed markets fix, this is the direction I’d likely go.
Factoring in a rock-bottom expense ratio of just 0.03% and an even more impressive dividend yield of 2.8%, this is an excellent option for those looking for better value in a market that many are starting to look at as seriously overvalued.
International stocks are coming back into vogue, with many top money managers eyeing stocks outside of the U.S. and Canada for relative outperformance. If you find yourself in a similar place, this is the ETF I’d look at to gain exposure to this trend.
Vanguard Information Technology ETF (VGT)
If you hold the view that the U.S. economy will likely be almost entirely tech driven in a decade or two from now, holding exposure to companies in this sector that actually provide the kind of growth an investor is looking for is important.
In that respect, the Vanguard Information Technology ETF (VGT) seems like a great option. This ETF focuses on a little more than 300 IT-related companies, including all of the mega-cap names. In other words, this is a portfolio tilted toward high-quality mega-cap U.S. tech giants, the sector of the economy that’s outperformed for most of the past two decades (outside of the GFC).
With an expense ratio of 0.41%, VGT is more expensive than the other two picks on this list. That said, I think the difference is minimal, and the quality of tech exposure investors can garner from investing in such a fund is definitely worth it right now.
I’d consider adding a small position in VGT now, and potentially legging into this ETF over time (via dollar cost averaging, or whatever method is best-suited to individual investors), as multiples come down and these stocks get cheaper. That’s my expectation, at least.