Why Investors Love Vanguard

I’ve personally been a Vanguard investor for over 7 years now and in my opinion, there are very few that can match what they offer. Here are 3 reason’s why investors love Vanguard and why it’s been growing ever since it launched its first fund in 1976.

1) Options

Vanguard offers a wide range of ETFs, mutual funds and index funds for all types of investors. As of January 2021, they offer 209 U.S. funds and around 232 funds outside the U.S (aka international funds).

Whether you want to add exposure to the real estate industry, the booming technology industry, diversify your risk with bonds, own the S&P 500 or add some income, Vanguard has it all.

When you can offer “a fund for any occasion” you become an attractive option for all types of investors seeking stability and growth in their investment portfolios.

2) Low-fees

The low fees are by far one of the best and most attractive parts of Vanguard. If you think fees don’t make a big difference, take a look at the graph below.

Same investment. Same time period. Same return. But one investor is paying no fees and the other is paying 2%. $170,000 is a good chunk of money. Throwing it away to fees could be tragic when it comes to your retirement or any other investment goals you may have.

So how much does Vanguard charge in fees?

That depends on what kind of fund you’re investing in. Of course, actively managed funds will have higher expense ratios than their counterparts because you’re paying extra for someone to be constantly rebalancing the fund. But across the board, Vanguard’s expense ratio averages 0.09% with the industry average being around 0.54%. That alone can amount to hundreds of thousands of dollars in your pocket 20-30 years down the road.

3) Attractive Returns

Here’s an interesting stat.

Still not convinced?

Check out the chart below.

The returns on Vanguard funds are significantly higher than the industry average making it that much more attractive to investors.

“This example assumes a 6% return on a $50,000 investment”

But enough about Vanguard facts, let’s get into the meat and potatoes.

Here are 3 Vanguard funds for all types of investors that you may want to consider adding to your portfolio.

1) Vanguard Dividend Appreciation ETF (VIG)

The dividend appreciation ETF seeks to track the performance of stocks with a record of growing their dividends year over year. If you’re a dividend investor, this is your cup of tea. With an expense ratio of only 0.06%, you pay very little in fees for holding some of the best dividend-paying companies in the world. I’m personally a big believer in owning some sort of dividend ETF if you’re a dividend investor and you can’t go wrong with this one.

Here are its top 10 holdings (of 247 total stocks):

Within a dividend appreciation ETF, you’ll find a lot of mature companies which means they’ve been profiting off their customers for years, they know how to fill a gap in the marketplace and they have significant amounts of free cash flow to continue paying out and growing their dividends year after year.

2) Vanguard Information Technology Index Fund ETF (VGT)

A great way to gain exposure to some of the most disruptive technology companies across the globe. Vanguard’s information technology index fund ETF invests in household names and companies I’m sure you use on a daily basis. It seeks to include stocks in the electronics and computer industries or companies that produce products/services based on the newest available technology.

With an expense ratio of 0.10% you pay a little extra in fees but rightfully so. I’m an investor myself with a strong conviction in the fund long term. It’s a great way to own quality businesses by also diversifying your risk as the technology space can be extremely volatile if you’re investing in individual stocks. If you’re in the early stages of your investing career, have a longer time horizon, can afford to take on a bit more risk and looking to take advantage of innovation, this is a good bet.

Here are its top 10 holdings (of 358 total stocks):

Instead of trying to pick individual stocks and hoping you made the right choice, why not own a little piece of all of them? VGT allows you to do just that.

3) Vanguard Total Stock Market ETF (VTI)

Here’s a fund that I personally believe should be in every investor’s portfolio. Whether you’re a beginner, intermediate or you’ve been investing for years, it never hurts to own the entire stock market.

Vanguard’s total stock market ETF seeks to track the CRSP US Total Market Index which is a fund that includes nearly 4,000 companies ranging from mega, large, small and micro capitalizations. The fund also employs a strategy of holding both growth and value companies making it a good choice for investors looking to add diversification with some added growth opportunity. With an incredibly low and insignificant expense ratio of only 0.03%, you can sleep well at night knowing you’re keeping the majority of your money and not losing it to unwanted fees.

Here are its top 10 holdings (of 3,935 total stocks):

It’s important to note that since this total stock market fund holds a lot more companies than the previous 2 ETFs mentioned, its top 10 holdings represent a smaller percentage of the total fund. Meaning that large price swings in the top 10 holdings will not have as much of an effect on the total price of the fund. Just something to keep in mind when investing in larger ETFs.

Final Thoughts…

With that being said, there are plenty of other funds to choose from when looking to invest with Vanguard no matter what kind of investor you are. ETFs allow the average investor to skip “stock picking” and invest with a “set it and forget it” type of mentality. Since ETFs trade on the exchange like any normal stock, you can buy and sell them with ease for a small price (the expense ratio).

With regards to my own portfolio. I like to keep around 20% invested in ETFs. This allows me to add some diversification and not keep "all my eggs in one basket”. If you don’t like watching the markets or just simply don’t have the time, Vanguard ETFs should be your best friend.

As always, make sure you’re doing your own research before investing in any stocks or funds mentioned in The Profit Zone. This is not financial advice, just simply some food for thought you can use for your own portfolio.

Thanks for reading and see you in the next one!

- Alex (The Dividend Dominator)