Vanguard funds, be they index funds or exchange-traded funds, are wildly popular with financial advisers and investors. One of the primary reasons Vanguard funds have such receptive audiences is their low fees.
Including ETFs, index funds and even actively managed mutual funds (which are usually pricier), Vanguard’s complex-wide asset-weighted average expense ratio is just 0.11%, or $11 annually per $10,000 invested, according to the Pennsylvania-based fund giant.
Scores of data points confirm that when investors look for funds to buy, they frequently turn to Vanguard funds. Focusing on ETFs for a moment, as of Sept. 11, Vanguard funds have $927.23 billion in U.S. ETF assets under management.
Investors looking for low-cost funds to buy may want to consider some of the following Vanguard funds, spanning multiple asset classes and regions.
Vanguard Funds to Buy: Vanguard Total World Bond ETF (BNDW)
Expense Ratio: 0.09% per year, or $9 annually per $10,000 invested.
The Vanguard Total World Bond ETF (NASDAQ:BNDW) is the newest member of the Vanguard funds fray, having debuted just last week. For fixed income investors looking for cost-effective, broad-based bond exposure, this Vanguard fund makes a lot of sense.
BNDW’s efficiencies are offered via an ETF of ETFs structure, a methodology Vanguard uses on other fixed income ETFs. The new BNDW features the Vanguard Total Bond Market ETF (NYSEARCA:BND) and the Vanguard Total International Bond ETF (NASDAQ:BNDX) as its two holdings.
That structure helps the new BNDW “achieve immediate scale by using existing exposure from the underlying ETFs and is expected to result in tighter bid/ask spreads and lower operating expenses than investing directly in the benchmark’s constituents,” according to Vanguard.
With an annual fee of just 0.09%, BNDW is cheaper than 90% of rival funds with comparable holdings.
Vanguard Funds to Buy: Vanguard Communication Services ETF (VOX)
Expense Ratio: 0.10%
The Vanguard Communication Services ETF (NYSEARCA:VOX) is the rejuvenated take on a Vanguard fund that used to track the slow-growth telecommunications sector. That sector is about to undergo some significant changes, becoming the communication services sector and making way for some more exciting growth fare that previously resided in the consumer discretionary and technology sector.
Once upon a time, VOX was dominated by the likes of Verizon (NYSE:VZ) and AT&T (NYSE:T). Now, this Vanguard fund devotes nearly 32% of its weight to Google parent Alphabet (NASDAQ:GOOGL NASDAQ:GOOG) and Facebook (NASDAQ:FB).
Vanguard Funds to Buy: Vanguard Value ETF (VTV)
Source: GotCredit via Flickr (Modified)
Expense Ratio: 0.05%
Value stocks are still struggling against their growth rivals, but the Vanguard Value ETF (NYSEARCA:VTV) is a fund to buy for investors willing to wager on a value resurgence. This Vanguard fund is a cheap way of doing just that. With an annual fee of just 0.05%, VTV is one of the cheapest value funds on the market.
While value stocks are again trailing growth fare this year, there are reasons to consider VTV as a fund to buy right now. Notably, the value fund is perking up in the third quarter with a quarter-to-date gain of just over 4%.
This Vanguard fund holds 338 stocks with a median market capitalization of $108.6 billion. As is the case with many value strategies, VTV has a large weight to financial stocks (24.40%), but the fund also devotes 14.60% to the technology sector.
Vanguard Funds to Buy: Vanguard FTSE Developed Markets ETF (VEA)
Expense Ratio: 0.07%
International stocks, be they developed or emerging markets, are trailing U.S. equities in epic fashion this year, but that is creating buying opportunities for prescient investors. For now, the better way to approach ex-U.S. equities is likely via developed markets and funds such as the Vanguard FTSE Developed Markets ETF (NYSEARCA:VEA).
As a developed markets play, this Vanguard fund keeps investors away from the China/U.S. trade spat, Brazil and Turkey’s political volatility and South Africa’s recession, all of which are factors plaguing emerging markets assets this year.
VEA holds over 3,900 stocks, 37.6% of which are Japanese or U.K. companies. With its annual fee of 0.07%, this Vanguard fund is also one of the cheapest ex-U.S. developed markets ETFs on the market today. VEA also features a solid dividend yield of just over 3.02%, giving the Vanguard fund a nice income profile, even though it is not a dedicated dividend fund.
Vanguard Funds to Buy: Vanguard Small-Cap Growth ETF (VBK)
Expense Ratio: 0.07%
Small-cap stocks are performing admirably this year. Just look at the diversified Vanguard Small-Cap ETF (NYSEARCA:VB), which is up nearly 12%. Small-cap growth stocks are proving to be an even better bet as highlighted by a year-to-date gain of nearly 18% for the Vanguard Small-Cap Growth ETF (NYSEARCA:VBK).
Other reasons why this is one of the better funds to buy include general dollar strength, the steady U.S. economy and the domestic focus of small caps, which steers smaller firms away from macro issues such trade spats and weak foreign currencies.
VBK holds 650 stocks with over 37% of its combined weight allocated to the industrial and technology sectors. This Vanguard fund resides just 0.60% below its 52-week high and is sporting a third-quarter gain of almost 5%.
Vanguard Funds to Buy: Vanguard Mega-Cap Growth ETF (MGK)
Expense Ratio: 0.07%
Investors looking for FAANG-heavy funds to buy often look to internet and technology funds. Sensible choices to be sure, but the Vanguard Mega-Cap Growth ETF (NYSEARCA:MGK) ETF is a credible FAANG fund in its own right.
In order, as of July 31, Apple (NASDAQ:AAPL), Alphabet, Amazon (NASDAQ:AMZN) and Facebook combined for 27.50% of MGK’s weight. In other words, this Vanguard fund is a cost-effective, one-stop shop for investors looking for FAANG exposure without having to splurge on the triple- and quadruple-digit price tags associated with those stocks.
This Vanguard fund is traditional in its approach to the growth factor, meaning the technology and consumer discretionary sectors loom large. Those sectors combine for 52.60% of MGK’s weight. Over the past three years, MGK is up 65.2%, beating the S&P 500 by 840 basis points over that period.
Vanguard Funds to Buy: Vanguard Extended Market ETF (VXF)
Expense Ratio: 0.08%
Total market and S&P 500 funds, including some Vanguard funds, are popular with a broad swath of investors. The rub is that those products heavily tilt toward large-cap stocks. The Vanguard Extended Market ETF (NYSEARCA:VXF) is the fund to buy for investors looking to fill in the blanks created by large-cap broad market funds.
VXF holds nearly 3,300 mid- and small-cap stocks that are not members of the S&P 500. The median market value of VXF’s holdings is $4.6 billion making this Vanguard fund a mid-cap blend ETF.
“Market-cap weighting skews the fund toward the largest names outside of the S&P 500, but it reaches further down the market-cap spectrum than most mid-blend Morningstar Category peers and straddles the mid- and small-cap size segment breakpoint,” said Morningstar in a note earlier this month. “Indeed, its average market capitalization is about half that of the category average. The fund’s broad reach and market-cap weighting should help it effectively diversify firm-specific risk.”
As of this writing, Todd Shriber owned shares of VB and VEA.