- (0:45) - Reviewing, “Your Money Or Your Life”
- (7:35) - Finding Financial Freedom: Where To Start
- (12:00) - Finding Top ETF Investments: Tracey’s Top Picks
- (32:15) - Episode Roundup: VOO, VYM, VBR, VIOV, VTV
Welcome to Episode #149 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
This week, she’s taking a look at the 1990s personal finance best seller “Your Money or Your Life” by Vicki Robin and Joe Dominguez. It was updated in 2018 thanks to buzz it was getting from the FIRE movement.
FIRE, if you don’t know, is “financial independence, retire early” and features many bloggers trying to achieve financial independence so they can retire in their 30s, 40s and 50s.
The point of the book is to take back your life by “changing your relationship with money.”
It’s a 9-step program that includes figuring out how much money you’ve made in your life and also tracking how much you spend every month.
What does it have to do with investing?
Creating Passive Income Streams
The final lesson in the book is about how you can turn what is now some significant savings (after you have done the other steps of the program) into passive income streams which will help you maintain your financial independence.
Numerous investment options are listed including treasuries, real estate, and, of course, stocks.
For stocks, the book advocates following John Bogle’s, the founder of Vanguard, philosophy of using basic ETFs.
ETFs are great for value investors as there are a lot to choose from and they give you quick exposure to value stocks.
5 Vanguard ETFs for Value Investors
1. Vanguard S&P 500 ETF VOO follows the S&P 500 index. What’s more basic than that? While this isn’t a “value” ETF, it does pay a respectable dividend, currently yielding 1.94%. The technology sector is the biggest sector now at 21.2%. The S&P 500 isn’t expensive, on a historical basis, right now, so value investors can still buy in without holding their nose.
2. Vanguard High Dividend Yield ETF VYM tracks the FTSE High Dividend Yield index. It has 423 stocks and will give investors exposure to many of the big cap multi-national companies such as AT&T, Verizon and Merck. Financials are the largest sector, at 18.6% of the portfolio with Consumer Goods and Healthcare coming in second and third. It’s pays a dividend yielding 3.3%.
3. Vanguard Small-Cap Value ETF VBR has 847 stocks with the 10 largest holdings just 5.6% of the total portfolio. You might be surprised that it pays a dividend yielding a healthy 2.22% because, after all, not as many small caps pay dividends. But financials are now 35% of the portfolio, which means the small banks. And the banks tend to reward shareholders.
4. Vanguard S&P Small-Cap 600 Value ETF VIOV is smaller than VBR with just 449 stocks. Financials are still the largest sector, but they make up just 21.5% of the holdings with Industrials and Information Technology coming in second and third. It also pays a dividend, yielding 1.77%. But this ETF has struggled more than the others over the last year as it’s down 7.3% during that time versus a decline of just 1.55% for the VBR ETF.
5. Vanguard Value ETF VTV is more heavily weighted towards the large caps. Pfizer, JPMorgan Chase, Cisco and ExxonMobil are among its top 10 holdings. It has 339 stocks with financials again the top sector at 24.6% of the portfolio. You’ll get a pretty sizable dividend too, yielding 2.68% as of June 30, 2019.
There are other value ETFs by Vanguard and other companies that investors may want to consider as well.
Should stock investors be reading Your Money or Your Life?
Tune into this week’s podcast to find out.
[In full disclosure, the author of this article owns shares of VBR in her personal portfolio.]
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Vanguard S&P Small-Cap 600 Value ETF (VIOV): ETF Research Reports
Vanguard Value ETF (VTV): ETF Research Reports
Vanguard S&P 500 ETF (VOO): ETF Research Reports
Vanguard High Dividend Yield ETF (VYM): ETF Research Reports
Vanguard Small-Cap Value ETF (VBR): ETF Research Reports
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