Should You Invest in the Vanguard Energy ETF (VDE)?
If you're interested in broad exposure to the Energy - Broad segment of the equity market, look no further than the Vanguard Energy ETF (VDE), a passively managed exchange traded fund launched on 09/23/2004.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 15, placing it in bottom 6%.
Index Details
The fund is sponsored by Vanguard. It has amassed assets over $8.69 billion, making it one of the largest ETFs attempting to match the performance of the Energy - Broad segment of the equity market. VDE seeks to match the performance of the MSCI US Investable Market Energy 25/50 Index before fees and expenses.
The MSCI US Investable Market Index (IMI)/Energy 25/50 is made up of stocks of large, mid-size, and small U.S. companies within the energy sector.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 3.78%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Energy sector--about 100% of the portfolio.
Looking at individual holdings, Exxon Mobil Corp (XOM) accounts for about 22.09% of total assets, followed by Chevron Corp (CVX) and Conocophillips (COP).
The top 10 holdings account for about 60.51% of total assets under management.
Performance and Risk
So far this year, VDE has gained about 9.91%, and was up about 20.97% in the last one year (as of 03/25/2024). During this past 52-week period, the fund has traded between $105.87 and $130.52.
The ETF has a beta of 1.27 and standard deviation of 28.98% for the trailing three-year period, making it a high risk choice in the space. With about 116 holdings, it effectively diversifies company-specific risk.
Alternatives
Vanguard Energy ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, VDE is a reasonable option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.
IShares Global Energy ETF (IXC) tracks S&P Global 1200 Energy Sector Index and the Energy Select Sector SPDR ETF (XLE) tracks Energy Select Sector Index. IShares Global Energy ETF has $3.28 billion in assets, Energy Select Sector SPDR ETF has $38.53 billion. IXC has an expense ratio of 0.44% and XLE charges 0.09%.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Vanguard Energy ETF (VDE): ETF Research Reports
Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
ConocoPhillips (COP) : Free Stock Analysis Report
Energy Select Sector SPDR ETF (XLE): ETF Research Reports
iShares Global Energy ETF (IXC): ETF Research Reports
