Regardless of whether you’re a new investor, experienced, or are near retirement, investing in an exchange-traded fund (ETF) can make a lot of sense. ETFs can be an easy option if you’re looking to simplify your strategy and aren’t sure of where to put your money. And having the same go-to ETF to put money into on a recurring basis can make for an excellent way to build up your portfolio’s balance over the years.
Vanguard is known for being a top fund manager. Its ETFs normally generate excellent returns, they offer a lot of diversification, and their expenses are not high. And some of their funds also pay dividends that are better than what you would get with the average investment on the S&P 500.
A couple of Vanguard ETFs you can comfortably buy and hold for the rest of your life are the Vanguard Value Index Fund ETF Shares (NYSEMKT: VTV) and the Vanguard High Dividend Yield Index Fund ETF Shares (NYSEMKT: VYM). Here’s a look at why these funds can be such attractive options for the long haul, especially for income investors.
1. Vanguard Value Index Fund ETF Shares
The Vanguard Value Index ETF has a minuscule 0.04% expense ratio, which is incredibly low for an ETF. And that’s important because it means fees won’t chip away at your returns over the long haul. The ETF also yields 2.3%, which is a full point better than the S&P 500 average of 1.3%.
What makes the fund a safe investment is that it focuses on large-cap stocks. Within the ETF, you’ll find large and reputable companies such as Berkshire Hathaway, JPMorgan Chase, and UnitedHealth Group among its biggest holdings.
By investing in big-name stocks, investors don’t have exposure to a lot of risk with this ETF because these are the types of investments that should remain fairly stable over the years. And even the largest holding in the fund accounts for just 3.4% of its overall weight. There isn’t too much exposure to a single stock.
There are 341 stocks in the fund, and the ETF averages a price-to-earnings multiple of just under 21 as it lives up to its name of being a good value investment.
Over the past 10 years, it has generated total returns (including dividends) of around 171%. That averages out to a compound annual growth rate of 10.5%. If the fund were to continue to average that kind of annual return in the future, it would take approximately 23 years for it to increase in value by a multiple of 10.
2. Vanguard High Dividend Yield Index Fund ETF Shares
For investors craving a slightly higher yield, the Vanguard High Dividend Yield fund pays 2.8% in dividends. It comes with a slightly higher expense ratio, but at 0.06%, it’s still minimal in the grand scheme of things.
Like the Value Index, it also tracks large-cap stocks, but its focus is more on stocks offering high yields, which in turn allows it to offer an above-average payout itself. There are more stocks in this ETF, with 550 holdings in total as of the end of August.
But the composition is a little different at the top as names such as Johnson & Johnson, Procter & Gamble, and ExxonMobil are among its biggest holdings. What those stocks have in common are reputations for paying dividends and growing them for decades.
Over the past 10 years, the fund has generated slightly less-impressive gains than the Value fund, but at 160%, they are strong nonetheless. For risk-averse investors who want some excellent dividend income, it’s hard to go wrong with either one of these investments in the long run.
Should you invest $1,000 in Vanguard Index Funds – Vanguard Value ETF right now?
Before you buy stock in Vanguard Index Funds – Vanguard Value ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Index Funds – Vanguard Value ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $756,882!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 23, 2024
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, JPMorgan Chase, Vanguard Index Funds-Vanguard Value ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Johnson & Johnson and UnitedHealth Group. The Motley Fool has a disclosure policy.
2 Vanguard ETFs That Dividend Investors Can Buy and Hold Forever was originally published by The Motley Fool
Source Agencies
