In this article, we discuss the 10 best Vanguard ETFs to diversify your portfolio. If you want to read about some more Vanguard ETFs to diversify your portfolio, go directly to 5 Best Vanguard ETFs to Diversify Your Portfolio.
The souring of the economy in the past few months has been a windfall for exchange-traded funds, which have witnessed a massive rise in demand, even among retail investors generally famous for attention towards the riskier growth sector. According to a report by news agency Reuters, retail investors are flocking towards funds like SPDR Bloomberg High Yield Bond ETF, the iShares iBoxx $ Inv Grade Corporate Bond ETF, and the iShares iBoxx $ High Yield Corporate Bond ETF as the economy slows, per data by investment bank JPMorgan.
Dave Nadig, the director of research at ETF Flows, says that a new series of exchange-traded funds launched recently, which will make it easier for people managing bond portfolios in a precise way. Nadig claims that the growth in bond ETFs has come as regulatory barriers that hindered institutional ownership are dropped. The analyst believes that fixed income is probably going to be “the growth story of the ETF space for the next four or five years”. Investments in defensive ETFs are also rising, per data from Morningstar.
Another trend sweeping the funds sector is the transition from mutual funds towards exchange-traded funds. A report from news platform Financial Times highlights that investors are selling out of bond mutual funds while maintaining their investments in exchange-traded funds. Morningstar data reveals that redemptions from US fixed-income funds amounted to over $200 billion in the first half of 2022. In the period between March and June, investors pulled over $137 billion from bond funds, the worst quarter for the industry since 1993.
In this overall market environment, investors are eagerly looking towards simpler investment strategies that charge low fees. Vanguard ETFs, founded by prolific investor Jack Bogle, focus on these two investor demands specifically. Vanguard offers over 80 exchange-traded funds for investors to choose from. Some of the top holdings of these funds include names such as Amazon.com, Inc. (NASDAQ:AMZN), Sea Limited (NYSE:SE), and Shopify Inc. (NYSE:SHOP). The funds are mostly actively-managed.
Vanguard funds manage over $7 trillion in assets for clients spread across the globe. Many investors on fixed incomes who want to build long-term portfolios often keep Vanguard holdings at the core of their investment strategies. There is a Vanguard fund for every type of investor at the market. For those who want a diverse portfolio, it may be prudent to invest in funds that cover broad areas of the market and provide investors with some much-needed cover against collapses or slowdowns in certain sectors.
Our Methodology
The ETFs listed below are discussed with regards to their top holdings. The aim of the article is to provide readers with a basic rundown of some of the top Vanguard ETFs in the US that have the best chance to provide investors with some diverse options in an uncertain economic environment. All the ETFs listed below trade on exchanges in the United States.
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Best Vanguard ETFs to Diversify Your Portfolio
10. Vanguard Dividend Appreciation Index Fund ETF Shares (NYSE:VIG)
Vanguard Dividend Appreciation Index Fund ETF Shares (NYSE:VIG) is an exchange traded fund that tracks the investment returns of an index which comprises common stocks of companies that have a record of increasing dividends over time.
One of the top holdings of Vanguard Dividend Appreciation Index Fund ETF Shares (NYSE:VIG) is Johnson & Johnson (NYSE:JNJ), a corporation that makes and sells a range of health-related products globally. At the end of the first quarter of 2022, 83 hedge funds in the database of Insider Monkey held stakes worth $7.4 billion in Johnson & Johnson (NYSE:JNJ), the same as in the previous quarter worth $7.3 billion.
Just like Amazon.com, Inc. (NASDAQ:AMZN), Sea Limited (NYSE:SE), and Shopify Inc. (NYSE:SHOP), Johnson & Johnson (NYSE:JNJ) is one of the stocks that elite investors are monitoring.
9. Vanguard Value Index Fund (NYSE:VTV)
Vanguard Value Index Fund (NYSE:VTV) is a fund that tracks the performance of the CRSP US Large Cap Value Index. The index comprises value stocks of large companies that trade on exchanges in the United States. It has over $146 billion in net assets with a yield of 2.42%.
One of the biggest holdings of Vanguard Value Index Fund (NYSE:VTV) is Berkshire Hathaway Inc. (NYSE:BRK-B), a conglomerate with interests in the insurance, freight rail transportation, and utility businesses. At the end of the first quarter of 2022, 104 hedge funds in the database of Insider Monkey held stakes worth $19 billion in Berkshire Hathaway Inc. (NYSE:BRK-B), compared to 108 in the preceding quarter worth $19.3 billion.
In its Q1 2022 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and Berkshire Hathaway Inc. (NYSE:BRK-B) was one of them. Here is what the fund said:
“Diversified holding company Berkshire Hathaway Inc. (NYSE:BRK-B) reported strong earnings during the quarter and benefited from continued share repurchases below intrinsic value. The company also announced significant deployments of excess cash during the quarter, including the acquisition of Alleghany and a large increase in its stake in Occidental Petroleum.”
8. Vanguard Consumer Staples Fund (NYSE:VDC)
Vanguard Consumer Staples Fund (NYSE:VDC) is an exchange traded fund that invests in securities on the MSCI US Investable Market Index/Consumer Staples 25/50. The index comprises large, mid-cap, and small-cap companies that operate in the consumer staples sector in the United States.
Vanguard Consumer Staples Fund (NYSE:VDC) holds a large stake in The Procter & Gamble Company (NYSE:PG), a company that markets consumer packaged goods. Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm GQG Partners is a leading shareholder in The Procter & Gamble Company (NYSE:PG), with 9.9 million shares worth more than $1.5 billion.
7. Vanguard 500 Index Fund (NYSE:VOO)
Vanguard 500 Index Fund (NYSE:VOO) is a fund that tracks the performance of the S&P 500 Index. The index is widely considered the benchmark index of the US stock market and comprises 500 of the biggest companies in the US based on their market capitalizations. The fund aims to replicate the returns of the index by holding each stock in the same proportion as the index.
One of the biggest holdings of Vanguard 500 Index Fund (NYSE:VOO) is Tesla, Inc. (NASDAQ:TSLA), a firm that markets electric vehicles and clean energy solutions. At the end of the first quarter of 2022, 80 hedge funds in the database of Insider Monkey held stakes worth $11 billion in Tesla, Inc. (NASDAQ:TSLA), compared to 91 in the previous quarter worth $12 billion.
Here is what Grantham Mayo Van Otterloo & Co. LLC has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter:
“To put the demand growth for clean energy materials into perspective, let’s look at Tesla, Inc. (NASDAQ:TSLA). At its Battery Day last year, Tesla, Inc. (NASDAQ:TSLA) projected three terawatt hours of lithium-ion battery capacity needed in 2030 for the EVs and storage they expect to produce. To reach this target, Tesla alone would gobble up approximately 75% of the world’s current nickel production and four times the world’s current lithium production. These numbers are astounding enough, but when one considers that EVs currently represent just 15% of global nickel demand and about 45% of lithium demand and that Tesla will likely be producing only a small proportion of the world’s EVs in 2030, the implications are staggering. Clean energy materials companies will make a lot more money in the decades to come than they ever have both because they will be selling a lot more metric tons of material and because there are certain to be shortages where supply can’t keep up with the rapidly growing demand.”
6. Vanguard Total Stock Market Index Fund (NYSE:VTI)
Vanguard Total Stock Market Index Fund (NYSE:VTI) is an exchange traded fund that invests at least 80% of net assets in securities on an index that comprises 100% of investable companies in the US stock market. The fund employs a sampling strategy to invest in securities on the index.
A key holding of the Vanguard Total Stock Market Index Fund (NYSE:VTI) is Apple Inc. (NASDAQ:AAPL), a firm that makes and sells consumer electronics. At the end of the first quarter of 2022, 131 hedge funds in the database of Insider Monkey held stakes worth $182 billion in Apple Inc. (NASDAQ:AAPL), compared to 134 in the preceding quarter worth $186 billion.
Along with Amazon.com, Inc. (NASDAQ:AMZN), Sea Limited (NYSE:SE), and Shopify Inc. (NYSE:SHOP), Apple Inc. (NASDAQ:AAPL) is one of the stocks that hedge funds are keeping a close eye on.
In its Q4 2021 investor letter, Berkshire Hathaway highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“Apple Inc. (NASDAQ:AAPL) – our runner-up Giant as measured by its yearend market value – is a different sort of holding. Here, our ownership is a mere 5.55%, up from 5.39% a year earlier. That increase sounds like small potatoes. But consider that each 0.1% of Apple’s 2021 earnings amounted to $100 million. We spent no Berkshire funds to gain our accretion. Apple’s repurchases did the job. It’s important to understand that only dividends from Apple are counted in the GAAP earnings Berkshire reports – and last year, Apple paid us $785 million of those. Yet our “share” of Apple’s earnings amounted to a staggering $5.6 billion. Much of what the company retained was used to repurchase Apple Inc. (NASDAQ:AAPL) shares, an act we applaud. Tim Cook, Apple’s brilliant CEO, quite properly regards users of Apple Inc. (NASDAQ:AAPL) products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well.”
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Disclosure. None. 10 Best Vanguard ETFs to Diversify Your Portfolio is originally published on Insider Monkey.
