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3 Vanguard ETFs For Boosting Portfolio Diversification

Published 23/05/2022, 08:27

Vanguard exchange-traded funds (ETFs) are extremely popular among retail investors. In terms of assets under management, this fund manager is one of the most important ETF providers stateside. Therefore, today’s post introduces three Vanguard funds with compelling qualities that could be of interest to many readers.

1. Vanguard High Dividend Yield ETF

  • Current Price: $105.81
  • 52-week range: $101.37 - $115.66
  • Dividend yield: 2.93%
  • Expense ratio: 0.06% per year

The first fund on today’s list is the Vanguard High Dividend Yield ETF (NYSE:VYM). It invests in businesses with high dividend yields. The fund was first listed in November 2006.

VYM Weekly

VYM, which tracks the FTSE High Dividend Yield Index, currently holds 443 stocks. In terms of sectoral allocations, we see financials (19.6%), healthcare (14.4%), consumer staples (13.4%), industrials (10.1%) energy (9.10%), consumer discretionary (9.0%) and technology (6.9%).

The top 10 stocks comprise over a fifth of $55.8 billion in net assets. Therefore, VYM is highly liquid, providing it with large economies of scale.

Among those leading holdings are Johnson & Johnson (NYSE:JNJ), Procter & Gamble (NYSE:PG), Exxon Mobil (NYSE:XOM), JPMorgan Chase (NYSE:JPM), Home Depot (NYSE:HD), Chevron (NYSE:CVX) and Pfizer (NYSE:PFE).

In early January, VYM was changing hands at record high prices. Yet it is down 5.6% year-to-date. By comparison, the S&P 500 index has lost almost 18% so far in the year.

The fund’s trailing price-to-earnings (P/E) and price-to-book (P/B) ratios stand at 14.9x and 2.5x. Those investors looking for a low-cost and diversified dividend stock fund should put VYM on their radar screen.

2. Vanguard Information Technology ETF

  • Current Price: $337.77
  • 52-week range: $327.06 - $467.06
  • Dividend Yield: 0.88%
  • Expense ratio: 0.1% per year

Our second fund is the Vanguard Information Technology ETF Shares (NYSE:VGT), which invests in some of the leading names in the information technology (IT) sector. The fund began trading in January 2004.

VGT Weekly

VGT tracks the Vanguard Information Technology Index and currently holds 357 stocks. Sub-sectors invested include: technology hardware, storage & peripherals (24.0%); systems software (22.5%); semiconductors (16.3%); data processing & outsourced services (11.40%); application software (11.30%); communication equipment (3.00%) and others.

The leading 10 companies on the roster comprise close to 60% of $51.4 billion in net assets. Among them are Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), NVIDIA (NASDAQ:NVDA), Visa (NYSE:V), Mastercard (NYSE:MA), Broadcom (NASDAQ:AVGO) and Cisco Systems (NASDAQ:CSCO).

Most of these names are widely followed and well understood by retail investors. Over the past two decades, tech shares, including IT names, have been clear winners on Wall Street. As a result, VGT hit a record high in late December 2021.

However, the risk-off sentiment of 2022 has changed the investing scene. Like many other tech-focused ETFs, VGT has lost almost 26.3% of its value since January. Similarly, the Dow Jones U.S. Technology index has also declined 28.2%.

Trailing P/E and P/B ratios for VGT are now at 25.8x and 8.1x. A further decline toward $300 would offer a better entry point for buy-and-hold investors.

3. Vanguard FTSE All-World ex-US Small-Cap ETF

  • Current Price: $111.98
  • 52-week range: $105.49 - $142.25
  • Dividend yield: 3.28%
  • Expense ratio: 0.07% per year

Our third Vanguard fund, namely the Vanguard FTSE All-World ex-US Small-Cap Index Fund ETF Shares (NYSE:VSS), could appeal to investors who want to hedge their bets beyond stocks stateside. It invests in small-capitalization (cap) companies outside the US. The fund was first launched in April 2009.

VSS Weekly

VSS, which tracks the FTSE Global Small Cap ex-US Index, currently holds 4281 stocks. Almost a fifth of the portfolio is in industrials, followed by consumer discretionary (13.0%), basic materials (12.3%), real estate (11.3%), financials (11.1%), technology (11.0%), healthcare (6.0%) and energy (5.2%).

Meanwhile, around a quarter of the names come from emerging markets. Next are stocks from Europe (33.4%), the Pacific (24.9%), and North America (16.80%). The top 10 holdings comprise only 4% of $10.0 billion in net assets.

Among the leading shares are several Canadian companies. They include the miner First Quantum Minerals (TSX:FM), whose main product is copper; energy groups Tourmaline Oil (TSX:TOU) and Emera (TSX:EMA); professional services company WSP Global (TSX:WSP); IT and software group Open Text (NASDAQ:OTEX); and West Fraser Timber (NYSE:WFG).

VSS hit an all-time high in September 2021. However, the ETF has declined 16.42% YTD. Trailing P/E and P/B ratios are 11.2x and 1.4x. Readers looking for some exposure to small-caps outside the US could research the fund further.

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