In 2021, with over $5.4 trillion in assets under management, Vanguard was the second-largest fund manager behind BlackRock (NYSE:BLK).
John Bogle, who founded the financial powerhouse, is also credited with transforming the investment management industry, bringing index funds to millions of retail portfolios. Research highlights: “… Bogle was successful. But all of his success, perhaps ironically, was achieved by simply targeting the average — capturing the market average and doing so in a way that benefits the average investor.”
In other words, Bogle believed investors could buy and hold many of these index funds for years, and even decades. Many investors also choose Vanguard mutual funds and exchange-traded funds (ETFs) for their low cost. The asset manager highlights its average ETF expense ratio is 0.06%, or $6 on an initial investment of $10,000. That compares to an industry average of 0.25%.
Best Vanguard Funds to Buy: Vanguard Consumer Discretionary Index Fund ETF (VCR)
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52-Week Range: $220.28-$360.54
Dividend Yield: 0.7%
Expense Ratio: 0.1% per year
The first Vanguard fund is the Vanguard Consumer Discretionary Index Fund ETF (NYSEARCA:VCR). It gives access to companies offering goods or services that consumers typically purchase on a discretionary basis. This ETF was first launched in January 2004.
VCR currently holds 313 stocks and the benchmark index is the Consumer Discretionary Spliced Index. Over a quarter of the fund is held in internet and direct marketing retail stocks. Then come names from automobile manufacturers (16.4%), restaurants (10.2%), home improvement retail (10.1%); hotels, resorts & cruise lines (5.6%) and general merchandise stores (4.1%).
More than 60% of the fund is in the leading 10 names, making VCR a heavily concentrated fund. Amazon (NASDAQ:AMZN) leads with 23.11%, followed by Tesla (NASDAQ:TSLA) with 13.93%. Other businesses to note include Home Depot (NYSE:HD), Nike (NYSE:NKE), McDonald’s (NYSE:MCD), Lowe’sCompanies (NYSE:LOW) and Starbucks (NASDAQ:SBUX).
In late 2021, VCR hit an all-time high. But so far in 2022, the fund has lost almost 20%. Trailing price-earnings (P/E) and price-book (P/B) ratios stand at 19.8x and 4.5x.
Readers who believe in the strength of the U.S. consumer could consider buying into VCR around these levels.
Vanguard Health Care Index Fund ETF (VHT)
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52-Week Range: $217.12-$268.72
Dividend Yield: 1.31%
Expense Ratio: 0.1%
According to data from the Centers for Medicare & Medicaid Services, in 2020, Americans spent over $12,500 per person on healthcare. Healthcare expenditure comprises about a fifth of the gross domestic product. The Census Bureau also reports that “By 2060, nearly one in four Americans will be 65 years and older.” In other words, the aging population will have diverse and increasing healthcare needs. As a result, Wall Street pays attention to shares of businesses in the industry.
Next up on our list is the Vanguard Health Care Index Fund ETF (NYSEARCA:VHT). It invests in a range of pharma, medical and healthcare companies stateside. The fund began trading in January 2004 and assets under management exceed $18.6 billion.
VHT invests in 408 stocks. Pharmaceuticals have the largest slice with 28.9%. Then, we see biotechnology (17.5%), healthcare equipment (17%), and managed healthcare (13.1%) among others.
Over 45% in the portfolio is held in the top 10 stocks. Among them are UnitedHealth (NYSE:UNH), Johnson & Johnson (NYSE:JNJ), AbbVie (NYSE:ABBV), Pfizer (NYSE:PFE), Eli Lilly (NYSE:LLY), Merck (NYSE:MRK), Thermo Fisher Scientific (NYSE:TMO) and Abbott Laboratories (NYSE:ABT).
VHT is down 7% year to date). Trailing P/E and P/B ratios stand at 21.7x and 4.5x. Interested readers could regard the $430 level as a better entry point into healthcare names in VHT.
Best Vanguard Funds to Buy: Vanguard High Dividend Yield Index Fund ETF (VYM)
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52-Week Range: $98.63-$115.66
Dividend Yield: 3.03%
Expense Ratio: 0.06%
Stable dividend payments typically increase confidence in the prospects of a business. Research suggests: “A willingness – and ability – to maintain and grow dividends over time provides clear evidence of strong fundamentals, solid business plans, and a deep commitment to shareholder value.”
Our last Vanguard fund is the Vanguard High Dividend Yield Index Fund ETF (NYSEARCA:VYM). It gives exposure to U.S. businesses that have been paying relatively large dividends for many years. The fund started trading in November 2006, and net assets stand at $44.1 billion.
VYM tracks the returns of the FTSE High Dividend Yield Index, and has 443 holdings. Close to a fifth of the portfolio is in financial stocks. Then come healthcare shares (15.5%), consumer staples (13.4%), industrials (9.9%), energy (9.2%), utilities (8.4%), and consumer discretionary (8.2%).
The top 10 stocks comprise over a fifth of VYM. Johnson & Johnson, Exxon Mobil (NYSE:XOM), Procter& Gamble (NYSE:PG), JPMorgan Chase (NYSE:JPM), Pfizer, Chevron (NYSE:CVX) and Home Depot lead the names on the roster.
VYM saw a record high in the first part of January. However, the fund has declined over 4% YTD. Yet, by comparison, the S&P 500 index has lost about 12.5% of its value.
Trailing P/E and P/B ratios for the ETF stand at 14.1x and 2.4x. VYM as well as other comparable income funds are likely to get continued attention in the coming months as investors look for safe havens amidst volatility on Wall Street.
On the date of publication, Tezcan Gecgil, Ph.D., did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
