ETFs have revolutionized investing by offering low-cost access to diverse market segments with minimal effort.
Vanguard's investor-owned structure allows it to offer some of the lowest expense ratios in the industry, averaging just 0.05%, versus the industry's 0.22%.
These three Vanguard ETFs look like top buys right now.
Passive investing through exchange-traded funds (ETFs) has become a cornerstone strategy for building long-term wealth, especially for retirement planning. By offering broad market exposure, automatic rebalancing, and low fees, ETFs simplify the investment process for individuals.
However, not all ETFs are created equal. Some funds come with hefty expense ratios that can erode returns over time.
Vanguard stands out in the ETF landscape due to its investor-owned structure, which allows it to return profits to shareholders through lower fees. As of Dec. 31, 2024, Vanguard's average ETF expense ratio was 0.05%, significantly lower than the industry average of 0.22%. This commitment to cost efficiency has transformed Vanguard into one of the most popular fund families in the world.
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Here's an overview of three popular Vanguard ETFs that currently screen as top buys.
An S&P 500 tracking vehicle: A cornerstone for any portfolio
The Vanguard S&P 500 ETF(NYSEMKT: VOO) provides investors with exposure to 505 of America's largest companies through a single investment. With an expense ratio of just 0.03%, this fund costs significantly less than the 0.75% average for competing funds in the large-blend category, delivering exceptional value to investors.
Over the past 10 years, this fund has delivered an annualized total return of approximately 12.3%, which includes both price appreciation and dividends reinvested. It pays a quarterly dividend yield of around 1.36% while consistently tracking its benchmark -- the S&P 500 -- with minimal tracking error. The fund's turnover rate of just 2.3% minimizes trading costs and potential capital gains distributions that could trigger tax liabilities.
Why is the Vanguard S&P 500 ETF a top buy right now? In today's uncertain market, this ETF serves as a reliable foundation, offering broad exposure to the U.S. economy at minimal cost while providing the liquidity and transparency that make it suitable for investors at any stage of their financial journeys.
Growth-focused strategy for market-beating returns
The Vanguard Growth ETF(NYSEMKT: VUG) targets companies with above-average growth potential across multiple sectors. With an expense ratio of only 0.04%, it's substantially cheaper than most active growth funds, which typically charge 0.75% or more.
The fund holds roughly 166 stocks aligned with the CRSP US Large Cap Growth index, with the top 10 holdings comprising 57.1% of total assets. The fund also holds significant numbers of the leading technology and consumer discretionary companies driving today's groundbreaking innovations.
Over the past 10 years, the Vanguard Growth ETF has posted a 14.4% annualized total return, including reinvested dividends -- significantly outpacing the benchmark S&P 500 by over 2 percentage points annually. While its dividend yield is lower, at about 0.49%, the fund's core strength lies in long-term capital appreciation, having delivered a cumulative five-year return of 122%.
For investors seeking exposure to innovative growth companies, this fund offers a compelling option that combines low costs with broad diversification, reducing the risks of individual stock selection while maintaining professional index management.
Technology sector exposure for innovation-driven gains
The Vanguard Information Technology ETF(NYSEMKT: VGT) offers concentrated exposure to the tech sector, tracking the MSCI US Investable Market Information Technology 25/50 index. Its 0.09% expense ratio compares favorably with the tech category average of 0.93%, representing significant cost savings for long-term investors. The fund encompasses approximately 310 companies spanning software, hardware, semiconductors, IT services, and digital infrastructure.
Since its 2004 inception, this ETF has delivered an impressive cumulative total return of approximately 1,280%, including reinvested dividends, substantially outperforming the S&P 500 over this extended period. This fund distributes dividends quarterly and maintains an efficient turnover rate of just 12.7%, compared to some competitors in its category with turnover rates exceeding 20%, which translates to greater tax efficiency for investors utilizing taxable accounts.
For investors seeking targeted exposure to artificial intelligence, cloud computing, and digital transformation trends, this fund delivers efficient access to technology innovators while balancing risk through broad sector diversification -- all at a fraction of what actively managed technology funds typically charge.
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George Budwell has positions in Vanguard Information Technology ETF and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard Index Funds-Vanguard Growth ETF and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
