Editor’s note: This article is regularly updated with the latest information.
Exchange-traded funds (ETFs) have long been an integral component of Wall Street and there may be no better player in this game than Vanguard. Primarily, ETFs offer a wide canvas for investors, providing exposure to a basket of stocks or other tradable assets under one umbrella. It may be perfect for folks who have trouble making up their mind.
In all seriousness, ETFs, in addition to their extensive footprint, also inherently offer risk mitigation. Of course, it depends largely on the focus of the ETF. If the fund is centered on completely speculative ventures, the fund will still be risky. However, the best Vanguard ETFs to buy incorporate high-quality names under the specified category. Thus, if one name flounders, the other companies in the basket can help pick up the slack.
To be fair, one of the downsides of ETFs is that, while they may mitigate downside, they also mitigate upside. In other words, a rip-roaring single stock might not lift the average much if the other stocks lag. That’s true for any fund, including the best Vanguard ETFs to buy.
Still, with the troubling economic cycle we’re facing, a wide footprint is probably the most appropriate. Therefore, here are the best Vanguard ETFs to buy now:
Vanguard ETFs to Buy: Vanguard Large-Cap ETF (VV)
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While large blue-chip companies may represent the most obvious — and therefore most-recommended — investments, that shouldn’t necessarily impugn their underlying opportunity. That’s the basis behind the Vanguard Large-Cap ETF (NYSEARCA:VV). True, the individual names that comprise VV stock’s top holdings probably won’t deliver astounding gains. But as established businesses, they’re likely to weather the storm for the long haul.
What makes the Large-Cap ETF one of the best Vanguard ETFs to buy is its emphasis on quality. At the time of this writing, its top three holdings are Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN). Primarily, the fund’s heaviest exposure is to the Technology sector with a 28.5% weighting, followed by Healthcare and Financials at 13.7% and 10.3%, respectively.
Even if you don’t care for blue chips, VV also has an expense ratio — or the cost of owning an ETF or mutual fund — of 0.04%. In contrast, the category average is 0.42%. That makes this pick of the best Vanguard ETFs to buy quite a good deal, too.
Vanguard Dividend Appreciation ETF (VIG)
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As literally every person that works for a living knows, inflation is a major problem right now. Of course, what makes inflation particularly harmful is the resulting decline in the dollar’s purchasing power. Essentially, the real income of workers declines, a sort of hidden tax. As such, passive income — which is always an important component of a holistic portfolio — has become even more critical for investors.
That brings us to the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG), one of the best Vanguard ETFs to buy simply because of the present paradigm shift. With the consumer price index (CPI) uncomfortably close to double digits, it’s crucial for investors to secure various income streams. The Dividend Appreciation ETF can help by focusing on firms with reliable payouts.
VIG’s top three holdings are UnitedHealth (NYSE:UNH), Microsoft and Johnson & Johnson (NYSE:JNJ). Interestingly, VIG’s largest sector represented in its holdings is currently Information Technology at 24%, followed by Healthcare and Financials at 15.7% and 14.5%, respectively.
Finally, VIG features an expense ratio of 0.06%, comparing favorably to the category average.
Vanguard ETFs to Buy: Vanguard Small-Cap ETF (VB)
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While the label of best Vanguard ETFs to buy almost has a sterile or clinical tone to it, the reality is that these funds command a wide footprint. Should you want to dial up your risk-to-reward profile, you can easily do so, particularly with the Vanguard Small-Cap ETF (NYSEARCA:VB). Focusing on small-capitalization (cap) firms, the individual names under the basket are inherently less stable. However, they make up for it with stronger upside potential.
VB’s top three holdings are Quanta Services (NYSE:PWR), Molina Healthcare (NYSE:MOH) and Atmos Energy (NYSE:ATO). VB has the most exposure to the Industrials sector with a 19.9% weighting, followed by Financials and Consumer Discretionary at 15.1% and 14.4%, respectively.
With other publications ranking the Small Cap ETF as one of the best Vanguard ETFs to buy within the high-growth potential market, VB is a solid proposition. It also features an expense ratio of 0.05%, well below the category average of 0.35%.
Vanguard Total World Stock ETF (VT)
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Before the pandemic uprooted fundamental understandings of the market, one common saying was that the U.S. was the best house on the worst block. While that’s a cynical description, it’s arguably valid. Owning the largest economy in the world along with the world’s reserve currency, the U.S. is uniquely privileged. Still, some investors may want to broaden their horizons. That’s where the Vanguard Total World Stock ETF (NYSEARCA:VT) enters the frame.
Although the VT fund features a heavy mix of U.S.-based stocks (about 60% in terms of geographic breakdown), it also features significant exposure to various markets around the globe. These include multiple countries in both Europe and Asia, particular the U.K. and Japan. Additionally, VT includes exciting opportunities in Latin America and Africa.
Sector wise, Technology dominates the VT fund with a 19.3% weighting, followed by Financials and Healthcare at 15.1% and 12.1%, respectively. Like the other best Vanguard ETFs to buy, the Total World Stock fund features a low expense ratio of 0.07%. That’s substantially below the category average of 0.51%.
Vanguard ETFs to Buy: Vanguard Energy ETF (VDE)
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When Russia invaded Ukraine in February 2022, the action disrupted geopolitics not only for its callousness, but also because it effectively removed Russia as a reliable economic partner. Now, it’s quite possible that Russia — irrespective of what happens in Ukraine — will be isolated for several years.
That also draws attention to the Vanguard Energy ETF (NYSEARCA:VDE), however, one of the best Vanguard ETFs to buy based on the new global paradigm shift. With Russia being a global powerhouse in terms of energy exports, the U.S.-led sanctions against Russia will likely foster sustained upward pressure on key resource prices. Perhaps the only viable caveat to this forecast is if the world succumbs to a crippling recession.
Barring that outcome, investors can reasonably expect to profit from VDE. Its top three holdings are Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX) and Conoco Phillips (NYSE:COP). Notably, VDE features an expense ratio of 0.10%, well below the category average of 0.43%.
Vanguard Consumer Staples ETF (VDC)
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Among the many problems associated with a soaring inflation rate is the widening wealth gap between the middle and upper class. As I mentioned in June, the loss of consumer confidence is contextually worse today since the difference between the share of net wealth held by the middle class is ridiculously low compared to the top 1% of earners.
Put another way, people have fewer resources to handle economic shocks. Cynically, though, this backdrop may bolster the Vanguard Consumer Staples ETF (NYSEARCA:VDC). The harsh reality is that, during down cycles, strained household budgets will focus largely on the essentials. Therefore, VDC is one of the best Vanguard ETFs to buy because of simple probabilities and trend recognition in hard times.
VDC’s top three holdings are Procter & Gamble (NYSE:PG), Coca-Cola (NYSE:KO) and PepsiCo (NASDAQ:PEP), which are reliable enterprises. The fund also has an expense ratio of 0.1%, below the category average of 0.43%.
Vanguard ETFs to Buy: Vanguard Emerging Markets (VWO)
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As mentioned earlier, the best Vanguard ETFs to buy tend to focus on the U.S. market because that’s where most of the established action occurs. However, younger investors who want to ramp up their reward potential may perhaps be better served by looking to riskier high-growth regions. If this sounds like your cup of tea, the Vanguard Emerging Markets ETF (NYSEARCA:VWO) may be right up your alley.
When VWO says it’s focusing on emerging markets, that’s no joke. Based on geographic breakdown, the lion’s share of stocks under VWO are in the emerging and developed Asian economies. Additionally, VWO features significant exposure to Middle Eastern and African countries.
Sector wise, Financials make up the bulk of VWO’s exposure with a 20.5% weighting, followed by Technology and Consumer Cyclical at 16.1% and 13.01%, respectively. Finally, VWO has an expense ratio of 0.08%, much lower than the category average of 0.46%.
On the date of publication, Josh Enomoto did not hold (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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
