Exploring the Vanguard Sector ETF’s

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It’s no secret that my favorite online investment platform is Vanguard. They have been around for years and have some of the lowest investment fees around.

Vanguard’s famous VTSAX is the beloved index fund of the personal finance community, which has an expense ratio of .04%. This means if you invested $10,000 in VTSAX you would only pay Vanguard $4 each year to manage it.

Investors love VTSAX because it provides extreme diversification by holding literally every U.S. stock, and plenty of people invest solely in this fund and call it a day. But there are also some other low-cost investment options at Vanguard, namely their sector ETF’s.

These ETF’s hold collections of stocks in specific sectors. Sometimes investors prefer to only invest in technology stocks (hello, Vanguard Information Technology ETF) or other specific industries like consumer staples (hi, Vanguard Consumer Staples ETF). The sector ETF’s are a great way to invest in specific industries while still avoiding the potential pitfall of betting on individual stocks.

Today I want to take a look at each sector ETF. I’ll highlight each ETF’s top 10 stock holdings, it’s dividend yield, and it’s performance over the years.

Let’s dive in!


Vanguard Consumer Discretionary ETF (VCR)

Includes stocks of companies that manufacture products and provide services that consumers purchase on a discretionary basis.

Div. Yield: 1.30%

Average Annual Return Since Inception: 9.21% (1/26/2004)

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Top 10 holdings (by percentage)

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(Top 10 holdings = 46% of entire fund)


Vanguard Consumer Staples ETF (VDC)

Includes stocks of companies that provide direct-to-consumer products that, based on consumer spending habits, are considered nondiscretionary.

Div. Yield: 2.52%

Average Annual Return Since Inception: 10.08% (1/26/2004)

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Top 10 holdings (by percentage)

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(Top 10 holdings = 63% of entire fund)


Vanguard Energy ETF (VDE)

Includes stocks of companies involved in the exploration and production of energy products such as oil, natural gas, and coal.

Div. Yield: 2.81%

Average Annual Return Since Inception: 6.16% (9/23/2004)

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Top 10 holdings (by percentage)

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(Top 10 holdings = 66% of entire fund)


Vanguard Financials ETF (VDE)

Includes stocks of companies that provide financial services.

Div. Yield: 1.94%

Average Annual Return Since Inception: 3.69% (1/26/2004)

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Top 10 holdings (by percentage)

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(Top 10 holdings = 44% of entire fund)


Vanguard Health Care ETF (VHT)

Includes stocks of companies involved in providing medical or health care products, services, technology, or equipment.

Div. Yield: 1.34%

Average Annual Return Since Inception: 9.85% (1/26/2004)

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Top 10 holdings (by percentage)

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(Top 10 holdings = 44% of entire fund)


Vanguard Industrials ETF (VIS)

Includes stocks of companies that convert unfinished goods into finished durables used to manufacture other goods or provide services.

Div. Yield: 1.79%

Average Annual Return Since Inception: 9.52% (9/23/2004)

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Top 10 holdings (by percentage)

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(Top 10 holdings = 38% of entire fund)


Vanguard Information Technology ETF (VGT)

Includes stocks of companies that serve the electronics and computer industries or that manufacture products based on the latest applied science.

Div. Yield: 1.12%

Average Annual Return Since Inception: 9.26% (1/26/2004)

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Top 10 holdings (by percentage)

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(Top 10 holdings = 57% of entire fund)


Vanguard Materials ETF (VAW)

Includes stocks of companies that extract or process raw materials.

Div. Yield: 1.72%

Average Annual Return Since Inception: 9.08% (1/26/2004)

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Top 10 holdings (by percentage)

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(Top 10 holdings = 49% of entire fund)

Vanguard Telecommunication Services ETF (VOX)

Includes stocks of companies that provide telephone, data-transmission, cellular, or wireless communication services.

Div. Yield: 3.57%

Average Annual Return Since Inception: 8.13% (9/23/2004)

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Top 10 holdings (by percentage)

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(Top 10 holdings = 70% of entire fund)


Vanguard Utilities ETF (VPU)

Includes stocks of companies that distribute electricity, water, or gas, or that operate as independent power producers.

Div. Yield: 3.14%

Average Annual Return Since Inception: 10.41% (1/26/2004)

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Top 10 holdings (by percentage)

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(Top 10 holdings = 50% of entire fund)


Observations

  • Healthcare and consumer staples are highly recession-resistant. Even during economic collapses, these sectors barely budge.
  • The telecommunications sector is excellent if you’re looking to collect dividends, but a whopping 44% of the entire sector is composed of AT&T and Verizon. This is the least diversified ETF.
  • Healthcare and Information technology have been the two powerhouse sectors delivering the highest returns over the past 5 years.
  • The sectors with lower dividend yields tend to have higher growth rates. Conversely, sectors with high dividend yields tend to have lower growth rates.
  • The financial sector still has not returned to it’s highest price point before the recession.

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4 Replies to “Exploring the Vanguard Sector ETF’s”

  1. I like the consumer ETF; decent dividend and almost 10% yield. Plus I’m familiar with these companies and their products since I’m an end user 🙂

  2. I’m a big fan of ETFs and my favorite is SPDR S&P 600 Small Cap Value (SLYV) as a complement to my total US market ETF and total market international and emerging market ETFs. . Vanguard offers a similar product to SLYV that tracks the same index. I believe the ticker is VIOV.

    1. Small Cap Value ETF’s are notoriously the most volatile, but also generally produce the highest annual returns over the long-term. The key is having the stomach to withstand the ups and downs that inherently come with small cap stocks 🙂

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