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Vanguard exchange-traded funds (ETFs) make investing in lots of assets all at once easier.
Click here to jump to our list of Vanguard ETFs.
What are Vanguard ETFs?
Vanguard ETFs are funds that group assets, such as stocks or bonds, in one investment. By investing in a Vanguard ETF, you can instantly diversify your portfolio.
In 1976, John Bogle, the founder of Vanguard, launched the first index fund available to everyday investors.
At that time, most fund managers used an active strategy, where they would buy and sell stocks in an attempt to beat the market.
Instead, Bogle's fund tracked an existing market index, meaning it would perform about the same as the index instead of trying to beat it. Bogle's passive investing strategy has proved more effective in the long run, resulting in higher returns than most active funds in the long term.
Most ETFs follow a similar passive strategy to Bogle's first index fund. ETFs can also be bought and sold live during the trading day, similar to a stock.
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How do Vanguard ETFs work?
ETFs work like this: The fund provider, in this case, Vanguard, owns the underlying assets and creates a fund that tracks their performance. Then, the fund provider sells shares in that fund to investors. Shareholders own a portion of an ETF but don't own the actual assets in the fund. Then, buyers and sellers trade the ETF throughout the day on an exchange, much like a stock.
» What's the difference? Index funds vs. mutual funds
Are Vanguard ETFs a good investment?
All investments carry some risk, and Vanguard ETFs are no exception. But Vanguard is a fund provider with a reliable company history, and well-diversified ETFs tend to be safer than individual stocks. That's because if a single asset within an ETF goes out of business, you have hundreds, or even thousands, of other assets that can help bolster your portfolio.
You can find broad market ETFs, such as ones that track the S&P 500, and sector-specific ETFs (such as oil ETFs, commodity ETFs and clean energy ETFs) to diversify your portfolio further.
» Learn more: Understand the different types of mutual funds
How much does it cost to buy Vanguard ETFs?
Like stocks, you purchase ETFs by their share price, so when looking at the cost of an ETF, you'll want to multiply the cost of a single share by the number of shares you want to buy.
According to Vanguard, "an ETF's minimum is the price of a single share, which could be as little as $50, depending on the ETF." However, you can buy a fractional share of a Vanguard ETF for $1.
In addition to the actual purchase price of an ETF, it's also important to consider ongoing fees, such as expense ratios.
Expense ratios are annual fees investors pay to cover a fund's expenses. For example, if you invest in a fund with a 1% expense ratio, you'll pay $10 annually for every $1,000 invested.
» Examine the cost: Calculate the impact of fees on mutual fund returns
How do you buy Vanguard ETFs?
There are two ways to purchase Vanguard ETFs: directly from Vanguard or by opening a brokerage account. You'll need to choose the type of investment account you'd like to open, such as a traditional brokerage account or a Roth or traditional individual retirement account.
Once you have opened an investing account and have added money, you'll need to decide which ETFs you'd like to purchase.
» Want more options? See our picks for the best brokers for funds.
What are the best Vanguard ETFs?
Vanguard has a lot of ETFs to choose from. Which fund is best depends on your portfolio mix and what you can afford based on account minimum and fees. Here are four of Vanguard's core ETFs. Together, these ETFs cover almost all parts of the U.S. and international stock and bond markets.
Ticker | Fund name | Expense ratio |
|---|---|---|
BND | Total Bond Market ETF | 0.03% |
BNDX | Total International Bond ETF | 0.07% |
VXUS | Total International Stock ETF | 0.08% |
VTI | Total Stock Market ETF | 0.03% |
Source: Vanguard: Data current as of April 2, 2024. Data is intended for informational purposes only.
1. Total Bond Market ETF (BND)
BND tracks the performance of a broad bond index. This fund holds over 10,000 bonds with an average duration of 6.5 years. This fund is classified as a conservative- to moderate-risk fund, meaning it will not have as much growth potential as a stock-based fund.
» Check out more bond ETFs
2. Total International Bond ETF (BNDX)
BNDX uses hedging strategies that attempt to help with uncertainty in exchange rates. This fund holds nearly 7,000 bonds with an average duration of 7.5 years. This bond fund has global representation, but most of its holdings are from Europe.
3. Total International Stock ETF (VXUS)
This stock fund tracks the performance of the FTSE Global All Cap ex U.S. Index, which focuses on non-U.S.-based companies. This fund holds nearly 8,000 stocks and is categorized as an "aggressive" fund, meaning it may be subject to big share price swings. VXUS holds mostly emerging market, European and Pacific stocks.
4. Total Stock Market ETF (VTI)
VTI tracks the CRSP U.S. Total Market Index and includes large-, mid- and small-cap stocks. This fund contains nearly 4,000 stocks and is considered "moderate to aggressive." Its top three holdings include Apple, Microsoft and Amazon.
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Vanguard ETFs: The bottom line
While it depends on your financial situation and existing portfolio, Vanguard ETFs could make sound investments for most individuals, especially if you plan to invest over a long period. You can use our investment calculator to determine how much your investment could grow.
» Learn more: Read our Vanguard brokerage review
