ETF Family Attributes: Vanguard

This is the first is a series of articles presenting key attributes of ETFs by fund family, with an eye toward the income component of the funds. In each case the yield shown is from dividends, interest or real estate cash flow from the underlying assets of the fund (excluding short-term and long-term gains). The yields are full year trailing.

We begin with Vanguard, the third largest player in the ETF field, but the lowest cost source of funds with typically the most diversified portfolios, as measured by the number of holdings. Subsequent posts will focus on the other principal ETF providers.

(Click image to enlarge.)

An interesting point to note is that some of the equity funds (emerging markets and developed Europe) have higher yields than the total US bonds ETF.

This family would be sufficient for many investors to create a complete portfolio from ETFs, but they lack ETFs for commodities, municipal bonds, taxable bonds shorter than one year, country funds, and certain exotica. They do have US sector funds (not presented here) and a wider of variety of mutual funds than ETFs. However, for may investors with a desire for an uncomplicated ETF-based portfolio, Vanguard could be a one-stop source.

iShares, SPDRs, Powershares, and some other ETF providers have more diverse and specialized offerings that would appeal to those investors who wish to more finely tune their exposures and to tactically manage their risks and opportunities. Stay tuned.

Comments

[Lightway:]

Richard Shaw delivers.

It's been more difficult, compared to domestic stocks, to get some diligence on many of the income/dividend ETFs, so I'm definitely looking forward to this entire series. ETFs are a great way to round out an income portfolio, since they provide exposure to bonds, REITs, and foreign equity.

There's alot of great diligence already on this site for finding leads on selecting domestic income equities, so really excited to see this series, keep them coming.

Regarding Vanguard, seems alot of people are fans of their products, because of the super low fees, and I have seen people construct entire portfolios just using Vanguard. Personally I prefer the versatility of selecting a portfolio not specific to any family.

Apr 18 05:21 AM

[Colorado St...:]

Has anyone attempted to use or heard of anyone trying to use the efficient frontier methodoloy with ETFs?

Apr 18 09:41 AM

[richjoy403:]

Costs are very important; likewise diversification within the ETF. Almost all their funds and ETF's perform well vis-a-vis their peers. Thus, it is very difficult to find fault with Vanguard.

Apr 18 12:13 PM

[Jade Queen:]

Thank you very much. I am in some unitary investment trust vehicles. I wonder if the author might consider commenting on these.

Apr 18 05:20 PM

[nym:]

As a Vanguard customer for 15 years I now see their diversification within funds to be a weakness, i.e., I am one of "those investors who wish to more finely tune their exposures and to tactically manage their risks and opportunities." Low fees look like a wry joke when you're down 50%.

Apr 18 07:50 PM

[donzelion:]

Vanguard figures prominently in my "core'n'explore" strategy - 90% of my investments to indexes, 10% to "great ideas" (which so far haven't worked out to be all that great). Within the 90% portion, my allocation is stocks-heavy (75%), then bonds (15%), real estate (5%) and commodities (5%).

Vanguard has me well covered on the first three. BND, VEA, VTI, and VNQ are pretty close to meeting my needs. For commodities, if I wanted commodity equities, I'd try Vanguard Materials and/or Vanguard Energy, but I like slightly more focused options like USO or actual physical gold (my wife loves jewelry).

Still, I'm a firm believer in the "explore" portion of my portfolio: Vanguard goes on zombie, monthly sharebuilding pace. "Explore" gets 90% of my attention as I try to decipher the truth from the company report. I find that exercise to be about as much fun as solving a crossword puzzle - but I do learn lessons from reading these sorts of reports that help out in my day job.

Apr 20 04:13 AM

[Fund Insider:]

Why does it matter how complete a suite of offerings are available from one fund family for ETFs ? To me one of the many benefits of opening a brokerage acct vs just opening a regular mutual fund acct at Vanguard (or elsewhere) is so that you are not locked into one fund family's offerings. If you want to stick with just Vanguard, you can escape commissions and just invest directly @ vanguard.com into their funds. You do lose some other benefits of ETFs that way, but you gain some too. As a direct investor in a fund, you are serviced directly by that fund. If you have questions, you are somebody to them and get service. As an ETF customer you are anonymous to them, not even a customer as far as they know.

I personally would use Vanguard for buy and hold investing of core index type exposures (low expense in common indices), but anything you want to trade, other ETFs offer additional options
(sectors etc) or for indices more liquidity (better for day trading
where price rather than expense ratios are more important).

Articles focusing on the best of breed in each type of exposure would be a better way to present. Which S&P 500 ETF is best ?
Which commodity ETF ? Which Bond ETFs ?

Apr 21 02:36 PM

[Richard Shaw:]

Fund Insider: There is nothing whatsoever about the article that suggests in any way that an investor should buy all funds from one provider. The article is one in a series that will explore each fund family. My blog labeled the article Part 1: Vanguard. Part 2a: iShares Bond Funds is up. Part 2b: iShares Country and Region Funds is nearly done. There will be parts 3 through "n".

SA chose to leave the "Part 1" out of the title which may have misled you to believe I am pushing Vanguard. I hope that helps clarify the point of the article.

Apr 21 04:31 PM

[dcb:]

I like their ETF's their investment philosophy is deeply flawed, therefore do expect any real investment advice.

Apr 21 10:13 PM

[DuffBeer:]

Richard you are going for the cycle on this one . Thank you for doing this !!!! What a great source to find a way to make a dollar 2 eighty.
Cheers a toast to you
DuffBeer

Apr 26 07:41 PM