An All-Vanguard ETF Portfolio

by: Scott Arterburn


I invested in Vanguard ETFs.

They are inexpensive to buy.

Vanguard have a large variety of ETFs to buy.

[Originally published on Mar 5, 2014.]

At the start of 2014 a circumstance required me to change the way I invest. So now I have to rethink how I choose my investments. I am leaning towards just buying electronic traded funds or closed end funds. Both of these types of funds offer a lot of variety. Buying into these would make me change my investment strategy. I would have to look at the stock market in a broader picture and look at whole sectors, such as technology, consumer staples and bonds, and not at individual stocks. I also think that since ETFs and CEFs hold multiple securities I don't think they will fluctuate in price as much as individual stocks could so I probably will be having more of a buy and hold strategy.

It doesn't make sense to trade between ETFs on a daily or weekly basis. Maybe, I will have a quarterly rebalancing strategy. I don't know what to expect and these are just my assumptions going into this. I have never had just an all-ETF buying strategy/portfolio before. I do not know what to expect in terms of performance. Since I will be investing in thousands of securities through these ETFs my hope is that it will mirror the Russell 2500 index.

So I had to first decide which ETFs or CEFs I should buy. I made my decision to go with an all Vanguard ETF portfolio. I have a personal bias for Vanguard as they have a large selection of ETFs to choose from. I could create a portfolio to fit my needs. I could go with any numerous combinations. I could choose between bonds and stocks, foreign and domestic securities, high yields and low yields, and long term vs. short term. Their expense ratios are lower than the average firm and I use them as my brokerage firm so I am able to save transactions and expense costs when I buy them.

I didn't start really buying any funds until the middle of January and beginning of February. I already had some Vanguard funds before the year started so those investments will be the value and share price of what they were as of December 31st.

I started out already invested in Vanguard's Long Term Bond fund (NYBLV), Corporate long term bond fund (NASDAQ:VCLT), and Extended treasury index fund (NYEDV). Since the beginning of the year I have added their Mega value fund (NYMGV), high dividend yield fund (NYVYM) Emerging Markets government fund (NASDAQ:VWOB), Emerging Markets fund (NVWO), Telecom services fund (NYVOX), Global REIT fund (NASDAQ:VNQI) U.S. REIT fund (NYVNQ), Value fund (NYVTV), Utilities fund (NYVPU), Financials fund (NYVFH), Consumer staples fund (NYVCR), Discretionary spending fund (NYVDC), Extended Market fund (NYVXF), and their Dividend appreciation fund (NYVIG).

Below is a chart of this initial portfolio. I have included a summary of what each fund.

Ticker Symbol Ave Price of Purchase Buy date # of Holdings Yearly Div Dividend Rate Definition of Fund
BLV $86.92 12/31/2013 1481 $3.828 4.50% Mature from 5 to 30 years
VCLT $87.18 12/31/2013 1201 $3.984 4.65% Investment grade corporate
VYM 61.98 1/6/2014 384 $1.748 2.80% High Yield Large Cap
EDV 96.14 12/31/2013 66 $4.000 4.17% Longterm gov strips/ Half Cash
VWOB 76.59 2/18/2014 518 $3.996 5.16% Emerging Markets
MGV 54.81 1/21/2014 154 $1.200 2.16% Mega Cap Value
VWO 37.83 2/3/2014 922 $0.880 2.26% Emerging markets
VOX 80.35 1/29/2014 33 $3.000 3.65% Telecommunication companies
VNQI 52.51 1/10/2014 526 $1.780 3.29% REITS
VTV 73.54 1/29/2014 310 $1.960 2.53% Large Cap value
VDC 104.24 1/29/2014 111 $2.480 2.27% Consumer Staples
VIG $71.30 1/31/2014 146 $1.592 2.11% Large cap Dividend appreciation
VPU 82 1/6/2014 78 $3.296 3.78% Utilitiy companies
VFH 42.21 2/4/2013 555 $0.832 1.83% Financial stocks
VCR 102.15 1/29/2014 376 $0.913 0.83% Consumer Discretionary
VXF 80.41 1/29/2014 3064 $0.930 1.07% Small and Mid Caps not in S&P 500
VNQ 66.09 1/29/2014 131 $2.700 3.78% REITS


Vanguard has over 50 ETFs, so why did I start out as I did? It looks like I invested in securities all over the map. There was a method to my madness. My favorite investments are ones with high yields. I already owned BLV, VCLT, and EDV. These all yield over 4%. I decided to add VWOB, VNQ and VPU because these also yield over 4%. VOX and VNQI yield over 3% which was high enough for me so in my portfolio they went. VYM, VDC, VTV, VIG, VCR, and VXF were bought because their average annualized returns were over 5% and each fund has been in existence for at least 7 years. I know that past returns do not represent future returns but 5% in 7 years which included the financial crisis seems impressive. VXF, VCR, VCD, and VTV have been around for at least 10 years and have an average return of 8.68%. I selected VWO because emerging market investments have declined a lot over the past few months. VFH and MGV weren't really strategically bought. MGV has very large cap stocks that I believe are safe investments and VFH are financials and I wanted exposure to another sector. These first 17 ETFs were a must have and were specifically bought as my starting point to my portfolio. I may not think too critically about my next purchases in my portfolio. I will probably compare the current price of the ETFs to their price at the beginning of the year.

Pros and Cons of an all ETF portfolio

There are good things about investing in just EFTs. One is diversification. A few of these ETFs have over 1000 securities invested in. Choosing one stock isn't diversified but buying into one ETF can diversify you 100 times over. Another thing, if you bought one stock you only have one chance of it increasing in value. If you are buying ETFs some stocks can go down and others can go up and the value of the ETF can still increase.

Also, you don't have to be picky in your investment picking. You wouldn't have to choose between Apple or Google. You could just buy a technology ETF that has both of them in it. Choosing ETFs is a simpler way to invest than having to do all the research on all the individual stocks you want to buy. If you don't have the time to manage your portfolio ETFs are a better way to go.


There are a few or problems with just investing in ETFs. One of them is that some stocks could increase faster than their ETF counterparts. When you invest in an ETF you are investing in a lot of stocks. An ETF could have good stocks as well as bad stocks. If you were able to choose the best of the breed in one sector those stocks could easily return more than an ETF. Let's compare VGT to GOOGLE (NASDAQ:GOOG) and APPLE (NASDAQ:AAPL). These are VGT's two largest holdings. Since VGT's existence in 2004 it has increased 86% while GOOG and AAPL in that same time frame have increased over 1,000% and 4,000% respectively. This comparison can be seen here. An investor would have been much better off investing in these 2 stocks instead of Vanguard's technology ETF. Less risk and less reward is a tradeoff one will have to take when investing in an ETF.

There is also the concept of over-diversification. The definition can be seen here. A portfolio that has too many securities can eliminate systematic risk but can also lower your returns. If an investor owns 2500 different securities through all their ETF funds, would that investor think they should get above average returns? They probably won't. All they should hope for is the average annual return of the Russell 2500.

So there there is my complete outline.

I will update my portfolio on a quarterly basis.

Disclosure: The author is long EDV, MGV, VTV, BLV, VCLT, VPU, VIG. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.