Investing is like gardening. It takes a bit of work, patience, and some specialized knowledge. Nevertheless, with a little help, anyone can do it.
One of the best ways to invest, whether you’re a beginner or an expert, is with exchange-traded funds (ETFs). These specialized investment products trade like stocks, but they have many of the characteristics of mutual funds. The beauty of ETFs is that they make investing in a diverse portfolio of stocks straightforward and accessible.
Two fantastic options for long-term investors are the Vanguard High Dividend Yield ETF (NYSEMKT: VYM) and the Vanguard S&P 500 ETF (NYSEMKT: VOO).
Vanguard High Dividend Yield ETF
The Vanguard High Dividend Yield ETF has many great features and offers investors a solid selection of stocks at a reasonable cost.
The fund tracks the FTSE High Dividend Yield Index, comprised of about 400 dividend-paying value stocks listed on U.S. exchanges. While some of its holdings are headquartered in foreign countries, about 96% are American companies.
In terms of sectors, the finance (21%), technology (14%), healthcare (11%), and consumer (10%) industries are represented at the highest levels. Still, the fund also has significant holdings in the energy (8%), utilities (7%), and retail (6%) sectors, among others.
Its Top 5 holdings are:
|
Company |
Ticker Symbol |
% of VYM Assets |
|---|---|---|
|
1. JPMorgan Chase |
JPM |
3.5% |
|
2. Broadcom |
AVGO |
3.5% |
|
3. ExxonMobil |
XOM |
3.2% |
|
4. Proctor & Gamble |
PG |
2.3% |
|
5. Johnson & Johnson |
JNJ |
2.1% |
ETFs charge various management fees to their investors. The sum of these fees, known as the expense ratio, is the percentage of your investment that you pay annually to cover the fund’s operating expenses. When choosing ETFs, it’s important to consider their expense ratios, as these can significantly impact your investment returns over the long haul.
This Vanguard fund, for example, has an expense ratio of 0.06%. That means that for every $10,000 a person has invested in the fund, they will pay $6 in annual fees.
That’s low compared to the average ETF expense ratio — many have expense ratios closer to 0.4%, equating to $40 in annual fees for a $10,000 investment. Some specialized ETFs have expense ratios of 1% or more.
In short, this Vanguard fund has one of the lowest expense ratios around, making it a smart and cost-effective choice for income-seeking investors.
Vanguard S&P 500 ETF
Perhaps more than any other fund, the Vanguard S&P 500 ETF is the one that buy-and-hold investors need to know.
The fund tracks the S&P 500 index, which is one of the most widely followed indexes. Because the S&P 500 is comprised of 500 of the largest publicly traded U.S. companies, it’s a reasonable benchmark for the overall performance of the U.S. stock market.
As such, the fund’s biggest holdings are what you might expect. Given that tech stocks dominate the list of most valuable companies today, over 40% of its holdings are from the tech industry. However, the fund also has substantial holdings in the finance (12%), healthcare (9%), and retail (8%) sectors. The Top 5 holdings are:
|
Company |
Ticker Symbol |
% of VOO Assets |
|---|---|---|
|
1. Microsoft |
MSFT |
7% |
|
2. Apple |
AAPL |
6.3% |
|
3. Nvidia |
NVDA |
6.1% |
|
4. Alphabet |
GOOG, GOOGL |
4.3% |
|
5. Amazon |
AMZN |
3.6% |
One thing that sets this fund apart — and that long-term buy-and-hold investors should love — is that its expense ratio is among the lowest available. It’s just 0.03%, so investors pay only $3 annually on a $10,000 holding.
In summary, this Vanguard fund offers exposure to the most prominent companies on Wall Street, and investors in it give only a tiny amount of their hard-earned gains to the fund’s administrators. In the long run, this fund offers investors, new and old, a smart and easy way to invest for the future — and that’s a winning strategy.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Alphabet, Amazon, ExxonMobil, Nvidia, and Procter & Gamble. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, JPMorgan Chase, Microsoft, Nvidia, Vanguard S&P 500 ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom and Johnson & Johnson and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
2 Top-Notch Vanguard ETFs That Are Screaming Buys in July was originally published by The Motley Fool