Top Vanguard ETFs to Consider for Your Investment Portfolio

Exchange-traded funds (ETFs) simplify investing by grouping individual companies under one ticker symbol. This provides instant diversification. Some ETFs follow stock market indexes, while others are themed or strategy-based.

One of the largest investment companies globally, Vanguard stands out for its structure. Investors own the funds, not the company itself, making it a reliable choice for ETFs meant for long-term holding.

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Below are three Vanguard ETFs that cater to various investor types. Each could serve as a solid foundation for a long-term portfolio. You can purchase all three for less than $1,500 or select the ones that align with your investing preferences.

1. The Vanguard ETF Owned by Warren Buffett

Investment legend Warren Buffett, known for his stock-picking prowess, holds only one Vanguard ETF: the Vanguard S&P 500 ETF (NYSEMKT: VOO).

This ETF tracks the S&P 500, which represents 500 major U.S. companies and is a key indicator of the market. It provides diversified exposure across multiple industries, including the notable “Magnificent Seven” tech stocks.

VOO total return price; data by YCharts.

The S&P 500 has proven to generate wealth effectively. Since the 1950s, an investment of $100 has grown to over $36,000, excluding dividends. While fluctuating yearly, its average annualized total return has been around 8% for the last 50 years.

Investors cannot buy the S&P 500 directly; hence, the Vanguard S&P 500 ETF serves as a suitable alternative.

2. An Excellent ETF for Growth Investors

Those seeking higher investment returns, despite potential volatility, may find the Vanguard Growth ETF (NYSEMKT: VUG) appealing. This ETF tracks the CRSP US Large Cap Growth Index, comprising 181 large-cap growth stocks.

It allocates approximately 52% of its funds to the “Magnificent Seven,” with the remainder spread across 174 other stocks, providing inherent diversification.

VUG total return price; data by YCharts.

Historically, holding this fund has proven beneficial. Sectors like artificial intelligence, cloud computing, semiconductors, and e-commerce are anticipated to enhance performance in large technology, favoring this ETF and its holders. Its expense ratio of 0.04% is low compared to many other growth-focused ETFs.

If you are comfortable with its significant concentration in major tech companies, the Vanguard Growth ETF could be a strong choice.

3. This ETF Provides Passive Income

Investors focused on earning passive income might consider the Vanguard High Dividend Yield ETF (NYSEMKT: VYM). It tracks the FTSE High Dividend Yield Index.

This ETF invests in 537 stocks, predominantly featuring established blue-chip companies with reliable dividend payouts over high-flying tech stocks, aside from Broadcom, which is its largest holding.

Notable names include Home Depot, Procter & Gamble, Johnson & Johnson, and Chevron. The ETF boasts a 2.6% dividend yield, and its constituent companies have an average earnings growth of 10%. These dividends are expected to grow over time, generating a robust stream of passive income.

With an expense ratio of only 0.06%, the Vanguard High Dividend Yield ETF offers a cost-effective solution for investors looking to manage a diverse portfolio of over 500 dividend stocks.

VYM total return price; data by YCharts.

Although this ETF has limited exposure to the tech sector (under 10%), it has provided steady dividends, making it a solid choice for investors prioritizing income over rapid growth.

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*Stock Advisor returns as of December 16, 2024

Justin Pope holds positions in Chevron and Johnson & Johnson. The Motley Fool has interests in and recommends Chevron, Home Depot, Vanguard Index Funds-Vanguard Growth ETF, Vanguard S&P 500 ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool also recommends Broadcom and Johnson & Johnson. For more information, please refer to their disclosure policy.

The views expressed in this article are those of the author and do not necessarily reflect the opinions of Nasdaq, Inc.