If you are seeking a blended (large cap value and growth) investment option for smaller portfolios ($10,000 to $20,000), these ETFs are worth a look.
All the expense ratios, average cap sizes, price/earnings ratios, and top five holdings for the ETFs listed here are true as of a certain date and are subject to change. You should verify all key details before making any purchase.
Vanguard Large Cap ETF (VV)
Indexed to: MSCI U.S. Prime Market 750 Index (750 corporate biggies from both the value and growth sides of the grid)
Expense ratio: 0.12 percent
Average cap size: $43.2 billion
P/E ratio: 16.7
Top five holdings: Exxon Mobil, Apple, Chevron, General Electric, International Business Machines
The low cost makes this one a solid choice. The MSCI U.S. Prime Market 750, as the name implies, encompasses a larger universe of stocks than the more popular S&P 500, which translates to holdings with a somewhat smaller average cap size than you’ll find with some other large cap options.
The MSCI index is also more “indexy” than the S&P 500: The choice of companies is purely quantitative, whereas with the S&P, some human judgment is applied. This ETF is an excellent choice for people with smaller portfolios trying to limit the number of ETFs they have to manage. Shares trade free of commissions if held at Vanguard.
Vanguard Mega Cap 300 ETF (MGC)
Indexed to: MSCI U.S. Large Cap 300 Index (the biggest 300 U.S. companies, regardless of type)
Expense ratio: 0.13 percent
Average cap size: $62.9 billion (whooeeee!)
P/E ratio: 15.9
Top five holdings: Exxon Mobil, Apple, Chevron, General Electric, International Business Machines
The top five holdings are the very same that you’ll find with the other Vanguard blended option, the Vanguard Large Cap ETF (VV). But in the case of this ETF, you won’t be getting the lesser sized of the large cap companies. That’s less than optimal from a diversification standpoint, and for that reason, don’t choose MGC over VV as a stand-alone investment.
But if you are combining either of these funds with a blended small cap fund, then MGC will give you somewhat lower correlation (in other words, greater simultaneous zig and zag potential), which is a good thing. For most investors’ portfolios, either Vanguard option would be an excellent choice. Shares trade free of commissions if held at Vanguard.
Schwab U.S. Large-Cap ETF (SCHX)
Indexed to: Dow Jones U.S. Large-Cap Total Stock Market Index (approximately 750 of America’s largest corporations)
Expense ratio: 0.08 percent
Average cap size: $40.65 billion
P/E ratio: 16.2
Top five holdings: Apple, A&T, Chevron, Exxon Mobil, General Electric
The management fee is one of the lowest in the industry. And, like all Schwab ETFs, you can trade this baby for free if held at Schwab. Most importantly, the index is a good one. Schwab does a good job of tracking the index, even though its ETFs were introduced only in late 2009.
iShares Russell 1000 ETF (IWB)
Indexed to: Russell 1000 (the largest 1,000 publicly traded companies in the land)
Expense ratio: 0.15 percent
Average cap size: $38.8 billion
P/E ratio: 20.2
Top five holdings: Exxon Mobil, Apple, Chevron, General Electric, International Business Machines
The cost isn’t high, but it is higher than the comparable Vanguard and Schwab funds . On the other hand, this ETF offers somewhat greater diversification — only a potential plus, really, if this is going to be a major part of your portfolio.
Given the exposure to smaller companies, which tend to see greater price flux than large companies, this fund may prove over the long run to be slightly more volatile but slightly more rewarding than the comparable Vanguard or Schwab or other iShares options. Like a number of other broad-based iShares ETFs, IWB trades are free if held at Fidelity.