Vanguard Industry Sector ETFs - dummies

By Russell Wild

Vanguard has 11 U.S. sector ETFs and one international ETF. These funds cover much of the domestic market. The Vanguard industry sector offerings include the following:

U.S. Sector Fund Name Ticker
Vanguard Consumer Discretionary ETF VCR
Vanguard Consumer Staples ETF VDC
Vanguard Energy ETF VDE
Vanguard Financials ETF VFH
Vanguard Health Care ETF VHT
Vanguard Industrials ETF VIS
Vanguard Information Technology ETF VGT
Vanguard Materials ETF VAW
Vanguard REIT Index ETF VNQ
Vanguard Telecommunications Services ETF VOX
Vanguard Utilities ETF VPU

Vanguard’s International sector fund is the Global ex-U.S. Real Estate ETF (VNQI).

Fill your domestic stock portfolio with Vanguard’s 11 U.S. industry-sector ETFs, and presto! You’ve captured just about the entire universe of Yankee stocks. Granted, that universe will be weighted in such a manner that you’ll have only token representation of mid and small caps (although you’ll have more small cap exposure than you would with SPDRs ).

The one exception is the Vanguard REIT Index ETF (VNQ). Principally a mid cap fund, VNQ is a prince among ETFs. With an expense ratio of 0.12 percent, it is the least expensive of all industry-sector ETFs. It is also well diversified within its own real estate universe. If you’re going to own a U.S. REIT ETF, Vanguard’s selection is an excellent choice.

The other Vanguard U.S. sector ETFs carry an expense ratio of 0.24 percent — a real bargain among sector funds, although a bit more expensive than the Select Sector SPDRs.

In general, Vanguard ETFs, based on MSCI indexes, and the Select Sector SPDRs, based on S&P indexes, are your best building blocks for a U.S. stock portfolio sliced and diced by industry sectors. They are also excellent options for peppering a style grid–based portfolio with sector funds.

If you want a more globally-based sector approach, then the more expensive iShares options may be your best bet.