Advertiser Disclosure
X

Advertiser Disclosure: The credit card and banking offers that appear on this site are from credit card companies and banks from which MoneyCrashers.com receives compensation. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages. MoneyCrashers.com does not include all banks, credit card companies or all available credit card offers, although best efforts are made to include a comprehensive list of offers regardless of compensation. Advertiser partners include American Express, Chase, U.S. Bank, and Barclaycard, among others.

  • Date

By

Dig Deeper

27,216FansLike
27,321FollowersFollow
43,399FollowersFollow

Become a Money Crasher!
Join our community.

9 Best Vanguard ETFs to Buy in 2021

Vanguard is renowned for its mix of high-quality, low-cost, mostly passively managed mutual funds and exchange-traded funds (ETFs).

The association is so profound that devotees of passive index investing are informally known as Bogleheads after Vanguard founder John Bogle. Throughout his long career at Vanguard’s helm, Bogle never deviated from his mission to keep more of his clients’ money in the market and out of his fund managers’ hands.

And that he did. According to data compiled by Vanguard, the average Vanguard mutual fund and ETF expense ratio is 83% lower than the industry average today. Over time, the savings add up.

Compared with the industry average, Vanguard investors save more than $35,000 in fees over 30 years on an initial investment of just $50,000, according to a Vanguard analysis.

It’s no surprise that Vanguard funds remain top of mind for do-it-yourself investors committed to building diversified portfolios with a mix of low-fee, passively managed mutual funds and ETFs.

(For investors with at least $50,000 in investable assets and less comfort with DIY investing, its Vanguard Personal Advisor Services is an affordable alternative to an independent human advisor.)

The list that follows focuses on the very best sector and index ETFs Vanguard has to offer.

Best Vanguard Funds (ETFs) for Retail Investors

If you have a tax-advantaged or taxable brokerage account — Vanguard or otherwise — with a self-directed investing option, you likely have access to the best Vanguard funds on the market.

And if your current online stock broker doesn’t offer Vanguard funds, there’s no cost to open a self-directed account with Vanguard.

What follows is a list of the best Vanguard ETFs for DIY retail investors — those building portfolios without help from a licensed financial advisor.

Each listing notes the instrument’s expense ratio (total operating expenses) and five-year return as of Q2 2021. Compare these figures to comparable instruments offered by other fund issuers, such as Fidelity and Charles Schwab.

Each listing also notes Vanguard’s proprietary “risk potential” score, which measures the risk of principal loss and growth on a scale of 1 to 5, with 5 being the riskiest. Funds composed primarily of stocks are higher-risk than funds that primarily include bonds and other fixed-income instruments.

One final note: Most of these ETFs are available as index funds (mutual funds), usually with investment minimums of $3,000. If you can meet the minimum investment and don’t mind waiting until the next trading session for your orders to fill, consult your financial advisor about investing in those instruments instead of these.

Pro Tip: Have you considered hiring a financial advisor but don’t want to pay the high fees? Enter Vanguard Personal Advisor Services. When you sign up you’ll work closely with an advisor to create a custom investment plan that can help you meet your financial goals. Learn More about Vanguard Personal Advisor Services.


1. Total Stock Market ETF (VTI)

  • Expense Ratio: 0.03%
  • Five-Year Return: 16.66%
  • Risk Potential: 4

The Vanguard Total Stock Market ETF (VTI) is also available as a mutual fund, but the ETF version is a better fit for investors who can’t meet the $3,000 mutual fund minimum.

As the name suggests, it’s designed to match the performance of a broad swathe of equities — specifically, the CRSP U.S. Total Market Index, which includes a mix of small-, mid-, and large-cap growth and value stocks.

VTI remains fully invested, meaning it holds minimal cash at any given time and is not insulated from the ups and downs of the market in any way. While that’s not ideal for cautious investors, VTI is a mainstay of more aggressive portfolios seeking exposure to the broader U.S. stock market.

VTI is also available as a mutual fund (index fund): Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX).


2. Total Bond Market ETF (BND)

  • Expense Ratio: 0.035%
  • Five-Year Return: 3.07%
  • Risk Potential: 2

The Vanguard Total Bond Market ETF (BND) is VTI’s bond market equivalent.

Designed to track the performance of a broad index of taxable investment-grade bonds, it excludes tax-exempt bonds (such as bonds issued by state governments and municipalities) and inflation-protected bonds (Treasury Inflation-Protected Securities).

BND has a wide range of use cases and is an integral component of a diversified portfolio, even those with relatively aggressive goals.

Vanguard recommends using BND as a hedge against stock market risk — basically, a counterweight to ETFs and funds like VTI, which tend to be more volatile. Otherwise, BND is appropriate for investors with moderate to long time horizons and lower tolerance for market risk.

BND is also available as a bond index fund: Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX).

Pro Tip: Are you looking for ways to diversify your investment portfolio? Fundrise and Groundfloor give you the opportunity to invest indirectly in real estate. If you’re an accredited investor, Crowdstreet is another option.

3. Vanguard Total International Stock ETF (VXUS)

  • Expense Ratio: 0.08%
  • Five-Year Return: 10.00%
  • Risk Potential: 5

The Vanguard Total International Stock ETF (VXUS) tracks the performance of the FTSE Global All Cap ex U.S. Index, which matches the performance of a broad basket of companies based outside the United States.

Its component firms hail from a mixture of developed and emerging markets, limiting regional risk and ensuring access to high- and low-growth economies alike.

VXUS hasn’t performed incredibly well over the past few years — a state of affairs that probably says more about the relative strength of the U.S. equities markets during that time than the composition of the fund itself.

Over longer periods, VXUS offers valuable diversification for U.S.-based investors seeking exposure to markets whose fates aren’t directly tied to the U.S. economy’s.

VXUS is also available as an index fund: Vanguard Total International Stock Index Fund Admiral Shares (VTIAX).


4. Vanguard S&P 500 ETF (VOO)

  • Expense Ratio: 0.03%
  • Five-Year Return: 16.26%
  • Risk Potential: 4

The Vanguard S&P 500 ETF (VOO) tracks the performance of the S&P 500 stock index, a basket of the 500 largest U.S.-based companies by market capitalization and a closely watched indicator of overall U.S. economic strength.

Like the underlying index, VOO is quite volatile, so it’s not appropriate for conservative investors with short time horizons and little tolerance for principal loss.

That said, it’s an essential complement to VTI, the mid- and small-cap components of which make for even greater volatility. Vanguard recommends VOO to long-term investors who can stomach near-term price drops.

VOO is also available as an index fund: Vanguard 500 Index Fund Admiral Shares (VFIAX).


5. Vanguard Russell 2000 ETF (VTWO)

  • Expense Ratio: 0.10%
  • Five-Year Return: 16.41%
  • Risk Potential: 5

The Vanguard Russell 2000 ETF (VTWO) tracks the performance of the Russell 2000 index, a broad basket of small U.S.-based companies.

The Russell 2000 (also known as the Russell 2K) is famously volatile, so VTWO isn’t for the faint of heart (or investors with short time horizons and a low tolerance for risk more generally).

But VTWO is absolutely a low-cost way for more aggressive investors to ensure exposure to high-growth companies during economic booms.

VTWO is not available as an index fund.


6. Vanguard Large-Cap ETF (VV)

  • Expense Ratio: 0.04%
  • Five-Year Return: 16.71%
  • Risk Potential: 4

The Vanguard Large-Cap ETF (VV) tracks the performance of the CRSP U.S. Large Cap Index, which encompasses a broad basket of mostly large companies based in the U.S., such as Apple (AAPL) and Facebook (FB).

VV’s performance is similar, though not identical, to the performance of the S&P 500 index and Vanguard’s VOO ETF, so it’s not clear you’d seek exposure to VV if you’ve already added VOO to your portfolio (or vice versa).

That said, if you’re looking for an alternative large-cap basket that’s fate isn’t directly tied to the S&P 500 index’s, VV could be a better fit.

VV is also available as an index fund: Vanguard Large-Cap Index Fund Admiral Shares (VLCAX).


7. Vanguard Mid-Cap ETF (VO)

  • Expense Ratio: 0.04%
  • Five-Year Return: 14.60%
  • Risk Potential: 5

The Vanguard Mid-Cap ETF (VO) tracks the CRSP U.S. Mid Cap Index, a broad basket of mid-cap stocks (midsize companies) in a range of industries and sectors.

Mid-cap stocks tend to be more volatile than large-cap stocks and less volatile than small-cap stocks — a healthy medium for those seeking higher growth than large-cap funds typically provide without the whiplash inherent in small-cap funds.

In a diversified portfolio, VO is a nice complement to VV and VTWO.

VO is also available as an index fund: Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX).


8. Vanguard Real Estate ETF (VNQ)

  • Expense Ratio: 0.12%
  • Five-Year Return: 6.13%
  • Risk Potential: 4

The Vanguard Real Estate ETF (VNQ) tracks the performance of the MSCI U.S. Investable Market Real Estate 25/50 Index, a basket of stocks in the U.S. real estate sector.

Fund components typically buy and hold commercial real estate properties, such as office buildings, retail properties, and hotels, across the U.S.

VNQ’s geographical diversity insulates it from regional economic trends but can’t do much about its exposure to macroeconomic risk, as recessions tend to be bad for the U.S. real estate market writ large.

That said, VNQ’s performance is not closely correlated with broader movements in U.S. equities outside real estate, so it’s a useful counterweight to funds like VO and VV.

VNQ is also available as a mutual fund: Vanguard Real Estate Index Fund Admiral Shares (VGSLX).


9. Vanguard Growth ETF (VUG)

  • Expense Ratio: 0.04%
  • Five-Year Return: 20.60%
  • Risk Potential: 4

The Vanguard Growth ETF (VUG) mirrors the performance of the CRSP US Large Cap Growth Index, a basket of mostly large companies with high growth potential (such as Amazon, Facebook, and Microsoft).

Because of its growth focus, VUG has performed very well relative to most other sector ETFs during the past few years and even held up well during the pandemic panic-induced stock market plunge of early 2020.

However, there’s no guarantee the party will last.

VUG is also available as an index fund: Vanguard Growth Index Fund Admiral Shares (VIGAX).


Final Word

Millions of satisfied clients would agree that Vanguard deserves its reputation as a low-cost, investor-friendly investment house. But investors — novices and experts alike — need to be realistic about the potential risks of investing with Vanguard too.

These risks aren’t unique to Vanguard. Investing in market-traded instruments always involves the risk of principal loss, and past performance is never a perfect predictor of future returns.

Always invest in accordance with your risk tolerance and financial objectives, and if you’re not sure how to assess either or both, consult a licensed financial advisor.

Brian Martucci
Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he's not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.

What Do You Want To Do
With Your Money?

Make
Money

Explore

Manage
Money

Explore

Save
Money

Explore

Borrow
Money

Explore

Protect
Money

Explore

Invest
Money

Explore