In the four decades since its founding, the Vanguard Group has grown to be one of the largest investment companies in the world. At the core of that expansion has been Vanguard’s commitment to providing individual investors with low-cost solutions to gaining wealth.
Although other fund companies such as Schwab and Fidelity attempt to compete with Vanguard on fees with selective funds, Vanguard is able to keep its low-cost edge across the fund spectrum based on its unique ownership structure. Unlike other fund companies, which are either corporate-owned or owned by third-parties, Vanguard is owned by its funds. And the funds, therefore, are owned by their investors. That means the profits generated by the funds’ operations are returned to investors in the form of lower fees. As such, it makes it very difficult for other companies, which are beholden to their companies’ shareholders, to compete over price.
Vanguard quickly introduced its own suite of exchange-traded funds (ETFs) when the investment product started becoming popular. It has since become one of the largest providers of ETFs in the U.S. — second to Blackrock. Vanguard’s unique cost structure, the economies of scale it has achieved and the total number of assets under management allow it to offer its ETFs at the lowest cost available in the market.
These are the firm's 10 cheapest ETFs by expense ratio, current as of Dec. 31, 2018, unless otherwise noted.
Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF is one of Vanguard’s lowest-cost ETFs with a 0.04% expense ratio. It is also among the largest with $400.7 billion in assets under management (AUM), according to Vanguard's website.
The fund’s objective is to track the performance of the Standard & Poor’s 500 Index. It holds 509 stocks with a median market capitalization of $99.1 billion. The ETFs top holdings are Microsoft, Apple, Alphabet, Amazon and Berkshire Hathaway. The top three sectors invested by the ETF were information technology, healthcare, and financials.
As of Jan. 31, 2019, the fund returned 10.93% over the last five years, a slight underperformance compared to the S&P 500's 10.96%. The fund's year-to-date return is 8.08%. It has returned 13.72% to investors since its inception on Sept. 7, 2010.
Vanguard Total Stock Market ETF
The Vanguard Total Stock Market ETF is Vanguard’s oldest and largest ETF with $672.2 billion in AUM. The fund covers the entire U.S. stock market for a rock bottom fee of 0.04%.
The ETF holds 3508 stocks in total in its portfolio. The top three sectors are technology, financials, and healthcare. Its top holdings are Microsoft, Apple, Amazon, Alphabet, and Berkshire Hathaway.
According to Vanguard, the fund's 10-year return is 15.17%, its five-year return is 10.42%, and its year-to-date return is 8.66% as of Jan. 31, 2019. The fund slightly outperformed the benchmark Spliced Total Stock Market Index on the five-year and year-to-date returns.
Vanguard Total Bond Market ETF
With $204 billion in assets under management, the Vanguard Total Bond Market ETF offers investors broad exposure to the fixed-income market. The expense ratio charged by Vanguard for this ETF is 0.05%.
The fund comes with 8582 bonds in its portfolio including 43.3% allocated to treasury/agency bonds, 22.1% to government mortgage-backed bonds and 16% to industrial bonds, leaving about 19% for the rest.
As of Jan. 31, 2019, the fund returned 2.36% over the last five years, underperforming its benchmark Bloomberg Barclays U.S. Aggregate Bond TR by 0.06%.
Vanguard Growth ETF
The Vanguard Growth ETF invests in stocks of large-cap companies with high-growth potential and charges an expense ratio of 0.05%.
Its $73.2 billion in assets are heavily weighted towards technology stocks, with Apple, Amazon, Alphabet, Microsoft, and Facebook comprising the top five out of 311 holdings.
As of Jan 31, 2019, the fund has returned 16.09% over the last 10 years, 11.65% over the last five years, and 9.37% year-to-date as of March 31, 2017.
Vanguard Large-Cap ETF
The Vanguard Large-Cap ETF invests in stocks representing the largest 85% of the U.S. stock market, which range from larger multinational mega-cap companies to smaller mid-cap ones. The fund’s expense ratio is 0.05%.
The fund, which has $19.2 billion in assets has a total of 612 stocks in its portfolio. It is most heavily invested in technology, financials, and healthcare. This ETF's top five holdings include Microsoft, Apple, Amazon, Alphabet, and Berkshire Hathaway.
The fund tracks the performance of the CRSP U.S. Large Cap Index. Its 10-year return is 15.04% and its five-year return is 10.80% as of Jan. 31, 2019—all slightly below the benchmark. The fund's year-to-date the return is 8.19%.
Vanguard Value ETF
The Vanguard Value ETF invests in large-cap value stocks in the U.S. across a wide range of industries and comes with an expense ratio of 0.05%.
Tracking the performance of the CRSP U.S. Large Cap Value Index, this ETF has $69.2 billion in AUM.
Made up of 344 stocks with a median market cap of $89.3 billion, it is most heavily invested in financials, healthcare, and technology. Its top five holdings include Berkshire Hathaway, Microsoft, Johnson & Johnson, JPMorgan Chase, and Exxon Mobil.
Over the last 10 years, it returned 14.05% and over five years, 10.05%. Its year-to-date return was 7.12%. These returns are current as of Jan. 31, 2019.
Vanguard Mid-Cap ETF
The Vanguard Mid-Cap ETF has an expense ratio of 0.05%, providing investors with low-cost access to a diversified group of mid-cap companies in the U.S.
The fund tracks the performance of the CRSP U.S. Mid Cap Index. The fund's $87 billion AUM is invested in 366 mid-cap stocks which have a median market cap of $12.5 billion.
The fund is mainly invested in financials at 20.5%, industrials at 18.8% and technology at 15.3%. Its top five holdings are Edwards Lifesciences, Red Hat, Fiserv, Autodesk and Roper Technologies.
As of Jan. 31, 2019, the fund's 10-year return is 15.84% and five-year return is 8.87%. Its returned 10.60% year-to-date.
Vanguard Small-Cap ETF
The Vanguard Small-Cap ETF is a high-risk market-cap-weighted fund invested in a diversified group of small companies. It tracks the performance of the CRSP U.S. Small Cap Index. The fund has an expense ratio of 0.06%.
As of Jan. 31, 2019, the had $77.9 billion in assets and was invested in 1413 stocks. Its top five holdings include Burlington Stores, NRG Energy, WP Carey, Atmos Energy, and iDEX Corp.
Over the last 10 years, the ETF returned 16.08% and over the last five, 8.09%. Its year-to-date return was 11.91% as of Jan. 31, 2019.
Vanguard Short-Term Inflation-Protected Securities ETF
With more than $77.7 billion in AUM and an expense ratio of 0.06%, the Vanguard Short-Term Inflation-Protected Securities ETF gives investors access to bonds backed by the federal government. It also aims to provide protection from inflationary risks or other unexpected inflationary surprises.
With $26.9 billion in assets, the fund is invested in 15 government-backed bonds. Among the holdings, the majority are between three to five-year bonds at 44.6% while one to three-year bonds comprise 40.2% of the portfolio. The remaining 15.2% are all under one year.
The fund, whose benchmark index is the BloomBarc US 0-5 Year TIPS Index, returned 0.64% in five years and 0.75% year-to-date as of Jan. 31, 2019.
Vanguard FTSE Developed Markets ETF
With more than $100.7 billion in AUM, the Vanguard FTSE Developed Markets ETF has become a very popular low-cost way for investors to gain broad exposure to foreign developed markets. The fund’s expense ratio is 0.07%.
The fund is heavily invested in the European and Pacific markets with exposure to 3958 stocks. The median market cap for the fund is $25.1 billion. Its top five holdings include Royal Dutch Shell, Nestle, Samsung Electronics, Novartis and Roche Holding.
As of Jan. 31, 2019, the fund returned 8.50% over the last 10 years and 3.27% over the last five years. Its year-to-date return was 7.49%.