A smart beta exchange-traded fund (ETF) invests in an index but uses alternative strategies for weighting the components of the index. Unlike a traditional ETF that seeks to track the returns of a capitalization-weighted index, smart beta ETFs seek to outperform the index and reduce risk. Using a transparent, rules-based approach, a smart beta ETF may weight its holdings according to fundamentals such as book value or dividend payments, or technical factors such as momentum. The Vanguard Group, known for its low-fee index funds, offers the following smart beta ETFs.

Vanguard Dividend Appreciation ETF

The Vanguard Dividend Appreciation ETF (NYSEARCA: VIG) seeks to mirror the performance of the NASDAQ US Dividend Achievers Select Index. The index tracks the performance of stocks with a history of increasing their dividends for at least 10 consecutive years, and the ETF passively invests in the index components. VIG is in the large blend category of Vanguard funds. As of September 22, 2016, the fund had $22.25 billion in assets under management (AUM) and an expense ratio of 0.09%. Of its 187 holdings, its top 10 holdings comprise 30.79% of its portfolio. VIG pays an annual dividend yield of 2.16%. As of September 22, 2016, the ETF has a YTD return of 10.67% and five-year annualized returns of 12.68%. 

Vanguard Value ETF

The Vanguard Value ETF (NYSEARCA: VTV) attempts to mirror the performance of the CRSP US Large Cap Value Index, which measures the investment returns of large-capitalization value stocks. The ETF is in the large value category of Vanguard funds and passively invests in the index components. As of September 22, 2016, VTV had $22.82 billion in AUM and an expense ratio of 0.08%. The fund holds positions in 325 stocks in a variety of sectors. Its top 10 holdings make up 28.06% of its portfolio. VTV pays an annual dividend yield of 2.55%. Its YTD return is 8.39%, with a five year annualized of 15.60%. 

Vanguard Growth ETF

The Vanguard Growth ETF (NYSEARCA: VUG) seeks to track the performance of the CRSP US Large Cap Growth Index, which tracks the returns of the largest domestic growth stocks. The ETF resides in the large-cap growth category of Vanguard's funds and invests passively in the components of the index that it tracks. As of September 22, 2016, VUG had $21.77 billion in AUM and an expense ratio of 0.08%. The fund holds positions in 335 stocks, with a concentration in its top 10 holdings of 25.76%. VUG pays an annual dividend yield of 1.38%. Its YTD return is 6.32% and it has five year annualized returns of 12.12%.

Vanguard High Dividend Yield ETF

The Vanguard High Dividend Yield ETF (NYSEARCA: VYM) focuses on dividend-paying stocks similar to VIG, but offers a variation on the approach. It invests in the highest-yielding dividend stocks but does not take into account how long the companies have paid the dividends. The fund seeks to track the performance of the FTSE High Dividend Yield Index and passively invests in the index. As of September 22, 2016, the fund had $15.48 billion in AUM and an expense ratio of 0.09%. It holds 425 stocks, and 31.91% of its assets are concentrated in its top 10 holdings. VYM pays an annual dividend yield of 3.14%. Its YTD return is 10.31%, with five-year annualized returns of 14.89%.