What are 'Vanguard Exchange-Traded Funds'

Vanguard exchange-traded funds (ETFs) are a class of funds offered by Vanguard.

BREAKING DOWN 'Vanguard Exchange-Traded Funds'

There are currently more than 50 Vanguard exchange-traded funds, which are traded, like any other shares, on the exchanges such as the New York Stock Exchange or Nasdaq. Their underlying indexes cover both individual sectors, such as materials and energy, and domestic and international indexes.

The Vanguard exchange-traded funds were previously known as Vanguard Index Participation Receipts (VIPERS). In their current form, Vanguard ETFs aim to track their underlying indexes as closely as possible and offer the flexibility of intraday trading.

By developing this class of low-cost funds, Vanguard sought to bring its leadership in the passive management market to the ETF space.

Vanguard explains that the ETFs, with sometimes thousands of stocks or bonds in a single fund offer more flexibility for portfolios – with the benefits of an index fund but more control for the individual investor, all supported by Vanguard's affordable customer service.

Vanguard ETFs Compared with Stocks and Mutual Funds

Owning an ETF is similar to a mutual fund, with baskets of individual stocks or bonds that offer the same  built-in diversification and low costs. The funds are also tradable, like individual stocks.

Compared with stocks and bonds, however, ETFs offer less risk and less ongoing maintenance, according to Vanguard. Its mix of preselected stocks or bonds means that if one stock or bond iin the fund performs poorly, others are likely performing well. Also, investors can leave security selection to professional fund managers. 

True, as noted, that sounds a lot like a mutual fund. But compared with standard mutual funds, ETFs have some unique characteristics that might make them appealing for some investors, according to Vanguard.

In addition, it points out that both mutual funds and ETFs are less risky than investing in individual stocks & bonds; offer a wide variety of options to meet specific investment goals; are managed by portfolio professionals; and, at Vanguard, are commission-free.

But ETFs require smaller investment minimums to start with. They also offer real-time, intraday pricing, assessing minute by minute changes, whenever they're bought and sold, as opposed to mutual funds, which are only priced at the close of a trading day.

 

RELATED TERMS
  1. Investment Fund

    An investment fund is the pooled capital of investors that enables ...
  2. Minimum Investment

    A minimum investment is the smallest dollar or share quantity ...
  3. Total Stock Fund

    A total stock fund is a mutual fund or exchange-traded fund that ...
  4. ETF of ETFs

    An ETF of ETFs is an exchange-traded fund (ETF) that tracks other ...
  5. IPO ETF

    An IPO ETF is an exchange-traded ETF that invests in companies ...
  6. Mutual Fund

    Mutual funds combine money from many investors to invest in a ...
Related Articles
  1. Investing

    Vanguard Balanced Allocation Funds Overview

    Learn about the basics of Vanguard Funds and how their Balanced allocation mutual funds and ETFs differ from other investment managers.
  2. Investing

    Vanguard Funds, ETFs Tops Money Magazine's Annual Investment Guide

    Money Magazine named 42 mutual funds and ETFs from Vanguard to its annual fund and ETF recommendation lists.
  3. Investing

    Vanguard Income Based Funds Overview (VOO,VPU)

    Discover the different income funds that Vanguard Investments offer, using either mutual funds or ETFs and stocks, bonds or balanced investment styles.
  4. Investing

    Vanguard Is At It Again With More Fee Cuts

    Fund giant Vanguard is once again lowering fees on some of its popular ETFs.
  5. Investing

    Vanguard Plans to Introduce a Bond ETF of ETFs

    Vanguard is again tapping the ETF of ETFs structure for a new bond fund.
  6. Retirement

    Is a Vanguard Roth IRA Account Right For You?

    Learn about factors such as fees and fund performance that help determine whether Vanguard is a suitable place to hold a Roth IRA account.
  7. Retirement

    The Vanguard Effect: Lower Expenses, Higher Returns

    Vanguard distinguishes itself by being the low-cost provider in a crowded field of mutual funds and ETFs.
  8. Financial Advisor

    Vanguard Fixed-Income Index Funds Overview

    Get an overview of Vanguard's fixed-income index funds, and learn about the characteristics of Vanguard Group and the array of fixed-income funds it offers.
  9. Investing

    Top 3 Vanguard Managed ETFs (VTI, VIG)

    Find out which three Vanguard exchange-traded funds made into the list of best Vanguard products for new and established ETF investors.
RELATED FAQS
  1. Can you buy Vanguard funds through another brokerage?

    Learn about Vanguard mutual funds and exchange-traded funds (ETFs), and how investors can purchase them through multiple ... Read Answer >>
  2. Do Vanguard ETFs pay dividends?

    Learn about Vanguard exchange-traded funds (ETFs) and how most of them typically have low expense ratios and pay dividends ... Read Answer >>
Trading Center