Vanguard Exchange Traded Funds

2020/01/05

One of the biggest name in exchange traded funds is the Vanguard ETF’s. Here in this article we will explain its constituents, the process associated and the reasons why they are considered one of the most popular ETF’s. Just like any ETF’s, Vanguard ETF’s are very economical and have most of the tax advantages.

Vanguard ETF’s are part of the Vanguard index funds which can be bought and sold only through the Vanguard Brokerage firm during trading hours. The brokerage services charges a fees/commission for helping you buy and sell.  The Vanguard ETF is managed by the Vanguard Equity Group. Vanguard ETF you can be bought and sold at prices fixed any time during the trading day with the option of short selling, stop loss, margin buying or placing limit orders.

Under normal market conditions Vanguard ETF’s stock prices are very close to their NAV.  Vanguard ETF’s are very low costing investment instruments traded on the exchanges. The expense ratio of a Vanguard ETF is lower than the Vanguard index funds due to the role of the brokerage service. Not only to Vanguard index funds, Vanguard ETF’s average expense ratio is 0.18 percentages when compared to 0.52 percentages of industry average.

Vanguard ETF’s price is usually depended on the prices of the stocks which are held by the underlying assets and also by the demand and supply factors in the market. Depending on the changes in the market,  the price of the ETF can be sometimes more than the NAV or less than the NAV. Expenses related to Vanguard ETF’s include the brokerage commission and bid ask spread cost.

Capital gains from the Vanguard ETF are usually distributed on a per year basis usually during December. Dividends are announced based on the  index fund’s schedule. Apart from dividends and capital gains, the Vanguard ETF also provides tax advantage more so because they are part of the Vanguard index funds. Those holding Vanguard index funds have the option to convert to Vanguard ETF’s. This is not applicable for Bonds. More so once a conversion has been done from conventional shares to Vanguard ETF, you cannot re-convert it again.

Just like the benefits, there are also risks associated with ETF’s such as sudden changes in the market can result in loss or gain. Apart from market risk, you must be careful about sector specific Vanguard ETF’s and small/mid cap stock indexes. This is because they can be more volatile. Similarly for international Vanguard ETF’s the risk is usually associated to currency and country specific issues.

Some of the Vanguard ETF’s include: Vanguard dividend appreciation ETF, Vanguards Emerging Market ETF’s, Vanguards Total World Stock ETF (includes emerging markets), and about 6-7 Vanguard Bond ETF’s.

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