10 Top Vanguard ETFs for Buy-and-Hold Strategies: Evaluating Costs, Returns, and Performance
Buy and hold has worked very well for long-term investors. History has also taught us that active money managers have underperformed S&P 500 or their benchmarks. We dream of becoming Warren Buffett, but most of us are below-average investors. Thus, it is best to buy some passive funds, get on with our daily lives, and forget about it. This article covers the 10 best Vanguard ETFs to buy and hold.
- Most passive and “lazy” investors prefer not to spend time and effort on active investment strategies, but to use passive strategies such as “buy and hold”. Passive investing fits buy & hold very well.
- Passive investing allows you to spend a minimum of time and effort and get a satisfactory return (you get the market’s return minus a small management fee) that will suit most passive investors. Forget about it, and carry on with your life.
- Passive strategies include a popular asset allocation strategy that makes extensive use of various ETFs that various companies manage.
- Among the companies that manage ETFs, Vanguard Group stands out favorably for a couple of reasons.
- In this article, we will pick, review, and describe Vanguard ETFs that are suitable for long-term “buy and hold” strategies.
We’d also like to mention that we have plenty of similar investment strategies on our major landing page.
What Is Vanguard Group
Vanguard leads the mutual and exchange-traded fund market in the United States with over $7 trillion in assets under management.
Vanguard is the best choice for long-term index investors for many reasons:
- Vanguard offers an excellent selection of three major asset classes: US equities, international equities and bonds;
- Vanguard funds have low costs because Vanguard is one of the cheapest providers in the industry;
- Vanguard funds use simple and reliable investment strategies because index funds are simple in their approach and inherently reliable in their actions;
- Long-term investors can easily build well-diversified portfolios exclusively from the top-rated Vanguard ETFs and mutual funds.
Vanguard is “equal” to passive investing because of John Bogle:
The late and iconic John Bogle founded Vanguard
John Bogle founded the Vanguard Group in May 1975. Bogle was passionate about investing and personal finance, and recommended passive investing, and he is regarded as the father of passive investing.
Bogle was an avid proponent of passive investing and shun any form of “speculation”. He preferred long-term patience and inactivity over active management to reduce broker fees and behavioral mistakes (which we do plenty of). His ideal investment was a fund that had exposure to the whole US market , held over a life time, and had a small exposure to bonds (10-20%). He later recommended included both foreign stocks and bonds.
Please read our take on Bogleheads 3 And 4 Fund Portfolio.
Vanguard Buy And Hold ETFs Backtesting
Before we go on describing the 10 best buy and hold Vanguard ETFs, we backtest each ETF’s buy and hold performance. The testing interval is from the inception date of each ETF until today. All quotes are adjusted for dividends (dividends are reinvested).
We would like to backtest all the ten ETFs as one equal-weighted portfolio, but because of the different inception dates, we decided not to (too short period to be meaningful).
The table below summarizes the statistics, performance, returns, and metrics for each ETF:
Fund Name | Fund Ticker | Total Return (%) | Anual Return (%) | Max. Drawdown (%) | CAR/MDD | Standard Deviation (%) | Sharpe Ratio (3% Risk-Free Rate) |
Vanguard S&P 500 ETF | VOO | 384.26 | 13.21 | -33.99 | 0.39 | 19.24 | 0.53 |
Vanguard S&P 500 Value ETF | VOOV | 258.8 | 10.57 | -37.31 | 0.28 | 18.51 | 0.41 |
Vanguard S&P 500 Growth ETF | VOOG | 406.72 | 13.61 | -32.73 | 0.42 | 20.68 | 0.51 |
Vanguard Total World Stock ETF | VT | 158.29 | 6.57 | -50.26 | 0.13 | 24.19 | 0.15 |
Vanguard Total International Stock ETF | VXUS | 60.24 | 3.9 | -35.97 | 0.11 | 20.22 | 0.04 |
Vanguard Real Estate ETF | VNQ | 257.15 | 7.06 | -73.07 | 0.1 | 34.92 | 0.12 |
Vanguard Long-Term Bond ETF | BLV | 102.44 | 4.47 | -37.23 | 0.12 | 12.26 | 0.12 |
Vanguard Long-Term Treasury ETF | VGLT | 57.47 | 3.45 | -42.5 | 0.08 | 14.55 | 0.03 |
Vanguard Long-Term Corporate Bond ETF | VCLT | 83.53 | 4.6 | -34.31 | 0.13 | 12.52 | 0.13 |
Vanguard Total International Bond ETF | BNDX | 19.01 | 1.76 | -16.23 | 0.11 | 3.91 | -0.32 |
The equity curves of the ETFs are below in the description of each ETF.
Let’s short describe each ETF and what assets they track:
Vanguard S&P 500 ETF (VOO)
Vanguard S&P 500 ETF seeks to track the investment performance of the S&P 500 Index, a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies.
Vanguard S&P 500 ETF is an exchange-traded share class of Vanguard 500 Index Fund. Using full replication, the portfolio holds all stocks in the same capitalization weighting as the index.
Vanguard S&P 500 ETF overview:
- Category: Large Blend;
- Assets Under Management (AUM): 820.7 billion;
- Yield: 1.57%;
- Expense Ratio: 0.03%;
- Inception Date: 09/07/2010;
- Ticker: VOO.
Vanguard S&P 500 ETF equity curve since inception:
Vanguard S&P 500 Value ETF (VOOV)
Vanguard S&P 500 Value ETF tracks the investment performance of a benchmark index that measures the investment returns of large-capitalization U.S. value stocks.
Vanguard S&P 500 Value ETF is an exchange-traded share class of Vanguard S&P 500 Value Index Fund. Using full replication, the portfolio holds all stocks in the same capitalization weighting as the index.
Vanguard S&P 500 Value ETF overview:
- Category: Large Value;
- Assets Under Management (AUM): 3.4 billion;
- Yield: 1.84%;
- Expense Ratio: 0.10%;
- Inception Date: 09/07/2010;
- Ticker: VOOV.
Vanguard S&P Value 500 ETF equity curve since inception:
Vanguard S&P 500 Growth ETF (VOOG)
Vanguard S&P 500 Growth ETF seeks to track Standard & Poor’s 500 Growth Index, a benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. growth companies.
Vanguard S&P 500 Growth ETF is an exchange-traded share class of Vanguard S&P 500 Growth Index Fund. Using full replication, the portfolio holds all stocks in the same capitalization weighting as the index.
Vanguard S&P 500 Growth ETF overview:
- Category: Large Growth;
- Assets Under Management (AUM): 7.2 billion;
- Yield: 1.20%;
- Expense Ratio: 0.10%;
- Inception Date: 09/07/2010;
- Ticker: VOOG.
Vanguard S&P 500 Growth ETF equity curve since inception:
Vanguard Total World Stock ETF (VT)
Vanguard Total World Stock ETF seeks to track the investment performance of the FTSE Global All Cap Index, a free-float-adjusted, market-capitalization-weighted index designed to measure the market performance of large-, mid-, and small-capitalization stocks of companies located around the world.
The index includes stocks of companies located in various countries, including both developed and emerging markets. The fund invests in a broadly diversified sampling of stocks in the index that approximates the index’s key risk factors and characteristics.
Vanguard Total World Stock ETF overview:
- Category: International/Global Stock;
- Assets Under Management (AUM): $36.19 billion;
- Yield: 2.06%;
- Expense Ratio: 0.07%;
- Inception Date: 06/24/2008;
- Ticker: VT.
Vanguard Total World Stock ETF equity curve since inception:
Vanguard Total International Stock ETF (VXUS)
Vanguard Total International Stock ETF seeks to track the investment performance of the FTSE Global All Cap ex US Index, an index designed to measure equity market performance in developed and emerging markets, excluding the United States.
The fund invests substantially all of its assets in the common stocks included in its target index. The fund allocates its assets based on each region’s weighting in the index.
The experience and stability of Vanguard’s Equity Index Group have permitted continuous refinement of techniques for reducing tracking error.
Vanguard Total World Stock ETF overview:
- Category: Foreign Large Blend;
- Assets Under Management (AUM): $373.9 trillion;
- Yield: 2.89%;
- Expense Ratio: 0.07%;
- Inception Date: 01/26/2011;
- Ticker: VXUS.
Vanguard Total International Stock ETF equity curve since inception:
Vanguard Real Estate ETF (VNQ)
Vanguard Real Estate ETF seeks to track the investment performance of the MSCI US Investable Market Real Estate 25/50 Index.
The fund seeks to provide high income and moderate long-term capital growth by investing in stocks issued by commercial REITs. Using a full-replication process, the fund seeks to hold all stocks in the same capitalization weighting as the index.
REITs and real estate securities included in the index must have enough shares and trading volume to be considered liquid.
Vanguard Real Estate ETF overview:
- Category: Real Estate;
- Assets Under Management (AUM): $62.8 billion;
- Yield: 4.1%;
- Expense Ratio: 0.12%;
- Inception Date: 09/23/2004;
- Ticker: VNQ.
Vanguard Real Estate ETF equity curve since inception:
Vanguard Long-Term Bond ETF (BLV)
Vanguard Long-Term Bond ETF seeks to track the investment performance of the Bloomberg U.S. Long Government/Credit Float Adjusted Index, an unmanaged benchmark representing the long-term, investment-grade U.S. bond market.
The fund provides high current income by investing in long-maturity U.S. Treasury, agency, and investment-grade corporate securities.
The fund’s passive investment style uses a sampling technique to closely match key benchmark characteristics: sector weight, coupon, maturity, effective duration, convexity, and credit quality.
Vanguard Long-Term Bond ETF overview:
- Category: Long-Term Bond;
- Assets Under Management (AUM): $8.7 billion;
- Yield: 4.80%;
- Expense Ratio: 0.04%;
- Inception Date: 04/03/2007;
- Ticker: BLV.
Vanguard Long-Term Bond ETF equity curve since inception:
Vanguard Long-Term Treasury ETF (VGLT)
Vanguard Long-Term Treasury ETF seeks to track the performance of a market-weighted Treasury bond index with a long-term dollar-weighted average maturity.
The fund invests by sampling the index, meaning that it holds a range of securities that, in the aggregate, approximates the full index in terms of key risk factors and other characteristics.
All of the fund’s investments will be selected through the sampling process, and at least 80% of the fund’s assets will be invested in bonds included in the index.
The fund maintains a dollar-weighted average maturity consistent with that of the index.
Vanguard Long-Term Treasury ETF overview:
- Category: Long Government;
- Assets Under Management (AUM): $9.5 billion;
- Yield: 3.97%;
- Expense Ratio: 0.04%;
- Inception Date: 11/19/2009;
- Ticker: VGLT.
Vanguard Long-Term Treasury ETF equity curve since inception:
Vanguard Long-Term Corporate Bond ETF (VCLT)
Vanguard Long-Term Corporate Bond ETF seeks to track the performance of a market-weighted corporate bond index with a long-term dollar-weighted average maturity.
The fund invests by sampling the index, meaning that it holds a range of securities that, in the aggregate, approximates the full index in terms of key risk factors and other characteristics.
All of the fund’s investments will be selected through the sampling process and at least 80% of the fund’s assets will be invested in bonds included in the index.
The fund maintains a dollar-weighted average maturity consistent with that of the index.
Vanguard Long-Term Corporate Bond ETF overview:
- Category: Long-Term Bond;
- Assets Under Management (AUM): $6.7 billion;
- Yield: 5.54%;
- Expense Ratio: 0.04%;
- Inception Date: 11/19/2009;
- Ticker: VСLT.
Vanguard Long-Term Corporate ETF equity curve since inception:
Vanguard Total International Bond ETF (BNDX)
Vanguard Total International Bond ETF seeks to track the investment performance of the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged). This index provides a broad-based measure of the global, investment-grade, fixed-rate debt markets.
The index includes government, government agency, corporate, and securitized non-U.S. investment-grade fixed income investments, all issued in currencies other than the U.S. dollar and with maturities of more than one year.
The fund invests in a broadly diversified sampling of bonds in the index that approximates the index’s key risk factors and characteristics.
Vanguard Total International Bond ETF overview:
- Category: World Bond;
- Assets Under Management (AUM): $85.3 billion;
- Yield: 3.02%;
- Expense Ratio: 0.07%;
- Inception Date: 05/31/2013;
- Ticker: BNDX.
Vanguard Total International Bond ETF equity curve since inception:
FAQ:
What is the significance of “buy and hold” strategy in investing?
The “buy and hold” strategy involves purchasing investments and holding onto them for an extended period, typically with the expectation of long-term growth. This approach minimizes the impact of short-term market fluctuations and emphasizes the importance of a patient, long-term perspective.
How do Vanguard S&P 500 ETFs (VOO, VOOV, VOOG) differ in their investment approach?
VOO tracks the S&P 500, VOOV focuses on value stocks within the S&P 500, and VOOG targets growth stocks in the same index. Each ETF offers a unique investment approach, catering to different investor preferences based on their stance on value or growth investing.
What is the role of Vanguard Real Estate ETF (VNQ) in a long-term investment portfolio?
VNQ provides exposure to the real estate sector by investing in REITs. Including VNQ in a long-term portfolio can add diversification and potentially higher income. However, investors should be aware of the sector’s volatility and conduct thorough research before investing.