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A Sector Investing Perspective

Vanguard ETFs are administered by The Vanguard Group, a leading mutual fund company that manages several index mutual funds. Vanguard ETFs are set up as a separate class of shares of selected Vanguard index funds.

Vanguard index funds that offer ETF shares have two classes of shares. The first class of shares is called Admiral Shares. The Admiral Shares are conventional mutual fund shares that can be bought from or redeemed with the issuing index fund. The ETF shares are the other class of shares and they trade on the American Stock Exchange.

Breadth of Sector Vanguard ETFs

Vanguard offers ten sector ETFs and one industry group ETF. The sector ETFs span the ten sectors of the Global Industry Classification Standard jointly developed by Morgan Stanley Capital International (MSCI) and Standard & Poor's. The sole industry group ETF focuses on real-estate investment trusts (REITs).

Investment Approach

The Vanguard ETFs as well as sector and industry group index funds are designed to track a target index. The target index is the MSCI US Investable Market Index for the corresponding sector or industry group. The MSCI sector indexes are subsets of the MSCI US Investable Market 2500 Index. The MSCI US REIT Index is the target index for the Vanguard REIT Index Fund.

Expense Ratio

The expense ratio for all Vanguard sector ETFs is 0.25%. The expense ratio for the Vanguard REIT ETF is 0.12%.

Trading Size

Vanguard ETFs may be purchased in 'round lots' of 100 shares or smaller with the minimum number being one share. Subject to certain restrictions, Vanguard allows existing Admiral Class shareholders to convert their shares into shares of the corresponding ETF.

AlphaProfit Take

Vanguard ETFs are based on benchmark indexes provided by MSCI. The MSCI indexes are reconstituted quarterly and reflect changes in equity markets in a relatively timely manner. The MSCI sector indices tend to be more broadly diversified. As such, Vanguard sector ETFs generally include a greater number of stocks and cover more market capitalization segments than sector ETFs offered by other ETF families.

The expense ratios of Vanguard ETFs are generally lower than those of most competing ETFs. The expense ratios of Vanguard ETFs are also generally a tad lower than those of the Admiral Shares offered by the corresponding Vanguard index fund.

The liquidity of Vanguard ETFs has generally been lower than those of SPDR ETFs. This in turn may translate into higher bid-ask spreads.

Since Vanguard ETFs are set up as a class of index fund shares, significant net redemptions of the Admiral Class mutual fund shares may adversely affect the tax efficiency of the ETF shares.

With just one industry group offering, Vanguard ETFs offer slim pickings for investors seeking industry group ETFs.

For most retail investors, Vanguard ETFs offer a less-onerous means to own shares in Vanguard sector index funds. ETF investors do not have to come up with the relatively large minimum initial investment required to own Admiral Shares. Unlike Admiral Share investors, ETF investors are not required to hold their shares for one year to avoid the short-term redemption fee.

AlphaProfit Newsletter and Vanguard ETF Recommendations

AlphaProfit Sector Investors' Newsletter is the premier resource for sector investors. The Newsletter offers recommendations on Vanguard ETFs. The Newsletter and its model portfolios have frequently been ranked #1 by Hulbert Financial Digest.

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Vanguard ETF List

Vanguard ETF Symbol Inception Date Vanguard Index Fund Offering ETF, Admiral Shares Ticker Underlying MSCI-US-IM Index Focus Area of ETF
Vanguard Consumer Discretionary ETF VCR 01/26/2004 Vanguard Consumer Discretionary Index Fund, VCDAX Consumer Discretionary Media, Entertainment, Home Improvement Retail, Restaurants
Vanguard Consumer Staples ETF VDC 01/26/2004 Vanguard Consumer Staples Index Fund, VCSAX Consumer Staples Food Products, Beverages, Tobacco, Household Products
Vanguard Energy ETF VDE 09/23/2004 Vanguard Energy Index Fund, VENAX Energy IntegratedOil, Oil & Gas Exploration & Production, Energy Service
Vanguard Financials ETF VFH 01/26/2004 Vanguard Financials Index Fund, VFAIX Financials Diversified Banks, Property & Casualty Insurance, Regional Banks, REITs
Vanguard Health Care ETF VHT 01/26/2004 Vanguard Health Care Index Fund, VHCIX Health Care Pharmaceuticals, Biotechnology, Health Care Equipment
Vanguard Industrials ETF VIS 09/23/2004 Vanguard Industrials Index Fund, VINAX Industrials Industrial Conglomerates, Aerospace & Defense, Heavy Equipment & Machinery
Vanguard Information Technology ETF VGT 01/26/2004 Vanguard Information Technology Index Fund, VITAX Information Technology Computer Hardware, Communication Equipment, Semiconductors, Software
Vanguard Materials ETF VAW 01/26/2004 Vanguard Materials Index Fund, VMIAX Materials Diversified Chemicals, Steel, Specialty Chemicals
Vanguard REIT ETF VNQ 09/23/2004 Vanguard REIT Index Fund, VGSLX REIT Retail REITs, Specialized REITs, Residential REITs, Office REITs
Vanguard Telecom. Services ETF VOX 09/23/2004 Vanguard Telecommunication Services Index Fund, VTCAX Telecom. Services Integrated Telecommunication Services, Wireless Telecommunication Services
Vanguard Utilities ETF VPU 01/26/2004 Vanguard Utilities Index Fund, VUIAX Utilities Electric Utilities, Multiutilities, Independent Power Producers, Gas Utilities

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The above content is for informational purposes only. AlphaProfit Investments, LLC neither is associated with nor receives any compensation from any of the entities connected with Vanguard ETFs. Vanguard is a trademark of the Vanguard Group. Vanguard Marketing Corporation distributes the Vanguard ETFs. The Vanguard ETFs were previously called Vanguard Index Participation Equity Receipts or VIPERS.

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