Vanguard Sector ETFs: Invest in Best Vanguard Sector ETFs ⋆ AlphaProfit

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Sector Investing Perspective on Vanguard Sector ETFs

Vanguard Sector ETFs are administered by The Vanguard Group, a leading mutual fund company that manages several index mutual funds. Vanguard sector 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 Vanguard Sector 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 of Vanguard Sector ETFs

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 of Vanguard Sector ETFs

The expense ratio for all Vanguard sector ETFs except the Vanguard REIT ETF is 0.10%. The expense ratio for the Vanguard REIT ETF is 0.12%.

Trading Vanguard Sector ETFs

Vanguard Sector 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 on Vanguard Sector ETFs

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.

Vanguard Sector ETF Recommendations

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

About AlphaProfit MoneyMatters

AlphaProfit MoneyMatters is a free e-letter distributed to registered users of AlphaProfit’s website. The e-letter analyzes the economy, markets, and sectors and provides money-making insights on stocks, exchange-traded funds, and mutual funds. AlphaProfit MoneyMatters is edited by Dr. Sam Subramanian acclaimed for his financial acumen and analytical skills. Sign Up for ETF Newsletter.

List of Vanguard Sector ETFs

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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