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5 Best Vanguard ETFs to Buy and Hold Forever - YouTube
Channel: Jarrad Morrow
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hey friends in this video i'll go
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through the five best vanguard etfs to
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buy and hold forever that can easily
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turn you into a multi-millionaire and
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get you that much closer to financial
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independence and to top it off i'll also
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mention one specific vanguard etf that i
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wouldn't suggest you touch with a 10
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foot pole because it's that bad i always
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recommend buying and holding these
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things for as long as possible because
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the stock market likes to act like a
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little five-year-old that constantly has
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temper tantrums in the short term but
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over a long period of time the odds of
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you doubling tripling or even
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quadrupling your money greatly increases
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first up we have the vanguard total
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stock market etf now if there was one on
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this list that i think everyone should
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be holding it's this one vti seeks to
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track the performance of the us stock
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market as a whole now because of that it
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basically holds a little bit of all of
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the 4 100 stocks traded on the stock
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market since the total stock market etf
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holds that many stocks it's diversified
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among large mid and small cap companies
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based on their market cap this is a
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passive index fund etf so there's very
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little manager risk involved with the
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types of stocks that are actually bought
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and sold which is a really good thing
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when you invest in the vanguard total
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stock market etf you're essentially
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placing your bet that u.s stocks will
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continue to dominate the world over the
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past 50 years the total market has only
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seen about 10 of them that have ended
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with a loss so 80 percent of the time
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someone investing in this type of etf
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ended up with more money it's like going
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to a casino aka the stock market and
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every time you spin that roulette wheel
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aka buy stocks there's an 80 chance that
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you'll end up making money in any given
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year a ten thousand dollar investment
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into this fund 10 years ago would have
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turned into over 63 thousand dollars
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that's because it has a one-year return
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of 32 percent three-year return of 15
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5-year return of 16.8 percent and of
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course 10-year return of 16.6 now while
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it's always fun to talk about how much
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the vanguard total stock market etf has
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made over the past 10 years it's always
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good to understand how bad things can
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get when the market has a downturn you
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won't hear many people mentioning this
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but all good investors understand the
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upside potential as much as they
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understand the downside potential as
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well in 2007 vti saw its largest drop
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due to the financial crisis it had a
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maximum drawdown at that time of 50
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percent and it took three years and one
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month to recover since this fund is
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passively managed there is very little
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stock picking going on the fund manager
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and their team are handling more of the
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high level decisions to help keep
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everything running properly because of
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that the yearly cost to own vti is a
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very low 0.03 percent or 30 cents for
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every 1 000 you have invested because
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the vanguard total stock market etf
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holds 100 stocks vanguard has this one
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rated at a 4 on the risk potential scale
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since vti tracks the total stock market
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the sector breakdown is going to be
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based on the size of the company because
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the largest companies are tech related
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we can see that 25 of the fund is in
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that sector followed by financial
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services at 13
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health care at 13
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consumer cyclical at 12 and
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communication services at 10 if things
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change over time to where we'll say tech
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companies become a smaller share of the
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stock market or financial services
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become a larger share of the market then
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the fund will automatically adjust for
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that so you don't really have to do
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anything the top 10 holdings are going
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to be a ton of companies that you most
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likely recognize like microsoft apple
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google amazon and tesla in total they
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make up about 25 of the total net assets
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the vanguard total stock market etf is
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for any investor who wants to match the
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returns of the you guessed it total u.s
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stock market in a very passive way since
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it's weighted by market cap and the top
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10 make up a huge part of this the
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majority of the returns are going to
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come from those top 10 stocks the good
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news is that they're all pretty solid
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companies that have a good hold on the
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industries that they dominate so it's
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very unlikely that they're going to go
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away anytime soon while some people
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might be concerned that vti is extremely
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concentrated in tech it's only that way
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because that's what the market has
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decided it should be i think we can all
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agree that technology has been a big
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part of the world's growth up until now
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and i would expect it to continue that
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way in the future we have more to go but
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if you're getting some value from this
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video so far then help support myself
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and of course my dog molly by hitting
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that thumbs up button and if you don't
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then i'm just gonna assume that you
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absolutely hate dogs come on now don't
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be that guy or girl but if you are
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someone who currently holds vti and
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wants to diversify your portfolio a
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little more so it's not extremely
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concentrated in tech companies then
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another etf to consider is the vanguard
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real estate etf vnq this etf is set up
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to track the broad u.s real estate
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market and is made up of 171 different
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stocks just like the vanguard total
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stock market etf vnq is a cap weighted
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fund so the larger companies will make
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up a larger portion of this one think of
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the vanguard real estate etf as a fund
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of funds that's because it holds stocks
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that are basically reits these reits
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manage and develop basically every type
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of real estate that you can think of
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construction development specialized
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commercial and residential real estate a
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10 000 investment into vnq 10 years ago
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would have turned into a little over 29
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000 when you think about real estate
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there's going to be two main ways that
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you make money monthly cash flow and
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property appreciation now because of
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that this etf is going to give you a
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little bit of income through dividends
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of 2.5 percent along with stock price
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appreciation so far it has a one-year
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return of 31.6
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three-year return of 13
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5-year return of 10
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and 10-year return of 11 because the
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vanguard real estate etf has only been
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around since 2004 i went ahead and
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pulled the mutual fund version to get a
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larger sample size to determine how many
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down years it's had since inception this
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mutual fund holds the exact same stocks
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as v and q the only difference is that
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it's existed for a longer period of time
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over the past 26 years we've only had
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six of them that ended in a negative
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which is the kind of thing that you want
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to see from any sort of etf that you
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might be investing in but we need to
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cover the downsides to give you an idea
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of how things played out during the bad
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times because all asset classes will
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react differently the largest drawdown
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came in 2007 where vnq saw a max
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drawdown of 68
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and it took three years and four months
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to recover keep in mind that this
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downturn in the market was extra hard on
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any type of real estate because the
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crash was caused by that specific sector
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vnq is very inexpensive coming in at a
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yearly cost of 0.12
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or one dollar and twenty cents for every
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one thousand dollars invested vanguard
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lists this etf at a four on the risk
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level scale because it is 100 stocks the
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sector breakdown for vnq is of course
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you guessed it because you're super
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smart 100 real estate but the sector
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breakdown within real estate looks like
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this 38 and specialized 38 in commercial
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and almost 14 in residential real estate
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the rest are spread among the four
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smaller sectors the top 10 holdings make
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up about 44 of the overall portfolio now
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this might sound like a lot because it
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technically is but this is usually the
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case with sector specific etfs that are
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based on market cap the enqueue is for
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the investor who wants to get some
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exposure to the real estate market in a
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very cost effective way without actually
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owning and managing physical properties
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on your own if you're someone who has a
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few rental properties then you might
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already have enough exposure in that
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asset class so it probably wouldn't make
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sense to add this etf to your portfolio
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overexposure in one asset class or
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specific stock is something that you
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want to double check before adding any
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etf to your portfolio if you hold
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something like an s p 500 etf or the
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vanguard total stock market etf and are
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concerned that too much of your money is
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concentrated into large cap stocks then
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you might want to consider adding a
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small cap fund like the vanguard small
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cap etf vb this etf seeks to track the
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us small cap index and is made up of
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over 1500 stocks now small cap stocks
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are generally considered to be companies
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with a market cap size of anywhere
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between 300 million and two billion
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dollars i know i know two billion
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dollars sounds like a lot and it kind of
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is but when you compare it to a large
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cap stock like apple that has a 2.8
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trillion dollar market cap two billion
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dollars sounds like peanuts a smaller
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cap etf is inherently more volatile in
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the short term compared to an s p 500
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etf but actually historically small cap
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companies have outperformed large cap
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companies ten thousand dollars invested
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into the vanguard small cap etf would
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have turned into a little bit over forty
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five thousand dollars today vb has had a
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one-year return of 22.5
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three-year return of 15.3 percent
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five-year return of 13.1 and of course
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10-year return of 13.8 percent even
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though historically small caps have
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dominated large caps i'll have to admit
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that over the past 10 years large cap
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companies have absolutely dominated
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small cap companies here's a side by
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side just to give you an idea of how
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different the returns have been this is
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because large cap stocks like apple
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google and amazon have grown at rates
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never seen before within the past few
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years these already large companies are
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always expected to grow of course but
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holy smokes not in the way that apple
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has been recently they've grown by
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almost five times within the past five
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years going from a market cap of 608
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billion dollars in 2016 to a 2.9
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trillion dollar market cap in 2021 the
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question is how much longer will that
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growth actually continue now if you
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think it has to slow down soon then we
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might start seeing small cap etfs start
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to outperform as always the drawdowns
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will happen when you own any type of etf
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for the vanguard small cap etf we saw
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its biggest drawdown of 53
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in 2007 where it took 1 year and 10
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months to recover vanguard small cap etf
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is also inexpensive coming in at a
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yearly cost of .05 or 50 cents for every
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1 000 invested the risk level for this
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etf is on the high end at five because
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small cap stocks are naturally more
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risky due to their size and short-term
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volatility the sector breakdown is
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spread pretty well for the top six
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sectors ranging from nine percent to
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sixteen percent from a sector
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diversification perspective this is
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pretty good the top 10 holdings is an
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interesting one compared to the etfs
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that we've already covered because they
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only make up 3.3 percent of the total
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net assets if you remember the total
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stock market etf was something like 24
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and the real estate etf was something
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like 44 in the top 10. 3.3 is probably
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what you want to see in a small cap etf
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anyways to help spread your risk out
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just a little bit more this small cap
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etf is for the investor who is looking
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for more exposure to small cap companies
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to help balance out a portfolio that
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might be large cap heavy if you hold
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something like a total market index or s
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p 500 index as a large portion of your
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portfolio then this might be a good one
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to add to gain some more exposure to
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some of those smaller up and coming
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stocks don't invest in this small cap
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etf if you're someone who freaks out
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every time that you look at your
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portfolio and see that it's down it is
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very common for something like a small
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cap etf to be down a couple percentage
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points within a one day period growth
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stocks have been ruling the world over
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the past few years so we had to add the
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vanguard growth etf vug vug tracks the
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large cap growth index this is going to
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be made up of large u.s companies whose
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stocks are on the rise most of these
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stocks are going to be above average
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when it comes to a sound balance sheet
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so the companies are pretty solid plays
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in total there are currently 278 stocks
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that make up this etf to keep things in
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check a little bit the fund has capped
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the amount that it can hold within one
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individual stock at 10 so even if one of
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the companies that it holds continues to
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grow at insane rates it won't be allowed
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to basically take over a huge portion of
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the vanguard growth etf ten thousand
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dollars invested into the vanguard
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growth etf since inception would have
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turned into over seventy four thousand
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dollars with interest rates being so low
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for so long it's really benefited growth
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stocks the most vug has had a one year
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return of 30.5 percent three-year return
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of 30.1 percent five-year return of 24.6
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and 10-year return of 19 when we're
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thinking about the largest drawdowns for
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this etf the largest one came in 2007
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where it dropped 47
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and took two years to recover the third
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largest was in 2018 when the federal
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reserve increased interest rates for
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just a short period of time which of
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course scared the crap out of the stock
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market so they turned around and lowered
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them back down again keep this in mind
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for when the federal reserve decides to
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increase rates again because when they
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do this etf might suffer a little bit
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for who knows how long vug is extremely
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inexpensive at a yearly cost of .04
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or forty cents for every one thousand
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dollars invested the risk level is at a
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four which is to be expected since it
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only holds a basket of stocks but not a
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five because all of these companies are
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pretty large with healthy balance sheets
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the sector breakdown is tech tech and
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more tech i'm kind of just kidding but
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it does make up 40 of this etf which
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basically means that when tech is down
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vug will be down as well the vanguard
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growth etf is made up of companies we're
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all very familiar with apple microsoft
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google amazon home depot and visa
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because these companies are massive and
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they are each capped at 10 holdings the
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top 10 makes up 50 percent of the funds
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holdings which is pretty high these 10
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companies are going to be what really
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moves this etf up or down an etf like
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vug is going to be for anyone looking to
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add some of the largest growth related
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stocks to your portfolio because 40 of
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the fund is made up of tech companies
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it's not well diversified in other areas
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which is perfectly fine if you're not
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worried about that if you currently hold
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something like the vanguard total stock
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market etf or an s p 500 etf then you
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technically already have a lot of
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exposure to the top 10 in this etf
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because of that if you're dead set on
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adding this one to your portfolio then
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it might not make sense to make vug a
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large portion of your overall holdings
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so far we've covered all us-based etfs
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it's time to give some love to the
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international money-making stocks out
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there to cover that area of the market
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we have to talk about the vanguard total
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international stock etf vx us this ctf
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seeks to track their performance of the
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global all-cap x us index which measures
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the investment return of stocks issued
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by companies located outside of the
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united states in total there are 7 800
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different international stocks held
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within this etf ten thousand dollars
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invested into the vanguard total
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international stock etfs since inception
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would have turned into a little over
[885]
twenty thousand dollars vxus has had a
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one-year return of eleven point four
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percent three-year return of 10.5
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percent five-year return of 9.5 and a
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10-year return of 7.3 percent the
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largest drawdown for this etf came in
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2018 when it dropped by 25 percent and
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took eight months to recover the second
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largest came in 2014 it lost 20 percent
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and took a little over a year to recover
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just like the rest of the etfs on this
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list vxus is very inexpensive at a
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yearly cost of .08 percent or 80 cents
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for every 1 000 invested since this etf
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only holds stocks outside of the us
[925]
there there's inherent risk associated
[927]
with that type of investment because of
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that vanguard rates the risk potential
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at a five when it comes to the sectors
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that make up this etf it's not overly
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exposed to one particular area the
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largest part of it is financial services
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at 18
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followed by tech and industrials both at
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13 when we look at the top 10 holdings
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you'll probably recognize most of them
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they all rely heavily on the us market
[950]
which is a big reason they all look so
[952]
familiar one thing to note is that these
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top 10 only make up a little less than
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10 of the overall holdings within this
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etf which isn't a lot the regent
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allocation for the vanguard total
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international etf are mainly in europe
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at 40 percent followed by emerging
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markets and pacific at 26 and 25 the
[970]
vanguard total international stock etf
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is for the investor who wants to
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diversify somewhere other than u.s
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stocks while u.s businesses are the most
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dominant in the world that could change
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at some point in the future now i
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personally don't think that it's going
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to happen anytime soon but let's be
[986]
honest crazier things could happen if
[987]
you're like me and still a little
[989]
skeptical about putting money into an
[991]
international etf then just make it a
[993]
small holding within your overall
[994]
portfolio at i don't know five or ten
[997]
percent investing in an international
[998]
etf can help diversify your overall
[1001]
portfolio but i personally wouldn't
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touch the vanguard total world etf with
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a 10 foot pole this etf holds 63 in u.s
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stocks and 37 in international stocks
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which in my opinion is absolutely insane
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37 in international is what my grandpa
[1018]
would call too much meat for the
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sandwich i know you're like too much
[1022]
meat for the sandwich is that even
[1023]
possible in this case yes it is the
[1025]
potential for international to
[1027]
underperform us going forward isn't a
[1029]
reason to completely avoid it but i
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wouldn't believe in it enough to bet 37
[1034]
of my portfolio on that outcome get
[1036]
access to the private financial
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independence community down in the
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description below to meet up and learn
[1041]
from a group of like-minded people on
[1043]
the path to financial independence make
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sure to hit that thumbs up button before
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you go and watch this video to your left
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next on how to build the ultimate refund
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investment portfolio i'll see in the
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next one friends done
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