Many investors are familiar with Vanguard’s mutual funds, most of which are passively managed index funds with extremely low expense ratios. In 1976, Vanguard also introduced the first index fund, Vanguard 500 Index (VFINX). (That fund is now available only as Admiral Shares.) Since that 1976 fund introduction, Vanguard’s been known as the home of low-cost, no-load mutual funds. In recent years, it has built an impressive selection of ETFs, making Vanguard the second-largest provider of ETFs.
How to Build a Portfolio of ETFs
When building a portfolio, the general strategy that is appropriate for most investors is to buy multiple investments from different asset classes and categories. For example, an investor may want to include a combination of assets, such as stocks and bonds, in the portfolio. Within each asset class, there are different categories, such as large- and small-cap stocks or long- and short-term bonds. That is the foundation of diversification. The best portfolio for each investor will differ based upon the individual’s risk tolerance and time horizon. For example, an investor with a high tolerance for risk may allocate a higher percentage of their portfolio to stocks, whereas an investor with a lower tolerance for risk may choose to allocate more to bonds. In either case, investors with longer time horizons, especially for 10 years or more, can generally allocate more to stocks than bonds. When building a portfolio of ETFs, an investor can easily allocate their investment assets to a wide range of investment categories. Most investors can build a diversified portfolio with as little as two or three ETFs, but a range of five to 10 ETFs may be more appropriate for other investors.
The Seven Best Vanguard ETFs to Build Your Portfolio
One good portfolio structure is called “core and satellite,” which means you’ll allocate the largest percentage of your portfolio to one or two core funds, such as an S&P 500 Index fund or a total bond market index fund, and smaller percentages to satellite holdings, such as foreign stock funds and sector funds. With that backdrop, here are seven Vanguard ETFs to build a complete portfolio: The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal.
