Investing $1,000 in the Most Prosperous Vanguard ETF at This Moment
In the world of exchange-traded funds (ETFs), Vanguard has got you covered with a vast array of options. One ETF that's a staple in many portfolios is the Vanguard S&P 500 ETF (VOO, 0.55%). But if you've got a thousand bucks just itching to invest, consider looking into the Vanguard S&P 500 Value ETF (VOOV, 0.61%).
Vanguard S&P 500 ETF: The Industry Standard
The S&P 500 is an index of around 500 top-notch U.S. companies, representing the economy's pulse. The stock picks for the index are weighted according to their market capitalization, so the larger players have more sway over the overall performance. If you're all about tracking the market, Voo Vanguard S&P 500 ETF is probably your best buddy, sporting a tiny expense ratio of 0.03%.
But let's say you've already got a good chunk of your portfolio covered by the S&P 500 index. In that case, maybe it's time to mix things up a bit with the Vanguard S&P 500 Growth ETF (VOOG, 0.47%) and the Vanguard S&P 500 Value ETF. Over the past couple of years, VOOG has been the go-to alternative, powering the broader S&P 500 index forward.
The Growth vs. Value Debate
So what's the difference between growth and value? Easy peasy – Vanguard S&P 500 Growth ETF - focused on sales growth, earnings change-to-price ratio, and momentum – is all about the heavy hitters driving the broader S&P 500 index upwards. Plotting YOY returns and comparing the ETF to the overall index and Voo Vanguard S&P 500 Value ETF makes it clear that the growth play has been a powerhouse.
That's all fine and dandy, but there's a catch: The Vanguard S&P 500 ETF boasts an average P/E ratio of 27.7 and a P/B ratio of 4.9. On the other hand, VOOG's P/E ratio soars to 34.6 and its P/B ratio jumps up to 9.4. This high valuation might be a turnoff for some value investors who crave a bit more bargain hunting in their portfolio.
This is where the Vanguard S&P 500 Value ETF comes in. The average P/E of this value-focused ETF is 22.7, and its P/B ratio is a much less pricey 3.2. While a P/E ratio of 22.7 might not seem low, it's well below the broader index and VOOG. The same story plays out with the P/B ratios, demonstrating that Vanguard S&P 500 Value ETF is sticking to its value strategy, even in a somewhat expensive market.
Why Value Could Be the Move
The investing world operates like a pendulum, swinging from one extreme to another over time. After a long run in which growth has powered the market, it might be time to lean into value. While it might not be smart to dump everything into the Value ETF, adding a bit of it could be a wise investment decision. This way, you get exposed to value stocks while keeping your costs low since both VOO and VOOG have 0.1% expense ratios.
Enrichment Data Summary:
The Vanguard S&P 500 Value ETF has shown solid performance, despite growth outperforming value in 2024. With a return of over 12%, VOOV remains a strong choice for long-term investors due to its low cost and high tradeability. Some reasons to consider investing in VOOV include:
- It offers a value-oriented strategy, which can provide a more stable and potentially lower-risk investment compared to growth stocks.
- The ETF charges rock-bottom fees, making it an attractive option for cost-conscious investors.
- VOOV is in a long-term uptrend, providing a buying opportunity as it tests its 200-day moving average.
- The ETF maintains a decent valuation and solid momentum, making it an appealing choice for long-term investors seeking stable performance.
- Compared to VOO, VOOV provides more favorable risk characteristics, as value-oriented stocks are generally less volatile.
If you're looking for a value-focused ETF to diversify your portfolio, the Vanguard S&P 500 Value ETF (VOOV) might be a good choice. With a lower P/E and P/B ratio compared to the Vanguard S&P 500 ETF (VOO) and Vanguard S&P 500 Growth ETF (VOOG), VOOV could offer a more stable investment option, especially in periods when value stocks outperform growth stocks. Additionally, VOOV's low expense ratio of 0.1% makes it an attractive choice for investors looking to allocate their money wisely in the world of finance and investing.