John C Bogle had a vision in 1975, which was to create a family of funds where the individual investor could park his or her money in mutual funds rather than high yield bank accounts.
Instead of storing money in a bank account, investing in his funds would introduce the investor to a basket of stocks wrapped up, with a fancy bow, of course, in a Mutual Fund. His Funds became known as the Vanguard Funds.
Up until this point, Mutual Fund Investing was reserved for large pension funds and other institutional investors, but Bogle had a different plan.
Bogle, was a pioneer, and his company, Vanguard was the ‘Paul Revere” of the investment world. Instead of the ‘British Coming’, Bogle created a way to entice a flood of small individual money to enter the market through his conservative Vanguard Select Funds.
As a long-term investor in Vanguard Select Funds, I’ve been more than pleased with the many options their funds offer, along with the fantastic returns I’ve enjoyed over the years.
In this post I will discuss the Vanguard Select funds I’m currently invested in, in the hopes of bringing awareness to a great family of Funds which are available for anyone to invest in.
My favorite fund and ‘Best Performer’, is the Vanguard 500 Index fund- VOO ETF.
The Vanguard VOO ETF (Exchange Traded Fund) is made up of the 503 stocks which comprise the S&P 500 Index, and these stocks are a blend of both Value and Growth.
Most of us are very familiar with the companies that make up the VOO ETF, and many of us use their products or services on a daily basis. Here are a few you may have heard of:
- Johnson & Johnson
- Exxon Mobil Corp.
The VOO ETF simply buys shares just like you, me, or Warren Buffet would, and holds them under the VOO ‘umbrella”. For instance, the fund holds 345,682,489 shares of Apple and 59,152,426 shares of Johnson & Johnson.
It’s like a holding company for shares of many of the largest companies in the United States.
VOO Dividend Yield
Holders of the fund also receive a nice quarterly dividend. At the current Net Asset Value (NAV), the VOO Dividend Yield is 1.55%. Some would consider this to be ho-hum dividend yield, but because of the growth stocks in the fund, you’re also getting added price appreciation.
Some of the companies in the fund like Alphabet (Google), Amazon, and Meta don’t even pay it’s shareholders a quarterly dividend, but by owning the VOO ETF you get to hold these great companies and receive a dividend when regular shareholders don’t get to.
The VOO Dividend Yield fluctuates based on the value of the S&P 500 Index. The most recent Dividend Payment of $1.469 per share was paid on September 28th 2022. This was a 2.583% increase from the previous dividend on June 29th 2022.
However, buyer beware, this VOO Dividend Yield it’s not always increasing. Case in point, last December the Dividend Yield was $1.533 per share, but in March 2022 it had dropped to $1.374, which is a drop of 10.37%. So, the VOO Dividend Yield can be risky, because it’s correlated with a weighted average of the total amount of shares the fund owns of each particular company.
How is VOO’s dividend yield calculated and allocated.
The Fund is the recipient of all dividend payments. So, when Apple pays it’s $.23 per share, or Johnson & Johnson pays its $1.13 per share, the payment is made to the Fund.
These dividend payments are then held in ‘trust’ until they are dispersed each quarter to all the VOO ETF Shareholders who meet the Ex-Dividend guidelines.
VOO Annual Return
In the last 10 years the VOO annual return has been a very healthy 11.66%. The S&P 500 Index for which the VOO ETF is modeled after, has seen an average annual return of 11.88% since 1957. That is off-the-charts-fabulous!
However, 2022 is not looking like it will end up anywhere near its historical return of 11.88%. In order to do that, the funds NAV would need to increase by 32.93% between now and New Years Eve. Not likely.
Some years are just down, others are up, but 2022 is sort of an anomaly. The overall global market is in very treacherous waters right now, and the VOO Annual Return is just a symptom of the overall sentiment of the market.
The bet is, do you believe in these companies ability to innovate, grow, and deliver shareholder value during your investing career, whatever time horizon that is? If that answer is Yes, then the VOO ETF may be a perfect fit for your portfolio. And, did I mention it’s price is down 21.05% this year?
Some Other Vanguard Dividend Funds I’m invested in are:
Vanguard Dividend Appreciation Exchange Traded Fund. (VIG)
This fund seeks to track the performance of the S&P U.S. Dividend Growers Index, which are companies within the S&P 500 Index who have a history of increasing dividends over time. Not every S&P Index company has a history of growing dividends.
But, here are a few companies which are part of the S&P 500 and the U.S. Dividend Growers Index:
- UnitedHealth Group, Inc.
- Proctor and Gamble
- JP Morgan Chase
Another fund I’ve been invested in for a while is the Vanguard International High Dividend Yield (VYMI)
This fund provides exposure to large worldwide companies.
I’ve been holding this Fund for some time now, but to be honest my interest in it is waning, for these specific reasons:
- 1) One of it’s largest holdings is China Construction Bank Corp. Class H with over 40,000,000 shares. China’s economical and societal problems run very very deep. And, because of the Evergrande Group crisis, they may be headed for a real estate bubble burst.
- 2)Neo-Malthusian family planning. Commonly referred to as the ‘One Child Rule’. This rule which was mandated in 1979 and continued until 2015, has dramatically slowed the Chinese Birthrate.
“The one child policy saw over 300 million Chinese women fitted with intrauterine devices modified to be irremovable without surgery, over 100 million sterilizations, and over 300 million abortions.” Cato.org.
The impact of this ‘One Child Rule’ will reverberate through the Chinese culture for many years. Because of it, China is right around the corner from a situation where they’ll have a shortage of ‘working-age people’, to cover the societal costs when older generations retire, and die off.
My concern with the Vanguard International High Dividend Yield (VYMI) is the exposure it has to China. There are a number of holdings in the fund tied to China, and it just makes me squeamish!
I do believe it’s important to have some international exposure for a healthy, well-diversified portfolio, but I think there are markets with better upside.
I love Vanguard Select Funds, they are well managed, generally have low expense ratios, and most funds or ETF’s allow you to to buy into with no minimum balance. What are your thoughts on Vanguard Funds?