3 Top Vanguard ETFs in 2017

Markets Motley Fool

If you want a quick and simple way to invest, exchange-traded funds (ETFs) can be the ideal solution to your investing needs. Low costs and convenience are key benefits of using ETFs, and The Vanguard Group has a reputation for being among the lowest-cost providers of ETFs in the business.

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With several dozen ETFs, Vanguard offers many choices to its investors. Yet in another good year for the stock market as a whole, three Vanguard ETFs, in particular, stand out as having provided exceptional returns. Let's learn more about these ETFs to see whether they deserve a place in your portfolio.

ETF

Year-to-Date Return

Assets Under Management

Vanguard Information Technology (NYSEMKT: VGT)

36.5%

$16.5 billion

Vanguard FTSE Emerging Markets (NYSEMKT: VWO)

26%

$64.7 billion

Vanguard Growth (NYSEMKT: VUG)

24.5%

$30.6 billion

Blazing-hot growth

The tech sector has been on a roll in 2017, and Vanguard Information Technology has taken full advantage of favorable conditions in the space. The fund seeks to match the performance of an index of tech stocks that concentrates on the software and services, hardware and equipment, and semiconductor sub-industry groups. The ETF holds more than 350 stocks, but because the index it tracks is weighted by market capitalization, the largest players in the tech sector play a major role in its overall performance.

Vanguard Information Technology charges annual expenses of just 0.10%, and Vanguard customers can purchase shares at no commission. With a solid long-term performance record to go with its recent outperformance, the ETF is a great vehicle to use if you believe that technology stocks are likely to continue their recent outperformance.

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Looking overseas for bigger gains

Many investors focus on U.S. stocks, and for many years following the end of the financial crisis, that was exactly the right move. Yet after going through a substantial downturn due, in large part, to falling commodity prices, emerging markets have staged a comeback, and that has been good news for the Vanguard FTSE Emerging Markets ETF.

The Vanguard ETF has exposure to key growth markets around the world, with its highest concentrations in China, Taiwan, India, Brazil, and South Africa. Expenses of 0.15% per year are a bit higher than for its domestic funds, but the Vanguard ETF still has a cost advantage over many of its largest peers in the industry. As global growth gains momentum, emerging markets could more consistently outperform U.S. stocks, offering helpful diversification to U.S. investors.

Tapping into growth opportunities

Closer to home, a strong U.S. economy has helped growth stocks shine. The Vanguard Growth ETF focuses on the stocks in the CRSP U.S. Large Cap Growth index. You'll find a healthy helping of technology stocks in this ETF, making up 28% of the fund's assets. But other industries also play a key role, including consumer services, healthcare, financials, and industrials, all of which have double-digit percentage allocations within the fund.

Vanguard Growth has more than 300 holdings, and its four largest positions are in the technology stocks that have helped lead the overall market higher in 2017. That concentration is unlikely to change in the near future, but the greater diversification you can get in this ETF compared to the Vanguard Information Technology ETF makes it a better choice for those who need broader exposure to the stock market, in general. Expenses of 0.06% also make it the cheapest choice of the three ETFs listed here.

Be ready for 2018

As 2017 comes to a close, these Vanguard ETFs are likely to finish on top of the company's fund list. That's no guarantee that they'll earn the same place in 2018, but their success this year has shown their ability to take advantage of favorable conditions when they arise and deliver solid returns to their investors.

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