Is a Vanguard ETF the Best Buy on the Market Right Now?

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When it comes to investing, choice can be difficult.

There are more than 2,000 stocks currently listed on the ASX. A plethora of companies that all offer unique investment potential.

Picking the right ones though, isn’t easy.

Finding the time to trawl through thousands of stocks is not something most people are willing to do. Hell, you’d be doing better than most if you had an intimate knowledge of just a handful.

Suffice to say, it’s simply too overwhelming for most.

Thankfully, there is an alternative. For an easy, choice-free investment strategy, there are exchange-traded funds. Better known as ETFs.

Rather than investing in an individual company, an ETF lets people invest in a range of companies. A collection of stocks that may be grouped by their size, sector, or other defining traits. All of them though, are designed to be simple.

And in Australia, when it comes to ETFs, Vanguard is one of the biggest in the business.

So, given our current market uncertainty, is now the right time to buy a Vanguard ETF?

Picking the right ETF

Ultimately, the answer to this question is going to come down to preference.

As I mentioned, ETFs are great for investors who don’t want too much choice. That doesn’t mean there isn’t room for some choice though.

In Australia, Vanguard currently offer 29 different ETFs. Covering a range of local shares, international shares, fixed interest, property, infrastructure, and diversified lists.

Here are just a few examples for you:

  • Vanguard Australian Shares Index Fund [ASX:VAS] — Tracks the ASX300 Index — investing in the top 300 companies on ASX
  • Vanguard Australian High Yield Fund [ASX:VHY] — Tracks the FTSE Australia High Dividend Yield Index — investing in top dividend paying stocks
  • Vanguard International Shares Index Fund [ASX:VGS] — Tracks the MSCI World ex-Australia Index — investing in 22 of 23 of developed markets around the world

The point is, each will offer a different return. A factor that does give investors some choice to suit their investment needs.

For example, right now, High Yield may be more attractive.

As the impact of the coronavirus unfolds, dividends will be harder to come by. Making it tougher for investors to find regular income from their investments.

Vanguard’s High Yield fund could help remedy that, but there are no guarantees.

Strong dividends will almost certainly be harder to find this earnings season.

Because of this, the simpler VAS may wind up being the better option. Or perhaps even the VGS, for a more diversified market mix.

At the end of the day, you’ll still have to choose the right ETF for you. And it could be that none of them fit into your investment strategy.

Choice matters

As challenging or intimidating as it may be, choice is important.

ETFs are a fantastic way to start your investing journey. And for some, that will be enough, they won’t have a desire or need to take their strategy to the next level.

Here at Money Morning though, we are firm believers in taking a more active approach with your money. Giving you the control to maintain or grow your wealth as it suits you.

For example, if someone was trying to protect their wealth right now, at least in the short term, an ETF may not be ideal. Instead, it may be more prudent to take an even more defensive position.

In this scenario, cash may also not be the best option. There are alternative ways to preserve your wealth during a crisis that may be smarter.

You can check out our 2020 Crisis Money Guide for more information on this, right here.

On the flipside, if you’re looking for a more aggressive investing strategy, an ETF may be too broad. These large, passive funds aren’t designed to respond and pivot during major events.

That’s where an active investing strategy can pull ahead. Picking stocks individually isn’t easy, but it can be far more lucrative.

Take the current coronavirus for instance. It has wiped out much of the market in recent weeks. And although the ASX has started to rebound, it is still well below all-time highs.

However, when it comes to individual companies, some are doing better than most. Stocks that have not only defied the downturn, but are thriving.

We even created our own Coronavirus Portfolio to show you the potential that is out there. You can read all about it, for free, right here.

The point is, every investor is different. We are all looking for or need different outcomes. And when it comes to that outcome, choosing the right strategy is crucial.

ETFs are easy and simple, but that doesn’t mean it will be right for everyone.


Ryan Clarkson-Ledward,
Editor, Money Morning

About Ryan Clarkson-Ledward

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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