The Vanguard Dividend Appreciation ETF (VIG) tracks the S&P U.S. Dividend Growers Index, which includes only companies with at least 10 consecutive years of dividend increases and excludes the top 25% highest yielders. Over the past year, the fund's share price rose about 11%, while cash paid to shareholders rose only about 3%, with a trailing yield of about 1.5%. Over five years, the adjusted share price is up over 48%, while trailing 12-month payouts of $3.6461 per share are up about 37% from $2.6601 in calendar 2021. The four largest holdings make up around 17% of the fund, and three of them yield less than the fund itself. The article argues VIG may suit investors who are five to 10 years from needing income, as a 1.5% yield alone would not cover living expenses for income-focused retirees.
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The article argues that long-term investors can look past daily headlines, since the broader U.S. stock market has tended to grow over time, using the Vanguard Morningstar Total Stock Market ETF (VTI) as an example. The fund has been available since May 2001 and delivered average annual returns of 9.44% over 25 years and about 12.6% annualized over the past five years, including through the 2008 financial crisis and the dot-com bear market. VTI holds 3,519 stocks across small-, mid- and large-caps, though it has underperformed the S&P 500 and Nasdaq-100 over the past 10 years. The illustrative math shows a one-time $1,000 investment in 2001 growing to about $9,537, while $300 monthly would have reached about $325,555 and $500 monthly $542,592 after 25 years. The author stresses that past returns do not guarantee future results.
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As of Sept. 30, Nvidia, Apple, Alphabet, Microsoft and Amazon made up 30.8% of VOO and 49.2% of VUG. The article argues the Vanguard Morningstar Total Stock Market ETF (VTI), holding 3,519 stocks, offers less concentration, with those five at 27.2% and the top ten at 36%. Because the S&P 500 makes up roughly 80% of the U.S. stock market, VTI's performance has been close to VOO's, with year-to-date returns of 12.5% versus 12.9% and five-year total returns of 73.2% versus 83%. All three ETFs have a 0.03% expense ratio. The author considers VTI a better catch-all option for investors seeking U.S. market exposure with less reliance on mega-cap growth stocks tied to AI.
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