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Globe and Mail
3 days ago
- Business
- Globe and Mail
These 3 Passive-Income ETFs Are a Retiree's Best Friend
Most people don't want to spend much time managing their retirement portfolio once they've stopped working. After all, you've made it! This is the period in your life when it's time to relax. It is essential to know the tools available to help you build a diversified nest egg that will meet your needs without having to watch it 24/7. That's where exchange-traded funds (ETFs) can help. These are buckets of stocks that trade under one ticker symbol. An ETF might follow an index or a particular investment strategy. The great thing is that a small handful of ETFs can create a well-diversified portfolio that will help protect you from risk. Here are three ETFs that could be a retiree's best friend. They are different from one another, but all three offer retirees the passive income they need. 1. Vanguard International High Dividend Yield ETF America is home to many of the world's most prominent companies, which is why the U.S. stock market is more valuable than any other countries' by a wide margin. However, there are still remarkable companies outside the United States that can help your portfolio. The Vanguard International High Dividend Yield ETF (NASDAQ: VYMI) is a great way to add that international investment exposure without having to wade through data that could be in different currencies or languages. It's the perfect situation for an ETF. It carries a 0.22% expense ratio, which Vanguard claims is far lower than comparable funds. VYMI Dividend Yield data by YCharts The ETF holds nearly 1,500 stocks, primarily companies based in North America, Europe, the Pacific region, and emerging markets. Its holdings span virtually all industries and includes top holdings like Nestle, Novartis, Roche, and Shell. The ETF's current yield is approximately 4.6%. Since its inception in 2016, the ETF has generated annualized total returns averaging 8.3%. Consider the Vanguard International High Dividend Yield ETF a great ETF for investing in fantastic companies that probably wouldn't be on your radar otherwise. 2. Invesco High Yield Equity Dividend Achievers ETF The passive income doesn't stop there. The Invesco High Yield Equity Dividend Achievers ETF (NASDAQ: PEY) tracks an index of 51 stocks on the Nasdaq stock exchange with high yields and a history of dividend growth. Financial and utility stocks comprise roughly half the ETF, which lists Walgreens Boots Alliance, Altria, Franklin Resources, Verizon Communications, and UGI among its largest holdings. No stock represents more than 4% of the ETF, so it's well-diversified despite holding just 51 stocks. PEY Dividend Yield data by YCharts This ETF's expense ratio is 0.53%, a little higher than I generally like. However, it has averaged a 9.5% annualized return (pre-tax) over the past decade, giving investors solid total returns while meeting their passive income needs. Invesco High Yield Equity Dividend Achievers ETF currently yields 4.6%. The fund's market price has climbed amid the Federal Reserve's interest rate cuts, which underlines how attractive these reliable high-yield ETFs can be to investors in a lower-rate investing climate. 3. Invesco S&P 500 High Dividend Low Volatility ETF Peace of mind is increasingly important as you age, which attracted me to the Invesco S&P 500 High Dividend Low Volatility ETF (NYSEMKT: SPHD). This ETF holds 52 companies listed on the S&P 500 index with high dividend yields and low betas. Stocks with high dividend yields can be more volatile because high yields can signal underlying trouble in a company. However, these low-beta stocks are the exception to this common wisdom. They generally stay more grounded and don't go up or down as sharply as the broader market. SPHD Dividend Yield data by YCharts Its top holdings include Bristol Myers Squibb, Altria, Kinder Morgan, AT&T, and Dominion Energy. Once again, the ETF holds a modest number of stocks (52), but the largest weighting is just over 3%. It's all spread pretty evenly, which means the ETF is well-diversified. The fund's yield is just 3.4%, following strong performance over the past 12 months. The ETF's annualized total returns have averaged 10% for the past decade, a pretty good deal considering the expense ratio is just 0.30%. Those looking for an ETF of mature blue chip dividend stocks should take a good look here. Should you invest $1,000 in Vanguard International High Dividend Yield ETF right now? Before you buy stock in Vanguard International High Dividend Yield ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard International High Dividend Yield ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. See the 10 stocks » *Stock Advisor returns as of November 11, 2024 Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb and Kinder Morgan. The Motley Fool recommends Dominion Energy, Nestlé, Roche Holding AG, and Verizon Communications. The Motley Fool has a disclosure policy.
Globe and Mail
19-03-2025
- Business
- Globe and Mail
These 3 Vanguard ETFs Have Left the S&P 500 in the Dust. They All Have Dividend Yields Above 3%
When it comes to the markets, U.S. exceptionalism reigned supreme for more than two years, as the broader benchmark S&P 500 outpaced most markets around the world. Recent weakening economic data, concerns about rising inflation, and President Donald Trump's efforts to initiate multiple trade wars have stalled this market run (at least for now). Last week, the S&P 500 briefly entered correction territory, and some investors appear to be moving their funds into stocks with cheaper valuations abroad in anticipation of further domestic upheaval. While the S&P 500 has crushed foreign markets historically, some wonder if times might be changing. If you wonder as well, these three Vanguard exchange-traded funds (ETFs) might be worth a closer look. All three have left the S&P 500 in the dust so far in 2025. They all also offer dividend yields above 3%. 1. Vanguard International High Dividend Yield ETF -- 4.53% yield The Vanguard International High Dividend Yield Index Fund (NASDAQ: VYMI) tracks large-cap stocks in emerging developed markets outside the U.S. that are projected to have higher dividend yields on average. While the S&P 500 has fallen nearly 4% year to date (as of March 18), VYMI has risen more than 11%. The ETF also has an attractive dividend yield of over 4.5%. Over 44% of the fund is invested in European equities, 26% is in the Pacific region, and about 21% is in emerging markets. In terms of sectors, 39% of the fund is invested in financials, 10% in industrials, and roughly 9% in energy. Data by YCharts. Following the Great Recession in 2008-09, many parts of the world struggled to spur real economic growth, forcing central banks (including in the U.S.) to lower rates. But problems abroad seemed to be more pronounced than in the U.S. In 2014, the European Central Bank (ECB) even lowered its benchmark lending rate below zero and held it there until 2022. Since inflation swept in, the ECB has upped its deposit benchmark rate to about 2.5%, while the U.S. went all the way up to 5.33% before cutting last year. As a result, the dollar strengthened, and the U.S. has also consistently outperformed G7 countries on gross domestic product (GDP). Stocks tend to perform well when the economy is expanding. However, with markets penciling in rate cuts for the Federal Reserve this year and some fearing that a slowing economy and Trump's tariffs could hurt GDP growth, investors think this could be the time to buy foreign stocks that have struggled. Investors also see the possibility of higher spending in Europe, which, coupled with rate cuts in the U.S., could lead to their currencies strengthening as well. If you look at the price-to-earnings ratios of the top 10 holdings in VYMI, many of these stocks trade much cheaper than some of the high flyers in the U.S. Rank/Holding P/E Ratio Rank/Holding P/E Ratio 1. Roche Holding AG 32.1 6. HSBC Holdings 9.2 2. Toyota Motor 7.4 7. Royal Bank of Canada 12.5 3. Nestle 21.4 8. Commonwealth Bank of Australia 24.3 4. Novartis 18.5 9. Siemens 19.3 5. Shell PLC 13.7 10. Mitsubishi Financial Group 12.4 Data by YCharts. 2. Vanguard Global ex-U.S. Real Estate ETF -- 3.97% yield The Vanguard Global ex-U.S. Real Estate Index Fund (NASDAQ: VNQI) seeks to track international real estate stocks, some of which are real estate investment trusts (REITs). REITs hold interesting corporate structures and can qualify for certain tax advantages. However, to do so they must pay out 90% of their annual taxable income through dividends; must invest 75% of their assets into real estate or cash; and receive at least 75% of gross income from real estate, including rent, mortgage interest, property financing, or real estate sales. Data by YCharts. VNQI hasn't performed as well as VYMI, but it's still up about 4% this year. Real estate remains challenged in many foreign markets, whether you think about China, which is dealing with deflationary headwinds and lacking demand in the housing sector, or Europe, where higher interest rates have also challenged housing affordability. VNQI has nearly 21% of its holdings invested in real estate operating companies, close to 19% in diversified real estate activities, roughly 14% in real estate development, and the rest in various REITs ranging from industrial to single-family residential. Nearly 48% of the ETF is invested in companies in the Pacific, over 24% in Europe, and slightly under 24% in emerging markets. 3. Vanguard European Stock Index Fund ETF -- 3.02% yield As the name suggests, the Vanguard European Stock Index Fund ETF (NYSEMKT: VGK) holds a basket of small-, mid-, and large-cap stocks located in major markets in Europe. As mentioned above, investors see attractive valuations in Europe that have been that way for many years, primarily because of mediocre growth in Europe's major economies. Data by YCharts. But perhaps due to inflated valuations in the U.S. and some of the recent economic prospects in Europe, there finally seem to be some catalysts headed Europe's way. The ETF has surged more than 15% already this year. The Trump administration's preference to have the U.S. work independently on many issues has started to make the European Union think more independently. For instance, given the way talks between the U.S. and Ukraine have gone lately regarding Ukraine's war with Russia, European governments have contemplated increasing their own military spending, which has led European defense stocks to fly. Historically, military spending has led to economic growth. At the same time, some strategists see a potential ceasefire between Russia and Ukraine lowering both energy prices and economic uncertainty on the continent. Close to a quarter of VGK is invested in companies in the United Kingdom, while an additional 14% to 16% are each invested in France, Switzerland, and Germany. The top three sectors are financials, industrials, and healthcare. Don't miss this second chance at a potentially lucrative opportunity Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $309,972!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $40,573!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $512,338!* Right now, we're issuing 'Double Down' alerts for three incredible companies, and there may not be another chance like this anytime soon. Continue » *Stock Advisor returns as of March 18, 2025
Yahoo
09-02-2025
- Business
- Yahoo
Vanguard slashed its fees. That's good news — and a lesson in what's a reasonable amount to pay.
The Vanguard Group this week whacked fees on 168 mutual fund and ETF share classes across 87 funds, lowering its expense ratios by an average of 20%. It's the largest annual expense ratio reduction in Vanguard's nearly 50-year history. The result: Its average asset-weighted expense ratio is now 0.07% — a fraction of the industry average of 0.44%. 'Fee cuts are always a positive sign,' Daniel Sotiroff, a senior research analyst at Morningstar, told Yahoo Finance. 'The impact for Vanguard's investors is positive, but it isn't going to be huge, largely because its fees are already really low.' Some of the funds on the Vanguard slash list include: Russell 1000 Value ETF (VONV), down to 0.07% from 0.08%; International High Dividend Yield ETF (VYMI), down to 0.17% from 0.22%; Total Bond Market Index Fund (VBTLX), down to 0.04% from 0.05%; Emerging Markets Government Bond ETF (VWOB), down to 0.15% from 0.20%; and Vanguard Dividend Appreciation ETF (VYM), down to 0.05% from 0.06%. To really understand why you should care about reduced fees — even by fractions of a point — you need to know what a low expense ratio actually means. 'Vanguard's fee cuts are a win for retail investors — you and me — helping to boost long-term returns,' said Mark Johnson, an investments and portfolio management professor at Wake Forest University. 'In today's market, expense ratios under 0.10% (10 basis points) are considered low, and Vanguard's announcement aligns with founder Jack Bogle's philosophy of maximizing returns by minimizing costs.' Read more: How to start investing: A 6-step guide That clearly remains the company's mission: 'At Vanguard, we're focused on creating value for our investors, not extracting value from them,' Salim Ramji, Vanguard's CEO, said in a press release. I'd be remiss not to mention that this massive fee cut comes on the heels of Vanguard agreeing to pay more than $106 million to the Securities and Exchange Commission 'for misleading statements related to capital gains distributions and tax consequences for retail investors who held Vanguard Investor Target Retirement Funds (Investor TRFs) in taxable accounts,' according to an SEC order. The blow to Vanguard's revenue from the new expense ratio cuts — estimated to be about $350 million this year — is the bigger thing that matters in my opinion. 'It shows that Vanguard is willing to give up a pretty substantial amount of revenue this year, and in future years, for the betterment of its clients,' Sotiroff said. Moreover, you could see some fee competition kick up. 'There were some low-cost index funds in Vanguard's list that are now a few basis points cheaper than comparable funds from competitors, particularly on broad international stock ETFs,' said Sotiroff. 'I'd be watching for announcements from BlackRock, State Street, and Charles Schwab to see if they make any cuts in the near future.' You can find the expense ratio on a mutual fund or ETF's profile page. For example, when you click on Vanguard Emerging Markets Stock Index Fund Admiral Shares, you can scroll down to find the expense ratio of 0.13%. But you won't find what is under the covers of that expense ratio. It's not spelled out in your account statement in the way a service fee or trading commission is shown. The specific details on the expense ratio fee that will be deducted from your investment returns can be found in a prospectus, which each mutual fund and ETF files with the SEC. You can track down that document on the fund's site. Simply put, expense ratios account for a range of costs including what a mutual fund or ETF pays for management advisory fees as well as fees that pay for the cost of marketing and selling the fund and other shareholder services, transfer-agent costs, and legal and accounting fees. The total annual fund operating expenses are expressed as a percentage of the fund's net average assets, not a flat dollar figure. As each fund passes its fiscal year-end, the annual expense ratio is calculated by dividing the fund's operational expenses by its average net assets. These expenses are pulled from dividend and capital gains distributions you would receive, not the principal, according to Vanguard's fund data. Fees have been falling in recent years. In 2023, index equity mutual funds had an asset-weighted average expense ratio of 0.05%, or just $5 for every $10,000 invested, according to research by the Investment Company Institute. Compare that to 0.42%, or $42 for every $10,000, for actively managed equity mutual funds. 'Many investors understand that low fees matter because they leave more money invested and compounding over time,' Johnson said. I'm not convinced of that. While many folks may be hip to fees, they don't focus on the reality of the dent they make in their future nest eggs. No matter how minuscule that expense ratio may appear, it has an outsized impact on your investment returns over time. When you're saving for retirement, that's the heart of it. Consider this: You're 35 years away from retirement and have a current 401(k) account balance of $25,000. If returns on investments in your account over the next 35 years average 7% and fees and expenses reduce your average returns by 0.5%, your account balance will grow to $227,000 at retirement, even if there are no further contributions to your account, according to calculations by the US Department of Labor. If fees and expenses are 1.5%, however, your account balance will grow to just $163,000. The addition of a mere 1% annually over a 35-year span can cut your retirement account by 28%. The Financial Industry Regulatory Authority (FINRA) provides a fund analyzer on its site to help you run the cost comparisons between thousands of mutual funds and investment management companies compete to attract clients with low-fee fund options, Johnson predicts they'll try to cross-sell clients on additional services once they join. Cue Ramji's recent interview with the Wall Street Journal: 'As clients enter retirement and they're thinking about income, they're thinking about other sets of things that they might not have thought about during the accumulation days — their desire for advice grows, and we want to offer more of that capability at Vanguard,' he said. Just this week I received an email from Vanguard touting its 'suite of advisory services' offering 'a range of support to prepare a future for your beneficiaries, from tax-efficient strategies and portfolio management to retirement planning and advice tailored to you.' I was curious enough to explore my options, whether I wanted automated investment management or an adviser who could serve as my 'personalized sounding board.' I discovered I could pay an annual advisory fee of $15 for every $10,000 I had invested at Vanguard to have access to a robo-advisor or $30 for every $10,000 invested as long as I had at least $50,000 in Vanguard accounts for a hybrid personal adviser and robo-helper. Read more: Robo-advisor: How to start investing right away If I had $500,000 or more invested with the firm, I'd shell out no more than $30 per $10,000 invested to work directly with a certified financial planner and get a personalized plan. Not bad. At least, I would know upfront how much I'm paying in fees. Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including "In Control at 50+: How to Succeed in The New World of Work" and "Never Too Old To Get Rich." Follow her on Bluesky. Sign in to access your portfolio
