VTV vs. VVIAX: Comparing Vanguard Value Funds
Considering an investment in Vanguard Value funds? If you’re weighing the merits of the Vanguard Value ETF (VTV) versus the Vanguard Value Index Fund Admiral Shares (VVIAX), this article will provide an in-depth comparison.
We’ll explore their general characteristics, expense ratios, dividend yields, holdings, performance, and more to help you choose the investment that best aligns with your financial goals.
VTV and VVIAX - An Overview
VTV and VVIAX track the CRSP US Large Cap Value Index
VTV is an ETF
VVIAX is a mutual fund
Understanding the distinctions between VTV and VVIAX requires insight into how these funds are structured.
VTV is an ETF (Exchange Traded Fund) that aims to imitate the performance of the CRSP US Large Cap Value Index. It attempts to provide a broad representation of value companies in the U.S. large-cap equity market.
VVIAX is a mutual fund that aims to track the performance of the CRSP U.S. Large Cap Value Index. It is designed to give investors exposure to a diverse range of large U.S. value companies.
While these funds have similar objectives, their structure differs significantly. An ETF like VTV is traded on an exchange and can be bought and sold throughout the day at market prices. In contrast, mutual funds such as VVIAX are purchased or redeemed at the end of the day at their NAV (Net Asset Value).
Expense Ratio Analysis: VTV vs VVIAX
One critical factor when choosing an investment fund is the expense ratio - the annual fee that these funds charge shareholders. It doesn’t just affect your annual returns but decreases future earning potential due to compounding lost on these fees. Hence, a lower expense ratio indicates cost-effectiveness and higher returns over the long term.
As per the latest data, VTV has an expense ratio of 0.04%, while VVIAX has an expense ratio of 0.05%. Although the difference is negligible, VTV’s lower expense makes it moderately more cost-effective over the long run.
Dividend Yield Comparison: VTV vs VVIAX
Consistently paying dividends can reflect a financially healthy company, which can serve as a source of regular income for investors. The dividend yield of a fund is calculated as a percentage of a company’s annual dividends per share divided by its price per share.
As of now, VTV has a 12-month trailing dividend yield of about 2.09%, whereas for VVIAX it stands at approximately 2.1%. The almost equal dividend yield signifies similar income generation potential from both these funds for their investors.
Holdings Analysis: VTV vs VVIAX
Holdings of a fund refer to the various investments it contains. Both VTV and VVIAX track the same index and would, therefore, have very similar portfolios predominantly consisting of large-cap U.S. value stocks.
Performance Comparison: VTV vs VVIAX
While past performance is not an indicator of future results, it provides insights into how each fund has reacted to different market conditions in the past.
Both VTV and VVIAX have shown solid long-term returns, aligning with the overall performance of the U.S. large-cap value market. However, their performances can vary slightly due to fund structure, expense ratios, and exact holding differences.
In the event of a bullish market, where investors flock to “growth” companies expected to outperform, growth-oriented funds can potentially outperform VTV and VVIAX. Conversely, in a down or volatile market where investors seek stable, undervalued stocks, these funds can excel due to their focus on value companies out of favor with the market.
Which is Better For You? VTV or VVIAX?
Choosing between VTV and VVIAX largely depends on your investment goals, risk profile, and whether you prefer the flexibility of trading an ETF or the ease of investing in a mutual fund at the end of day NAV.
VTV’s slightly lower expense ratio provides a minor cost advantage, but the dividend yields are nearly identical for both funds. Performance varies according to larger-scale economic conditions.
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