Vanguard Extended Market Index ETF Analysis
We love the Vanguard S&P 500 ETF (NYSEARCA: VOO ). We have had this index in our portfolios for decades. The Vanguard Extended Market Index ETF (NYSEARCA: VXF ) is the mate to the Vanguard S&P 500 Index. They are a pair, and we recommend taking them together. The Vanguard Extended Markets ETF follows the S&P Completion Index. To understand this index you must first understand the S&P Total Market Index. This is a comprehensive US market index that includes large, mid, small and micro cap stocks. Take the S&P 500 stocks out of the S&P Total Market Index and you end up with the S&P Completion Index. This is why they are a pair that should not be separated. The S&P Completion Index holds all of the other mid, small and micro cap stocks not included in the S&P 500 Index. Our database of 1,500+ ETFs does not show any ETFs that replicate the S&P Total Market Index. Even if there were a great ETF available, we would still buy the Vanguard S&P 500 ETF combined with the Vanguard Extended Markets ETF. These two ETFs move at different rates, and since we apply Opportunistic Rebalancing to our portfolios, we have found rebalancing benefits from buying these two ETFs. The Vanguard Extended Market ETF has a low internal fee of 0.14 percent. Even better, as discussed in the previous spotlight, the actual total holding costs have been lower at 0.11 percent over the past 12 months. Put these costs into perspective. The average mutual funds charge 1.27 percent and the average ETF charges 0.61 percent. Vanguard is able to achieve the lowest total costs in the business because they are formed like a credit union instead of a bank. Vanguard is owned by the funds themselves and, as a result, is owned by investors in the funds. This is why Vanguard rebates all of the income from lending securities while most companies rebate a much smaller share. There’s a reason turtle doves come in pairs in “The Twelve Days of Christmas.” Much like the turtle dove, if you are going to use the Vanguard S&P 500 ETF, then consider combining this great holding with the Vanguard Extended Market ETF. Share this article with a colleague