Vanguard: Analysis of the 5 largest ETFs

In this article, we will explore in detail the five largest ETFs offered by Vanguard , one of the world's largest asset managers. The objective is to compare these investment funds based on their composition, strategy, fees, and historical performance, in order to help you determine which one best suits your investment objectives, taking into account volatility and fees. We will also address the issue of their eligibility for Plan d’Épargne en Actions (PEA) in France, a tax system that is advantageous but restrictive.

Table of Contents

• Vanguard ETFs and the PEA: What about it?
• Presentation of the 5 largest Vanguard ETFs
• Comparison of the performance and volatility of the three best ETFs
• Conclusion: Which Vanguard ETF to choose?

Vanguard ETFs and the PEA: What about it?

A recurring question is whether these Vanguard ETFs are eligible for the PEA. The latter is a French tax wrapper that allows investment in stocks while benefiting from an exemption from income tax after five years of holding, provided that investment is made only in European stocks. However, the Vanguard ETFs we are going to analyze mostly replicate international markets, particularly American ones, and are therefore not eligible for the PEA.

Synthetic replication solutions exist to include certain foreign ETFs in a PEA, but these methods have significant drawbacks. Therefore, it is often more interesting to accept standard taxation by investing in high-performing international ETFs, rather than limiting one's investment universe to French or European stocks with a PEA.

Presentation of the 5 largest Vanguard ETFs

1. VTI: The US Total Market ETF

VTI is Vanguard's largest ETF, with an impressive market capitalization of $1.15 trillion. Its strategy is to invest in over 4,000 listed stocks worldwide, with a strong weighting in the US market. Fees are extremely low at 0.03% per year.

In terms of performance, VTI shows an average of 226% growth over ten years, which is an average annual return of approximately 12.77%. It is a very diversified ETF, suitable for those who want broad exposure to US stocks with an excellent cost/performance ratio.

2. VOO: The ETF replicating the S&P 500

VOO is one of my favorite ETFs. It aims to replicate the performance of the 500 largest US companies in the S&P 500. Its market capitalization is $750 billion, and it contains approximately 506 companies. The fees are also very low, at 0.03%.

Its average annual performance is 13.10%, making it one of the best-performing ETFs in the long term. The S&P 500 is an iconic index, often used as a benchmark for the US market.

3. VXUS: The ETF for international markets outside the United States

VXUS focuses on international stocks excluding the United States. With a market capitalization of $320 billion, it contains over 8,000 stocks. Its fees are slightly higher, at 0.07%, due to the more complex management of such a broad universe.

Its average annual performance since its inception is 4.31%, which is lower compared to US ETFs, often reflecting different volatility and returns from international markets.

4. BND: The global bond ETF

The BND is highly valued by investors seeking to limit volatility. It invests in over 17,300 government and corporate bonds worldwide, with a capitalization of $270 billion. The fees are very low, at 0.03%.

However, the performance is more modest, with total growth of 13.51% over ten years, or an average annual return of 2.32%. This fund is ideal for balancing a portfolio with a stable bond component.

5. VTV: The ETF for American "value" stocks

The VTV invests in so-called "value" type companies, meaning stable companies, often not widely publicized, with moderate growth but attractive valuations. Its capitalization is $150 billion, with 344 stocks in its portfolio. The fees are 0.04%.

Over ten years, it shows a total performance of 221.69%, an average annual return of 7.88%. This fund has recently gained popularity, especially during periods of stock market uncertainty, as it offers relative stability.

Comparison of the performance and volatility of the three best ETFs

To refine the choice, let's focus on the three best-performing and most popular ETFs: VOO, VTI, and VTV. Thanks to an analysis of performance since December 31, 2010, here's what emerged:

• VOO is the one that achieved the best performance. A hypothetical investment of $10,000 on that date would be worth approximately $40,782 today, an average annual return of 12.52%.
• In terms of volatility, VOO shows a "max drawdown" (maximum loss from a peak) of -23.91%, which is similar to VTI.
• The worst year for VOO recorded a decrease of 13.21%.
• VTV shows slightly lower volatility in the worst year, with only -5.44%, but this comes at the cost of lower average annual performance.

In conclusion, VOO offers an excellent compromise between performance and volatility, making it a preferred choice for those who accept a little more fluctuation in exchange for higher long-term returns.

Conclusion: Which Vanguard ETF to choose?

Among the five largest Vanguard ETFs analyzed, VOO stands out as the best choice for investors wishing to gain exposure to large US companies with an excellent performance history and very low fees. Despite higher volatility than some more defensive ETFs, its long-term profitability is undeniable.

For those who prefer broader diversification or international exposure outside the United States, VTI and VXUS are also solid options. Finally, for investors seeking less volatility and a more defensive profile, bond ETFs like BND or value stocks with VTV can complement a balanced portfolio.

It is important to keep in mind that these ETFs are not eligible for the PEA, but this should not be a barrier if one wishes to take advantage of the superior performance offered by the American and international markets. Investing in these ETFs represents an opportunity to build a diversified, high-performing, and low-cost portfolio.