Is VTV a Smart Buy for Long-Term Investors?
Key Points
ETFs provide a great way to diversify a portfolio and offer protection against volatility.
The Vanguard Value Index Fund ETF holds more than 300 stocks.
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Hands down, the best argument for investing in exchange-traded funds (ETFs) is diversification. Picking individual stocks can be great, but it also leaves you woefully exposed should something catastrophic happen to a company that makes up a huge part of your portfolio.
The best and quickest ways to diversify are through ETFs. Some of them are geared toward a specific sector, trend, or idea, such as online retail, cybersecurity, or robotics. Others have a broader focus that captures an entire index, allowing investors to profit from a much larger pool. One such index fund that is an ideal choice for fans of value stocks is the Vanguard Value Index Fund ETF (NYSEMKT: VTV), which provides exposure specifically to large-cap value stocks.
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While every portfolio is different, the VTV ETF can often be a credible option for investors who are looking for the security of value stocks in a set-it-and-forget-it fund.
Let's dive in and see what this ETF has to offer, and if it's a good fit for your portfolio.
What is the Vanguard Value Index Fund ETF?
Vanguard operates some of the best, most cost-efficient index funds on the planet. The Vanguard Value Index Fund ETF tracks the CRSP US Large Cap Value Index that follows large-capitalization value stocks. The fund is passively managed, so investors can benefit from a tiny expense ratio of 0.04%, or just $4 annually for every $10,000 invested. Vanguard says the average expense ratio for similar funds is 0.87%.
In addition, the fund has a dividend yield of 2.2%, which is better than the 1.2% yield that you get from the S&P 500. That gives investors the opportunity to accumulate more shares each quarter by reinvesting their dividend payout back into the ETF.
The VTV ETF also is a solid performer rising 8.2% so far this year, or about 1% more than the Dow Jones Industrial Average. When you add the dividend payouts to the return, the VTV gives you a total return of 9.5% so far in 2025.
Image source: Getty Images.
What stocks do you buy with the VTV ETF?
You get interest in a lot of companies by investing in the Vanguard Value Index Fund ETF. The fund currently has stakes in 323 stocks, decently balanced throughout several sectors. Financial services leads the way with a 20.7% weighting, followed by tech stocks (14.1%), healthcare (13.2%), and industrials (11.7%).
| Equity | Portfolio Weight | 1-Year Return | Forward Price-to-Earnings Ratio |
|---|---|---|---|
| JPMorgan Chase | 3.61% | 40.9% | 15.1 |
| Berkshire Hathaway Class B | 3.27% | 5.9% | 23.3 |
| ExxonMobil | 2.18% | 2.02% | 14.7 |
| Walmart | 1.95% | 31.8% | 38.7 |
| Oracle | 1.93% | 59.7% | 33.0 |
| Johnson & Johnson | 1.80% | 9.85% | 15.8 |
| Home Depot | 1.66% | 15.4% | 27.5 |
| Procter & Gamble | 1.60% | (7.1%) | 22.7 |
| AbbVie | 1.51% | 11.4% | 15.1 |
| Bank of America | 1.35% | 27.6% | 12.0 |
Data source: Morningstar.
The diversification of the fund gives investors a lot of protection -- no single holding has a weighting of more than 4%. The stocks are also smartly allocated, with only one top-10 holding being in the red in the last 12 months.
Is it a smart buy?
The VTV ETF does an ideal job of tracking the CRSP US Large Cap Value Index, providing 11.5% annual returns over the last 10 years and 14% returns in the last five years.
I think long-term investors can use this fund for a portion of their portfolios to get additional exposure to value stocks. But I recommend devoting a similar percentage of your portfolio to growth stocks or an ETF that tracks growth stocks if you want to beat the market's return over a long period of time.
After all, it never pays to put all your eggs in one basket -- even a basket that appears to be as stable as the VTV ETF.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Berkshire Hathaway, Home Depot, JPMorgan Chase, Oracle, Vanguard Index Funds-Vanguard Value ETF, and Walmart. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
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