5 Popular Vanguard ETFs Are Splitting Their Shares. Do You Own Any, and Should You Be Rejoicing?
Key Points
The five popular ETFs are splitting 4-for-1, 5-for-1, 6-for-1, and 8-for-1.
Shareholders' positions won't really change much in value.
Focus on the ETFs themselves, not the splits.
- 10 stocks we like better than Vanguard Growth ETF ›
Here's some news you don't see every day: Shares of five popular exchange-traded funds (ETFs) are splitting soon. The ETFs belong to the respected money manager Vanguard (known for ultra-low fees, among other things), and the splits will be effective April 21.
Here's a closer look at the news and how it might affect you.
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Five Vanguard ETFs splitting
First off, below are the five ETFs. (Remember that an ETF is a fund that trades like a stock.) I'll include their recent performances, dividend yields, expense ratios (annual fees) -- and how they will be splitting their shares. I'm also including numbers for Vanguard's S&P 500 index fund, for comparison.
|
Fund |
Expense Ratio |
Dividend Yield |
5-Year Average Annual Gain |
10-year Average Annual Gain |
Split Ratio |
|---|---|---|---|---|---|
|
Vanguard Growth ETF (NYSEMKT: VUG) |
0.03% |
0.46% |
11.38% |
16.21% |
6:1 |
|
Vanguard Information Technology ETF (NYSEMKT: VGT) |
0.09% |
0.44% |
14.78% |
21.72% |
8:1 |
|
Vanguard Mega Cap Growth ETF (NYSEMKT: MGK) |
0.05% |
0.39% |
12.26% |
17.00% |
5:1 |
|
Vanguard Mid-Cap ETF (NYSEMKT: VO) |
0.03% |
1.51% |
6.72% |
10.91% |
4:1 |
|
Vanguard S&P 500 Growth ETF (NYSEMKT: VOOG) |
0.07% |
0.54% |
12.17% |
15.91% |
6:1 |
|
Vanguard S&P 500 ET |
0.03% |
1.19% |
11.74% |
14.22% |
N/A |
All about splits
The difference in split ratio is likely due to differences in the funds' per-share prices: The Vanguard Information Technology ETF recently traded near $718 per share, while the Vanguard Mid-Cap fund traded near $291.
Should you be excited about these splits? Well, no. It's true that if you own any of these funds, you'll suddenly own more shares. For example, 100 shares of the Vanguard Information Technology ETF will turn into 800 shares! But the share price will be ratcheted down proportionately. The total value of your shares won't change much at all when a holding splits.
Here's a clearer example: If you owned 100 shares of the Vanguard Information Technology ETF when it split, and it traded at $718 per share pre-split, your holding would be worth $71,800. Post split, you'd have 800 shares, but the share price would have been divided by eight, so shares would be trading for around $89.75 apiece. Multiply your 800 shares by $89.75, and you'll arrive at...$71,800.
What to do?
These impressive ETFs are worth considering for your portfolio. Most investors will be served quite well just sticking with a basic, low-fee S&P 500 index fund. But if you're seeking faster growth, you might consider some of these funds above. Remember, though, that should the market pull back, as it invariably does now and then, growth stocks will often fall harder.
Note, too, that most of these funds are rather top-heavy with huge tech stocks such as Nvidia, Microsoft, and Apple. All but the Mid-Cap fund recently sported those as their top three holdings. So, if you're investing in several of these funds, you won't be diversifying as much as you might think.
Anyone worried about a market pullback might want to check out some great dividend-focused ETFs, such as the Schwab U.S. Dividend Equity ETF.
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Selena Maranjian has positions in Apple, Microsoft, Nvidia, Schwab U.S. Dividend Equity ETF, and Vanguard Growth ETF. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, Vanguard Growth ETF, Vanguard Mid-Cap ETF, and Vanguard S&P 500 ETF and is short shares of Apple. The Motley Fool has a disclosure policy.
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