Can Vanguard Value ETF Outperform the S&P 500 in Generating Steady Passive Income?
In the realm of investing, striking the right equilibrium between growth and value is vital for a well-rounded portfolio. One such investment vehicle that has gained prominence in recent years is the Value ETF.
Over the past decade, the Value ETF has witnessed a remarkable surge, rising 111.5% and boasting a total return of 173.5%. This impressive growth makes it an appealing choice for investors who already own numerous top growth stocks in the S&P 500 and are looking to diversify their portfolio, enhance passive income, and participate in the broader market.
However, it's crucial to understand that the investment thesis of the Value ETF centers around the companies it holds rather than yield. While the ETF does offer opportunities for passive income, its primary focus is on the quality of companies it invests in.
In contrast, the JP Morgan Nasdaq Equity Premium ETF, another popular option, offers a higher 30-day SEC yield of 11.2% (as of June 30). This ETF generates income by selling covered call options on the Nasdaq-100, providing a substantial stream of monthly payouts.
While the JP Morgan Nasdaq Equity Premium ETF offers a higher yield, it's important to note that the companies it holds may not align as closely with traditional value stocks. On the other hand, the Value ETF takes pride in its high-quality company selections, making it one of the best ways to consistently collect more passive income than the index.
When comparing the top holdings of the Vanguard S&P 500 ETF and the Vanguard Value ETF, some notable differences emerge. The S&P 500 is more top-heavy, with high-growth and tech-focused firms such as NVIDIA, Microsoft, Apple, Amazon.com, Meta Platforms, Broadcom, Alphabet (both classes), Berkshire Hathaway, and Tesla making up a significant portion of its top holdings.
In contrast, the Value ETF focuses more on traditional value stocks like British American Tobacco, Siemens, and Novartis, which are absent from the S&P 500 ETF's top holdings. It's worth noting that the Value ETF does not overlap with Berkshire Hathaway or JPMorgan Chase in its top 10 holdings with the S&P 500 ETF.
Moreover, the Schwab U.S. Dividend Equity ETF, another potential investment option, doesn't use call options to achieve its high 3.9% yield. However, many of its holdings are arguably lesser quality compared to the Value ETF.
In conclusion, the Value ETF presents a compelling investment opportunity for those seeking to diversify their portfolio, collect passive income, and invest in high-quality companies that may not be found in the S&P 500. As always, it's essential to do thorough research and consider your investment goals and risk tolerance before making any decisions.
Data source: Vanguard.
Read also:
- Linde Wins Major Engineering Design Contract for Equinor's Low Carbon Hydrogen Project at H2H Saltend, Progressing Towards a Greener Future
- Stock markets in Asia experience a surge following a record-breaking rally in U.S. stocks, fueled by optimism towards potential interest rate reductions.
- Dazzling Accomplishment: Constructing a £5m Venture by Age 25
- Transportation via roads plays a critical role in India's shift towards clean energy.
