Should You Invest in the Vanguard Energy ETF (VDE)?
Designed to provide broad exposure to the Energy - Broad segment of the equity market, the Vanguard Energy ETF (VDE) is a passively managed exchange traded fund launched on 09/23/2004.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 1, placing it in top 6%.
Index Details
The fund is sponsored by Vanguard. It has amassed assets over $6.98 billion, making it one of the largest ETFs attempting to match the performance of the Energy - Broad segment of the equity market. VDE seeks to match the performance of the MSCI US Investable Market Energy 25/50 Index before fees and expenses.
The MSCI US Investable Market Index (IMI)/Energy 25/50 is made up of stocks of large, mid-size, and small U.S. companies within the energy sector.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 3.90%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Energy sector--about 100% of the portfolio.
Looking at individual holdings, Exxon Mobil Corp. (XOM) accounts for about 21.35% of total assets, followed by Chevron Corp. (CVX) and Conocophillips (COP).
The top 10 holdings account for about 67.69% of total assets under management.
Performance and Risk
Year-to-date, the Vanguard Energy ETF has added roughly 20.42% so far, and was up about 32.05% over the last 12 months (as of 07/07/2022). VDE has traded between $63.79 and $128.99 in this past 52-week period.
The ETF has a beta of 1.45 and standard deviation of 42.58% for the trailing three-year period, making it a high risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk.
Alternatives
Vanguard Energy ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VDE is an outstanding option for investors seeking exposure to the Energy ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
IShares U.S. Energy ETF (IYE) tracks Dow Jones U.S. Oil & Gas Index and the Energy Select Sector SPDR ETF (XLE) tracks Energy Select Sector Index. IShares U.S. Energy ETF has $2.48 billion in assets, Energy Select Sector SPDR ETF has $32.26 billion. IYE has an expense ratio of 0.41% and XLE charges 0.10%.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Vanguard Energy ETF (VDE): ETF Research Reports
Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
ConocoPhillips (COP) : Free Stock Analysis Report
Energy Select Sector SPDR ETF (XLE): ETF Research Reports
iShares U.S. Energy ETF (IYE): ETF Research Reports
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