A Top Vanguard Sector ETF to Consider for Under $500

There are nearly 1,000 sector exchange-traded funds (ETFs) available to investors today. These ETFs typically focus on specific industries or sectors like healthcare, financials, and energy. In this article, we will highlight one particular sector ETF from Vanguard Group that stands out as a strong investment choice for those looking to invest $500 or less.

Exploring the Vanguard Communications Services ETF

The Vanguard Communications Services ETF (VOX) is designed specifically for the communications sector. This fund tracks stocks from various sub-sectors, including U.S. technology services, consumer services, and communications.

While traditionally viewed as a field filled with low-growth, income-oriented stocks such as Verizon Communications and AT&T, the landscape is evolving. The sector is now diversified with rising players from social media, internet services, and streaming sectors, including companies like Meta Platforms, Alphabet, and Netflix.

Company Name	Symbol	Percentage of Holdings
Meta Platforms	META	22.6%
Alphabet	GOOGL, GOOG	21.5%
Netflix	NFLX	4.6%
Verizon Communications	VZ	4.3%
Comcast	CMCSA	4.2%
AT&T	T	4.1%
Walt Disney	DIS	3.8%
T-Mobile US	TMUS	3.2%
The Trade Desk	TTD	1.9%
Electronic Arts	EA	1.5%
Roblox	RBLX	1.5%
Charter Communications	CHTR	1.4%
Take-Two Interactive Software	TTWO	1.2%
Live Nation Entertainment	LYV	1.1%

This shift in the communications sector towards technology-driven companies has resulted in the Vanguard Communications Services ETF having a forward dividend yield of 0.96%. Thus, if an investor puts $10,000 into this ETF, they can expect to receive approximately $100 in annual dividend payments.

Moreover, this fund maintains a low expense ratio of only 0.10%. This means that for a $10,000 investment, the annual fee would only be $10, which is quite economical compared to many other sector ETFs that generally have higher fees. Keeping fees low is crucial for investors since higher fees can erode returns over time.

Reasons to Buy the Vanguard Communications Services ETF Now

Given the mix of growth and value stocks along with its low costs, why is now a good time to invest in this fund?

From the historical perspective, the Vanguard Communications Services ETF has achieved a compound annual growth rate (CAGR) of 8.4% since it launched. While this is lower compared to the S&P 500, which has a 10.8% CAGR over the same period, it’s important to note that some of the larger holdings within the fund, like Netflix and Meta, have significantly outperformed the broader market this year. For instance, Netflix stocks have surged 77% year-to-date, while Meta has risen by 68%.

This ETF is positioned to benefit from a major shift in communication styles, where digital platforms like social media and streaming are overtaking traditional media such as cable TV. The communications sector is also witnessing considerable growth in digital advertising, a market valued at about $740 billion that is projected to approach $1 trillion by 2029.

Therefore, for long-term investors looking for a balanced option that includes both growth potential and affordability, the Vanguard Communications Services ETF presents a solid opportunity.

ETF, Investment, Vanguard