The Surprising Vanguard ETF That Is Soaring Past Tech Funds This Year
Tech stocks appear to have fallen out of favor with investors this year. Concerns about not only high valuations but excessive spending on artificial intelligence (AI) appear to be weighing on even some of the best companies in the world. As of Monday’s close, tech giant Microsoft has fallen by more than 15%, which is uncharacteristically bad for what’s normally a fairly low-risk stock.
It’s not just Microsoft, either. Tech stocks as a whole aren’t performing well, and that’s evident through the State Street Technology Select Sector SPDR ETF, which gives investors access to the tech stocks within the S&P 500 index. The tech-focused exchange-traded fund (ETF) is down by 3%. Last year, it surged by 24%.
Investors have instead been loading up on safer investments. One ETF that’s been outperforming tech right now may come as a bit of a surprise, given that its focus is on utilities. The Vanguard Utilities Index ETF (VPU +0.36%) is up an impressive 9% thus far. Here’s why it can continue to be a good investment as the year goes on.
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The Vanguard Utilities ETF checks off many boxes for investors
What’s appealing about utility stocks is the consistency and reliability that comes with them. Not only are their businesses fairly predictable given the recurring revenue they generate and ongoing demand, but they also typically pay dividends. With the Vanguard Utilities ETF, investors are collecting an above-average dividend that yields roughly 2.5% — that’s more than double the S&P 500 average of around 1.2%.
The fund also charges a low expense ratio of only 0.09%, meaning that fees won’t have a significant impact on its overall returns. Over the past five years, the ETF has also averaged a beta of 0.73, which indicates that it’s a less volatile investment than the overall market. A beta of 1.0 would mean that an investment follows the market closely, while anything below that would indicate a low-volatility investment.
Today’s Change
(0.36%) $0.73
Current Price
$202.85
Key Data Points
Day’s Range
$200.74 – $202.85
52wk Range
$154.00 – $206.10
Volume
93K
Why the ETF can still be a good buy today
There are multiple reasons why the Vanguard Utilities ETF can be a solid option for investors. And a time when investors may be worried about the general safety of the S&P 500 and tech stocks, it can make for a compelling option, potentially leading to more buying and a higher value in the future.
While the ETF may not be entirely risk-free, it’s definitely a whole lot safer than many other investments these days. It may not generate huge gains over the long term, but it can help reduce your overall risk, making it an ideal option to hang on to for years.
