Investors always want to own stocks that offer promising returns and minimal risk, and many turn to value stocks in search of bargain opportunities to produce big gains. The danger with value investing is that many low-priced stocks are cheap for good reasons, and so when you look to take concentrated positions in just a handful of companies, you have to do your homework.
Many value investors prefer to take a diversified approach toward their investing, using exchange-traded funds to dilute company-specific risks. The following five value ETFs look at a variety of different markets to find value stocks, and they give their shareholders options in tailoring their exposure to the value realm.
|Value ETF||Assets Under Management||Expense Ratio||5-Year Average Annual Return|
|iShares Russell 1000 Value (NYSEMKT: IWD)||$36.5 billion||0.20%||13.7%|
|Vanguard Value (NYSEMKT: VTV)||$31.7 billion||0.06%||14.4%|
|Vanguard Small-Cap Value (NYSEMKT: VBR)||$11.4 billion||0.07%||15%|
|iShares Russell Mid-Cap (NYSEMKT: IWS)||$9.59 billion||0.25%||14.9%|
|iShares Russell 2000 Value (NYSEMKT: IWN)||$8.48 billion||0.25%||13.3%|
|Vanguard Mid-Cap Value (NYSEMKT: VOE)||$7.49 billion||0.07%||15.7%|
How iShares And Vanguard Came To Dominate The Value ETF Space
It's not all that surprising to see that the two leaders of the exchange-traded fund world have attracted the most assets in value investing. Vanguard has a reputation for offering value to its customers by keeping expense ratios as low as possible. iShares' expense ratios tend to be higher, but the company looks to make its ETFs attractive to short-term institutional traders who value liquidity over long-term cost.
You can find other ETF providers in the value space, and they take different angles toward investing in the market. For broad-based exposure to value stocks, it's hard to beat what iShares and Vanguard bring to the table.
|The 10 Best Stocks To Buy Now|
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market. David and Tom just revealed what they believe are the ten best stocks for investors to buy right now. Click here to learn about these picks!
Choosing The Size Of Stocks You Want
Both iShares and Vanguard have different funds that cover companies of different sizes. Large-cap exposure is easiest to get and maintain, and so expense ratios are slightly cheaper for the two fund companies' large-cap value ETF offerings. The indexes that the two ETFs track differ somewhat, and so the exposure each ETF has to various sectors of the economy vary. Financials make up the largest sector in both funds, taking about a quarter of assets in each case. For the iShares fund, healthcare and energy are the two next-largest sector exposures. The Vanguard fund prefers healthcare, industrials, and technology stocks, each getting 12% to 13% allocations. The slightly better performance from the Vanguard offering reflects superior index performance and a narrower expense ratio.
In the mid-cap value-stock realm, allocations are slightly different. For the Vanguard fund, financials and consumer stocks split just over half of the portfolio, with industrials, utilities, and technology each getting about 10%. The iShares mid-cap value ETF emphasizes financials and real estate stocks with about a one-third allocation, and consumer discretionary, industrials, and utility stocks get 10% to 12% weight in the fund. Again, Vanguard's index outperformed iShares', and the Vanguard fund also does better matching that higher index performance with reduced costs.
Finally, small-cap value stock ETFs have similar holdings with slightly higher concentrations. Financials make up 30% of the iShares ETF's portfolio, with industrials, real estate, consumer discretionary, and technology each in the 10% to 12% range. For the Vanguard small-cap value ETF, financials get a similar allocation, but industrial stocks make up 20% of the portfolio, and consumer stocks represent nearly another fifth of the fund's assets.
This article originally appeared on The Motley Fool.