If you’re interested in making your money work harder for you, one avenue worth exploring is the best Value ETFs.
These ETFs are like treasure maps in the world of stocks, helping you discover underpriced gems. But let’s break it down without any jargon and in plain, everyday language.
Value stocks are like hidden treasures. They’re stocks that trade for less than they’re truly worth. In other words, they’re great bargains.
And what’s interesting is that over the long term, value stocks tend to outperform the popular growth stocks.
So, how do you find these value stocks without spending countless hours researching? Enter Value ETFs!
Here’s a list of the best Value ETFs for you to consider:
|SPDR Portfolio S&P 500 Value ETF (SPYV)||0.04%|
|Fidelity Value Factor ETF (FVAL)||0.29%|
|Invesco FTSE RAFI Developed Markets ETF (PXF)||0.45%|
|Vanguard International High Dividend Yield ETF (VYMI)||0.22%|
|Invesco S&P MidCap Value with Momentum ETF (XMVM)||0.39%|
|Vanguard Mid-Cap Value ETF (VOE)||0.07%|
|Vanguard Small-Cap Value ETF (VBR)||0.07%|
What you'll learn:
➤ Best Value ETFs
1️⃣ SPDR Portfolio S&P 500 Value ETF (SPYV)
- Expense Ratio: 0.04%
- Dividend Yield: 1.99%
- 10-Year Avg. Ann. Return: 8.69%
This ETF is your go-to if you’re seeking a low-fee value ETF. It scours the S&P 500 for undervalued stocks and holds about 400 companies.
The top three holdings include well-known names like Berkshire Hathaway, Johnson & Johnson, and Exxon Mobil.
Plus, it boasts the lowest expense ratio on our list, making it a strong choice for large-cap value stocks.
2️⃣ Fidelity Value Factor ETF (FVAL)
- Expense Ratio: 0.29%
- Dividend Yield: 1.72%
- Avg. Ann. Return Since Inception: 11.53%
This ETF is a gem for those looking to turn growth stocks into value plays. It looks for profitable companies with good growth prospects and solid balance sheets.
FVAL’s long-term earnings growth rate and projected growth rate are both above the category average, giving it an edge in total returns.
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3️⃣ Invesco FTSE RAFI Developed Markets ex-U.S. ETF (PXF)
- Expense Ratio: 0.45%
- Dividend Yield: 3.40%
- 10-Year Avg. Ann. Return: 3.06%
This ETF takes an international approach, investing in companies outside the U.S. It uses a unique strategy, ranking stocks based on fundamentals like book value, cash flow, sales, and dividends.
This approach aims to outperform unmanaged indices of developed market companies.
4️⃣ Vanguard International High Dividend Yield ETF (VYMI)
- Expense Ratio: 0.22%
- Dividend Yield: 4.61%
- Avg. Ann. Return Since Inception: 7.04%
This passively managed index fund seeks global companies with above-average dividend yields. With over 1,300 companies, it offers diversity, and it’s less volatile compared to its peers.
If you’re looking for good dividends and reasonable fees, this international value fund is worth considering.
5️⃣ Invesco S&P MidCap Value with Momentum ETF (XMVM)
- Expense Ratio: 0.39%
- Dividend Yield: 1.69%
- 10-Year Avg. Ann. Return: 8.35%
This ETF combines the best of both worlds – value and momentum investing.
It screens S&P MidCap 400 companies for stocks with high value and momentum scores, offering the potential for better returns.
It’s a bit more focused on financial services and basic materials, providing a different flavor of value.
6️⃣ Vanguard Mid-Cap Value ETF (VOE)
- Expense Ratio: 0.07%
- Dividend Yield: 2.51%
- 10-Year Avg. Ann. Return: 7.44%
If you’re a cost-conscious investor, this ETF is a great choice. It captures the returns of mid-cap value stocks and offers diversity in sectors.
With a focus on financials, industrials, consumer discretionary stocks, utilities, and real estate, it’s well-diversified.
7️⃣ Vanguard Small-Cap Value ETF (VBR)
- Expense Ratio: 0.07%
- Dividend Yield: 2.37%
- 10-Year Avg. Ann. Return: 7.06%
For those interested in small-cap value, this is a top pick. With over 800 small-cap value stocks, a lower price-earnings ratio, and strong earnings growth, it offers excellent value potential.
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➤ What’s Value Investing?
You know how you patiently wait for those big-ticket items like televisions and laptops to go on sale before you buy them?
Well, that’s a lot like value investing in the world of stocks. Value investing is all about purchasing stocks at a discount, just like you would with those electronics, and then holding onto them until their price matches their true value.
However, the analogy only takes us so far. In the stock market, it’s not as simple as waiting for a sale. Value investing is much more complex and involves a lot of research.
It’s like being a detective trying to figure out which stocks are the real bargains and what their “true” price should be, often referred to as their intrinsic value.
Value investors believe that the stock market tends to overreact to news and events that affect individual companies. They think that short-term factors can lead to stock price fluctuations that don’t always represent a company’s long-term health.
So, they dive deep into research, looking at things like P/E ratios, P/B ratios, and book value to understand a company’s intrinsic value. They want to see if the current market price is in line with that intrinsic value or if the stock is on sale.
When it comes to value investing, the bigger the difference between a stock’s intrinsic value and its current market price, the better the opportunity.
But here’s the catch: not every undervalued stock will necessarily see its market price rise to match its intrinsic value. Value investing can be a bit of a puzzle, and success is far from guaranteed in every case.
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➤ How Do Large-Cap Value ETFs Work?
Now, let’s shift our focus to Large-Cap Value ETFs. These ETFs follow an underlying index that aims to mimic the performance of a group of undervalued, large-cap stocks.
While they have common characteristics, there can be significant differences between the indexes they track. One key area of divergence is how they measure value.
These indexes use various metrics to evaluate value, such as P/E (price-to-earnings) and P/B (price-to-book) ratios. These factors can vary from one index to another. Some may consider lower P/E ratios as indicating better value for investors.
So, when you’re choosing a Large-Cap Value ETF, it’s important to look at the specific measures used by the underlying index.
Additionally, the average market capitalization of the component companies in these indexes can differ. The funds on our list have varying average market caps, with some around $62 billion and others exceeding $100 billion.
This diversity in market capitalization should also be taken into account when considering which ETF may be the right fit for your portfolio.
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➤ Final Thoughts
In summary, value investing is like bargain hunting in the stock market, but it involves a lot of detective work.
Large-Cap Value ETFs provide a way to access undervalued, large-cap stocks, but it’s essential to understand the specific metrics and components used by the underlying index of the ETF you’re interested in.
The investing landscape can seem complex, but with these Value ETFs, you have a straightforward way to access potentially undervalued stocks.
These ETFs provide options for different preferences and risk profiles. Remember, before investing, it’s always a good idea to consult with a financial advisor or do your own research to make the right choice for your financial goals.
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