The Best Vanguard Sector ETF to Invest in Right Now for Under $500

There are close to 1,000 sector exchange-traded funds (ETFs) available in the market today. These ETFs target specific industries or sectors such as healthcare, financials, and energy. Among these options, one particular sector ETF from Vanguard Group stands out as a promising choice for investors looking to invest $500 or less. Here’s what you should know about it.

Overview of the Vanguard Communications Services ETF

The Vanguard Communications Services ETF (VOX 0.28%) focuses specifically on the communications sector. This fund includes stocks from various sub-sectors in the U.S., like technology services, consumer services, and communications.

Historically, the communications realm has been known for offering lower growth and more income-driven stocks, such as Verizon Communications and AT&T. However, this landscape is shifting. The sector now encompasses high-growth companies in social media, internet, and streaming, including names 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%

Consequently, investors might notice that the Vanguard Communications Services ETF has a lower dividend yield than expected. Currently, it offers a forward dividend yield of 0.96%, which implies that a $10,000 investment in this fund would generate around $100 in annual dividends.

When it comes to fees, this fund is quite appealing, charging only 0.10% in expense ratio. This means that an investment of $10,000 incurs an annual fee of just $10. These low fees are particularly important for sector ETFs, which often have higher expense ratios. Minimizing fees helps maximize returns and allows investors to achieve their financial goals faster.

Reasons to Buy the Vanguard Communications Services ETF Now

While the Vanguard fund provides a balanced mix of growth and value stocks with a modest dividend and low costs, you might wonder why it is a worthwhile investment at this time.

The fund has demonstrated a lifetime compound annual growth rate (CAGR) of 8.4%. In comparison, the S&P 500 has achieved a CAGR of 10.8% during the same stretch.

However, the situation may soon change as some of the fund's largest holdings, including Netflix and Meta, have greatly outperformed the S&P 500 this year. As of now, Netflix has gained 77% year to date, while Meta has risen by 68%.

This ETF is positioned to benefit from a trend in which new communication methods, such as social media and video streaming, are replacing older forms like broadcast and cable TV. Additionally, digital advertising is experiencing significant growth; currently a $740 billion annual industry, it is projected to approach $1 trillion by 2029.

For long-term investors, the Vanguard Communications Services ETF presents solid opportunities due to its strong performance history, low fees, and increasing ties to the rapidly expanding digital advertising sector.

ETF, Investing, Vanguard