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ETF Portfolios Available Commission-Free at Vanguard
The ever-expanding ETF universe has made it easy for investors of all walks to construct well-diversified, cost-effective, portfolios spanning across previously difficult-to-reach corners of the global market. The evolution of the ETF industry has further democratized the investment landscape as a growing number of issuers are not only aggressively slashing management fees on existing products, but are offering funds entirely commission-free on some of the most popular online brokerage platforms. For smaller investors especially, minimizing expenses is key and a surefire way to boost your portfolio’s returns over the long-haul [see 101 ETF Lessons Every Financial Advisor Should Learn].
At first glance, the idea of commission-free trading might not seem all that enticing to long-term, “hands off” investors, but upon closer review it becomes apparent that cutting out those paltry trading fees can actually save you big bucks over time, even if you’re not an active trader. To illustrate the tremendous cost-efficiencies that commission-free trading can offer to long-term investors, consider the example below:
- Let’s assume you contribute $1,000 every month to your retirement portfolio spread out across 5 ETFs over the course of 30 years and you’re able to generate 10% returns annually.
Now let’s compare two scenarios; in one instance, you incur a $10 commission fee every time you add to one of your five positions. This means that for every $1,000 monthly contribution you make, you are effectively paying $50 in commission fees alone, thereby bringing your net monthly investment down to $950 a month, or $11,400 a year. In another instance, let’s assume you are only utilizing commission-free ETFs available on your brokers platform, which means that your net monthly investments are simply $1,000 a month, or $12,000 a year [see also The Cheapest ETF for Every Investment Objective].
At the end of one year the difference between the two portfolios is fairly minimal; however, the cost-efficiencies of the commission-free portfolio are best showcased over the long-haul. As the chart below illustrates, over the course of 30 years, you may end up losing out on as much as $10,496 simply because of commission fees.
But can you develop a well-balanced all-ETF portfolio that maintains exposure to all the major asset classes, all the while relying only on commission-free funds available on your brokers platform? We examined all of the ETFs available commission-free to Vanguard account holders and came up with five simple, but effective, low-cost portfolios.
Looking for even more portfolio ideas? ETFdb Pro members have access to more than 50 All-ETF model portfolios; the lineup includes everything from sector-focused strategies, to regional ones, and even a host of retirement portfolios.
1. U.S. Total Market
This portfolio might work well for those who prefer to maintain a home-country bias when it comes to their equity and fixed-income investments:
|VOO||S&P 500 ETF||50%|
|BND||Total Bond Market ETF||20%|
|Portfolio Expense Ratio||0.08%|
2. Go Global
This portfolio is intended for those who are looking to take a geographically-diversified approach while still keeping expenses to a minimum:
|VTI||Total Stock Market ETF||50%|
|VWO||Emerging Markets ETF||10%|
|BND||Total Bond Market ETF||20%|
|Portfolio Expense Ratio||0.09%|
This strategy should appeal to investors who are looking to generate meaningful current-income:
|VYM||High Dividend Yield ETF||45%|
|VCLT||Long-Term Corporate Bond Index Fund||10%|
|VMBS||Mortgage-Backed Securities Index Fund||10%|
|Portfolio Expense Ratio||0.10%|
This strategy is geared towards investors with a stomach for volatility and a long-term horizon in mind:
|VOT||Mid-Cap Growth ETF||35%|
|VBK||Small-Cap Growth ETF||25%|
|VSS||FTSE All-World ex-US Small Cap Index ETF||20%|
|VNQI||Global ex-U.S. Real Estate Index Fund||20%|
|Portfolio Expense Ratio||0.17%|
5. Ready To Retire
This portfolio is bond-heavy and geared towards very conservative investors who wish to preserve capital and generate income:
|VIG||Dividend Appreciation ETF||30%|
|VCSH||Short-Term Corporate Bond Index Fund||30%|
|VGSH||Short-Term Government Bond Index Fund||40%|
|Portfolio Expense Ratio||0.12%|