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Should You Invest in the Vanguard Utilities ETF (VPU)?

Looking for broad exposure to the Utilities - Broad segment of the equity market? You should consider the Vanguard Utilities ETF (VPU), a passively managed exchange traded fund launched on 01/26/2004.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Utilities - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.

Index Details

The fund is sponsored by Vanguard. It has amassed assets over $5.03 billion, making it one of the largest ETFs attempting to match the performance of the Utilities - Broad segment of the equity market. VPU seeks to match the performance of the MSCI US Investable Market Utilities 25/50 Index before fees and expenses.

This index made up of stocks of U.S. companies within the utilities sector, as classified under the Global Industry Classification Standard.The GICS utilities sector is made up of electric, gas, and water utility companies, as well as companies that operate as independent producers and/or distributors of power. The sector includes both nuclear and non nuclear facilities.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 3.08%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Utilities sector--about 99.40% of the portfolio.

Looking at individual holdings, Nextera Energy Inc. (NEE) accounts for about 14.85% of total assets, followed by Duke Energy Corp. (DUK) and Southern Co. (SO).

The top 10 holdings account for about 52.48% of total assets under management.

Performance and Risk

The ETF has added about 11.23% and was up about 5.79% so far this year and in the past one year (as of 11/10/2021), respectively. VPU has traded between $128.27 and $152.64 during this last 52-week period.

The ETF has a beta of 0.42 and standard deviation of 24.99% for the trailing three-year period, making it a medium risk choice in the space. With about 66 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Utilities ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, VPU is a reasonable option for those seeking exposure to the Utilities/Infrastructure ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Fidelity MSCI Utilities Index ETF (FUTY) tracks MSCI USA IMI Utilities Index and the Utilities Select Sector SPDR ETF (XLU) tracks Utilities Select Sector Index. Fidelity MSCI Utilities Index ETF has $1.14 billion in assets, Utilities Select Sector SPDR ETF has $12.31 billion. FUTY has an expense ratio of 0.08% and XLU charges 0.12%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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Vanguard Utilities ETF (VPU): ETF Research Reports
 
NextEra Energy, Inc. (NEE): Free Stock Analysis Report
 
Southern Company The (SO): Free Stock Analysis Report
 
Duke Energy Corporation (DUK): Free Stock Analysis Report
 
Utilities Select Sector SPDR ETF (XLU): ETF Research Reports
 
Fidelity MSCI Utilities Index ETF (FUTY): ETF Research Reports
 
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