VIG: A Rather Clever Little ETF

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Now, listen closely. Most folks think dividend stocks are about as thrilling as watching paint dry. They’re not wrong, entirely. But there’s a peculiar sort of comfort in owning bits of businesses that actually share their spoils. It’s a bit like a kindly giant tossing crumbs to the deserving. And if you’ve got five hundred dollars burning a hole in your pocket, it’s a far better place for it than, say, a particularly grumpy goose.

There’s one little fund, a rather clever contraption called the Vanguard Dividend Appreciation ETF (VIG +0.20%), that’s been tickling my fancy. It’s not flashy, mind you. It doesn’t promise overnight riches. But it’s a solid sort of chap, and in this topsy-turvy world, that’s worth a good deal.

Its dividend yield – a measly 1.6% – might make a penny-pincher scoff. But don’t let that fool you. There’s more to this fund than meets the eye, a bit like a particularly cunning magician.

What is This Vanguard Thing?

This ETF, you see, follows the Nasdaq U.S. Dividend Achievers Select Index. It’s a bit of a mouthful, I admit. Essentially, it picks companies that have been steadily increasing their dividends for at least ten years. A decade! That’s a lot of birthdays. It then politely excludes the highest-yielding companies, deeming them a bit too…boisterous. It also limits how much of any one company it holds, capping it at 4% – a bit like a strict schoolmaster keeping order.

Now, this has its drawbacks. Cutting out the biggest yields is like removing the sweetest cherries from the tart. It won’t be the highest-income generator, not by a long shot. But it’s not trying to be. It’s aiming for something more…reliable.

The clever bit is that it’s not overly fussy. It lets in a lot of “up-and-coming” dividend payers, especially those tech companies that haven’t quite reached the grumpy old age of dividend aristocracy. It’s a bit like letting the bright young apprentices into the guild.

Right now, the top three holdings are Broadcom, Microsoft, and Apple. All yielding less than 1%, you say? Precisely! It’s a bit like building a fortress with marshmallows – not the most conventional material, but surprisingly sturdy. Tech makes up about 28% of the whole portfolio, a rather substantial chunk.

Some might call that a flaw. I see it as a rather astute move, positioning the fund nicely for the current climate. It’s a bit like training a particularly clever raven to deliver messages – unconventional, perhaps, but remarkably effective.

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Why Now, You Ask?

This Dividend Appreciation ETF has been enjoying a rather splendid run, thanks to its fondness for tech. Having two of the “Magnificent Seven” in its top three holdings (and Broadcom lurking nearby) has done wonders. It’s been outperforming many of its rivals, a bit like a nimble squirrel darting through the trees while the lumbering bears struggle to keep up.

The U.S. economy is still chugging along, inflation is behaving (mostly), unemployment is reasonable, and interest rates are expected to fall. All of this bodes well for growth stocks. And since this ETF leans towards growth and tech, it’s poised to do rather well. It’s a bit like giving a particularly energetic puppy a boundless field to run in.

But it also has that defensive side. Requiring a ten-year dividend growth history means it’s investing in companies that are built to last. In a market downturn, that should provide some protection. It’s a bit like building a fortress with both marshmallows and granite – a rather unusual combination, but surprisingly resilient.

A Few Wrinkles to Consider

Now, before you rush off and empty your pockets, there are a couple of things to keep in mind:

  • The tech overweight that has helped the fund recently could become a hindrance if growth slows or inflation rears its ugly head. It’s a bit like relying on a particularly temperamental weather vane.
  • The 1.6% yield isn’t exactly dazzling. You’ll likely need to pair it with another ETF that offers a bit more income.

Overall, if you believe the bull market will continue and the AI craze still has some life in it, this ETF is as well-positioned as any dividend ETF to capitalize. It’s a logical first investment, with a tiny 0.05% expense ratio and a focus on quality dividend-paying companies. Even for seasoned investors, it’s one worth considering. It’s a bit like finding a hidden treasure – small, perhaps, but solid and reliable.

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2026-01-15 23:24