Best Vanguard ETFs to Consider Ahead of Interest Rate Changes

Tuesday, 21 May 2024, 12:00
Investors should focus on Vanguard Small-Cap Index Fund ETF (VB) and Vanguard Mid-Cap Index Fund ETF (VO) as prime beneficiaries of anticipated rate cuts. Small and mid-cap companies may face challenges with rising interest rates, making these ETFs attractive options for exposure to growth stocks. Diversified and low-cost, VB and VO offer potential gains amidst changing market conditions.
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Best Vanguard ETFs to Consider Ahead of Interest Rate Changes

The Impact of Interest Rate Shifts on ETFs

When interest rates rise, smaller companies dependent on borrowing for growth face increased borrowing costs, impacting profitability and risk. In contrast, large-cap stocks with strong capitalization perform well in high-interest environments.

Vanguard Small-Cap Index Fund (VB)

  • Low Expense Ratio: 0.05%
  • Historical Returns: 7.74% annually
  • Diversification: 1,417 stock holdings across sectors

Vanguard Mid-Cap Index Fund (VO)

  • Expense Ratio: 0.04%
  • Average Return: 9%
  • Investment Recommendation: Position VB and VO ahead of potential interest rate changes for growth opportunities.
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