2 Vanguard ETFs to buy Hand Over Fist before September 18th

Warren Buffett said, “Market timing is both impossible and stupid.” Anyone have questions about the legendary investor’s situation on this topic? I didn’t believe it.

I agree with Buffett for the most part, although perhaps some people might get lucky from time to time with their attempts to time the market. That said, buying certain assets during certain periods makes more sense than others.

I think we’re in such a time — and I have an opinion on which exchange-traded funds (ETFs) to buy. Here are two Vanguard ETFs to buy before September 18.

Obtaining real estate (real estate)

First on the list in alphabetical order is Vanguard Real Estate ETF (VNQ 1.04%). You can probably guess what this fund focuses on — real estate. It seeks to track the performance of the MSCI US Investable Market Real Estate 25/50 Index. By the way, the “25/50” in the index name means that no more than 25% of the fund’s assets can be invested in a single issuer and that the sum of all assets with weights above 5% cannot be more than 50% of the index .

This Vanguard ETF holds 155 stocks with an average market cap of $31.9 billion. As you might expect, most of these stocks are real estate investment trusts (REITs). The most important actions of the fund include Prologue, American Tower, Equinix, Welltowerand Simon Property Group. He also has a sizable position in a mutual fund — the Vanguard Real Estate II Index Fund.

Income investors often prefer REITs. So it’s no surprise that the Vanguard Real Estate ETF generates solid income, with a distribution yield of 3.32% as of August 31, 2024 (the most recent yield provided by Vanguard).

Vanguard is known for its low-cost funds. This ETF is no exception, with an annual expense ratio of 0.13%. The average annual expense ratio for similar funds is 1.07%.

Thinking small

Two Vanguard ETFs are neck and neck for second place on my list. The Vanguard Small-Cap ETF (VB 1.91%) and the Vanguard Small-Cap Value ETF (VBR 2.01%) they share a lot in common. I don’t think buying both is the best move because of their overlap, so I’ll just pick one. My pick is the Vanguard Small-Cap Value ETF.

Both Vanguard ETFs focus on stocks with relatively small market caps. The main difference, however, is that the Vanguard Small-Cap Value ETF also emphasizes attractive valuations. The average price-to-earnings ratio for the fund’s shares is 15.6, compared with 19.2 for the Vanguard Small-Cap ETF.

The Vanguard Small-Cap Value ETF holds 848 stocks (compared to 1,402 held by the Vanguard Small-Cap ETF). None of its holdings represents more than 0.68% of the total portfolio.

There is a minor downside to buying the Vanguard Small-Cap Value ETF instead of the Vanguard Small-Cap ETF. The former fund’s annual expense ratio is 0.07%, while the latter’s expense ratio is 0.05%. However, this difference is not a problem in my view, given the lower valuation for the Vanguard Small-Cap Value ETF.

Why Buy These ETFs Before September 18th?

Now for the big question: Why buy the Vanguard Real Estate ETF and the Vanguard Small-Cap Value ETF before September 18? Part of the answer is that this is when the Federal Reserve is likely to announce interest rate cuts.

The Federal Open Market Committee is scheduled to meet on September 17 and 18. Federal Reserve Chairman Jerome Powell said on August 23, 2024: “The time has come for our policy to adjust.” Recent jobs and inflation reports raise the likelihood of a Fed rate cut.

The rest of the answer is that the Vanguard Real Estate ETF and the Vanguard Small-Cap Value ETF should rise if interest rates fall. REITs and small companies are particularly sensitive to interest rates because they often need to borrow to finance their growth. Lower interest rates translate into higher profitability.

Investors should be aware that these Vanguard ETFs could fall if the Fed doesn’t cut rates this week. However, I think the chances of a rate cut are high. Even if the Fed fails to meet expectations, both the Vanguard Real Estate ETF and the Vanguard Small-Cap Value ETF should be excellent funds to hold for the long term.