Best value ETFs: Top funds that hold bargain-priced stocks

Value investing has proven to be a successful long-term investing strategy, with top investors like Warren Buffett using this approach to achieve outstanding returns.

However, in recent years, value stocks have lagged behind growth stocks due to low interest rates boosting the valuations of fast-growing companies. From 2011 to 2020, large value funds underperformed large growth funds by over 5 percentage points annually, according to Morningstar. The gap widened to 32.2 percent in 2020.

While value stocks outperformed in 2023, the trend reversed in 2023, with growth stocks seeing a significant increase compared to value stocks.

Here are some top value ETFs to consider for your portfolio. (Data as of August 29, 2024.)

Top value ETFs

Vanguard Value ETF (VTV)

The Vanguard Value ETF tracks the CRSP U.S. Large Cap Value Index, holding around 340 different stocks.

• 5-year returns (annualized): 12.5 percent
• Expense ratio: 0.04 percent
• Assets under management: $125.3 billion
• Top holdings: Berkshire Hathaway (BRK.B), Broadcom (AVGO), JPMorgan Chase (JPM), Exxon Mobil (XOM)
• Dividend yield: 2.4 percent

iShares Russell 1000 Value ETF (IWD)

The iShares Russell 1000 Value ETF tracks the Russell 1000 Value Index, providing exposure to undervalued large- and mid-cap U.S. stocks.

• 5-year returns (annualized): 10.9 percent
• Expense ratio: 0.19 percent
• Assets under management: $59.3 billion
• Top holdings: Berkshire Hathaway (BRK.B), Exxon Mobil (XOM), JPMorgan Chase (JPM), UnitedHealth Group (UNH)
• Dividend yield: 1.9 percent

Vanguard Small-Cap Value ETF (VBR)

The Vanguard Small-Cap Value ETF tracks the CRSP U.S. Small Cap Value Index, holding over 800 stocks with a focus on small-cap value companies.

• 5-year returns (annualized): 12.0 percent
• Expense ratio: 0.07 percent
• Assets under management: $29.9 billion
• Top holdings: Smurfit WestRock (SW), Carlisle Companies (CSL), Builders FirstSource (BLDR), First Citizens BancShares Class A (FCNCA)
• Dividend yield: 2.0 percent

Vanguard Mid-Cap Value ETF (VOE)

The Vanguard Mid-Cap Value ETF tracks the CRSP U.S. Mid Cap Value Index, focusing on mid-cap value stocks with holdings falling between small- and large-cap stocks.

• 5-year returns (annualized): 11.0 percent
• Expense ratio: 0.07 percent
• Assets under management: $17.3 billion
• Top holdings: Arthur J. Gallagher & Co (AJG), Carrier Global (CARR), Newmont Corp (NEM), D.R. Horton (DHI)
• Dividend yield: 2.2 percent

Fidelity High Dividend ETF (FDVV)

The Fidelity High Dividend ETF invests in large- and mid-cap companies expected to pay and grow dividends in the future.

• 5-year returns (annualized): 15.2 percent
• Expense ratio: 0.15 percent
• Assets under management: $3.4 billion
• Top holdings: Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Exxon Mobil (XOM)
• Dividend yield: 2.9 percent

SPDR Russell 1000 Yield Focus ETF (ONEY)

The SPDR Russell 1000 Yield Focus ETF aims to track the performance of the Russell 1000 Yield Focused Factor Index, focusing on above-average dividend payments.

• 5-year returns (annualized): 14.4 percent
• Expense ratio: 0.20 percent
• Assets under management: $845.6 million
• Top holdings: Bristol-Myers Squibb (BMY), Altria Group (MO), Diamondback Energy (FANG), Ford Motor Co. (F)
• Dividend yield: 3.0 percent

What is value investing?

Value investing involves getting more value than what you pay for in an investment. It focuses on companies with lower price-to-book and price-to-earnings ratios, higher dividend yields, and lower expected earnings growth.

Bottom line

Investing in value ETFs can provide exposure to undervalued stocks without the need for extensive research. Diversification across different industries and companies with below-average earnings and assets multiples can be beneficial for investors.

Editorial Disclaimer: It is recommended that investors conduct their own research before making investment decisions. Past performance is not indicative of future results.