VPU - VFH: Not Attractive In This Macroeconomic Environment

2024-04-30 01:12:54 ET

Summary

• Vanguard Financials Index Fund ETF has underperformed the S&P 500 index since its inception in 2004.
• The fund's portfolio of U.S. financial stocks has a slower growth profile than the broader market.
• VFH has a higher downside risk than the S&P 500 index, making it less attractive in the current economic environment.

ETF Overview

Vanguard Financials Index Fund ETF ( VFH ) owns a portfolio of nearly 400 U.S. financial stocks. The fund has underperformed the S&P 500 index since its inception back in 2004. Stocks in its portfolio have a slower growth profile than the broader market, namely the S&P 500 index. Therefore, VFH is expected to continue to underperform the broader market in the future. The fund also has a higher downside risk than the S&P 500 index. Given the increasing possibility of a recession coming due to persistent inflation and the Federal Reserve's policy to keep the rate elevated, we think investors may want to wait on the sidelines....

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