ETFs are a great way for most Europeans to build their wealth and improve for their financial future. Vanguard is one of the largest providers of index funds and ETFs, and their funds are among the best on the market. We carefully picked out the best Vanguard ETFs so you don't have to. We compare them and highlight their pros and cons. We also show ways of using ETFs to construct a well-balanced portfolio that is best-suited to grow your wealth over the long term.
ETFs are the best way for Belgians to do index investing, an approach where you buy all the stocks in a market index, aiming to earn an average return that matches the overall market's performance. This strategy has proven to be more successful than active investing, where investors select individual stocks they believe are undervalued.
One reason for index investing's success is the difficulty and time-consuming nature of stock picking. Most stocks don't perform well, and only a small number excel, making it hard for investors to consistently pick winners. Moreover, professional investors with better information are often on the other side of stock transactions, putting individual investors at a disadvantage.
Index investing with ETFs offers several benefits compared to other ways of investing, including:
- Low costs: Index funds are cheap to run, as they simply track an index and don't require expensive analysts or specialists.
- Diversification: Index investing aims to diversify across many countries and sectors, reducing risk and increasing the likelihood of including top-performing stocks.
- Connection to the real economy: Most index funds invest in stocks or bonds, which are backed by real companies with tangible assets.
- Accessibility: Index investing requires little capital to start, making it accessible to a wide range of investors.
- Tax efficiency: In Belgium, stock market investments are tax-efficient compared to other types of investments.
- Proven track record: Long-term index investing has delivered great returns historically, such as the MSCI World index's average yearly return of 10.8% since 1979.
Due to these advantages, ETFs are the best way for most to build their wealth.
The appeal of Vanguard ETFs
John Bogle, the founder of Vanguard, launched the world’s first index fund in 1975. Since then the company has grown to become one of the largest investment firms in the world with trillions of dollars invested.
One reason for their great reputation is that the company has always remained true to its core belief in passive investing. As it has grown and started to benefit from economies of scale, it has consistently focused on lowering the price for its customers instead of pocketing higher profit. As a result, their index funds are among the cheapest on the market.
They also have a unique structure because the company is owned by its funds, which in turn are held by the shareholders of the fund. So by purchasing shares of VWCE, one of Vanguard's funds, you effectively become part owner of Vanguard. This organisation ensures that the goals of Vanguard are aligned with its investors, and it has allowed the company to constantly lower their fees as economies of scale were passed on to investors.
They have a growing selection of ETFs with over 82 Vanguard funds available! But how do you know which one to buy? We've picked out the best five for you.
Best 5 Vanguard ETFs in 2023
1) Vanguard FTSE All-World (VWCE)
VWCE continues to be a popular ETF for European investors. The Vanguard fund launched in 2019 and tracks the performance of the FTSE All-World Index, currently holds more than €11 billion under management.
It's composed of approximately 3,370 stocks. And because it's so diversified, investors can find in VWCE a great way to follow the market and hold a significant portion of the world's stocks. Equities such as Apple, Microsoft, Amazon, etc… are represented in the fund. The index has delivered an average yearly return of about 8.6% per year since 2005:
There are some downsides to investing solely in a FTSE All-World ETF.
One downside with investing everything through VWCE is that you will only invest in stocks. Stocks are a risky asset, meaning that your investment will fluctuate a lot. It’s important to understand your own unique approach to risk, how it affects you and find the right balance that suits you. So it’s often beneficial to reduce the riskiness of your portfolio by including bonds, if it will prevent you from selling at the worst possible time and incur a much bigger loss.
Another downside with VWCE is that it does not apply sustainability criteria when selecting the companies that it invests in. Due to its globally diversified nature, tracking the performance of close to 3,700 companies of all types around the world, you can't consider VWCE to be sustainable in terms of environmental, social, and corporate governance criteria (ESG). For instance, an investment in VWCE means an investment in companies that manufacture and sell controversial weapons. The lack of ethical concerns in the selection of companies within VWCE can be a drag on investors wishing to follow responsible investment ethics.
If you want to invest with sustainability at the forefront, we put together a resource that looks at the best sustainable ETFs for Belgians.
2) Vanguard S&P 500 (VUAA)
A popular ETF amongst European investors is the Vanguard S&P 500 (Acc) ETF (ISIN: IE00BFMXXD54). The S&P 500 stands for the Standard & Poor’s 500 index and as the name suggests, it seeks to track the performance of an index composed of the 500 largest American companies (even though it holds 502 companies at the moment). Through the S&P 500, you get exposure to a large section of the US economy as it covers 80% of the total American market capitalisation. It's one of the better S&P 500 ETFs.
As you can tell from the graph below, the S&P 500 has returned an average 10.4% per year since 1992. That’s quite a significant return on your investment if you began your investment journey in the early 90's:
There are downsides to investing solely in the S&P 500.
Invests only in the US
The 500 companies in the S&P 500 represent about 40% of the global stock market. This is significant, but it also means that you're leaving many companies aside if only investing in the S&P 500. There are great stocks to be held from other regions of the world, like Europe, Asia or South America.
Also, the US stock market has performed exceptionally well over the last 20 years. But that's not guarantee that it will over the next 20 years. Betting on a single country, no matter how dominant its market is at the moment, increases the likelihood of a bad outcome when investing for the long term.
Invests only in the largest companies
The S&P 500 invests in only the largest companies. But good investment returns can be achieved in mid-size and smaller companies too.
If you wish to learn more, we dig deeper into the advantages and disadvantages of investing solely in the S&P 500.
3) Growth portfolio (accessible through Curvo)
The Growth portfolio is a bit special because it's not a single ETF but a balanced portfolio of funds. It's available through the Curvo app is and is a popular combination for investors who wish invest in the global economy for the long term. The portfolio is managed by NNEK, a Dutch investment firm supervised by the Dutch regulator (AFM). It's composed of two funds, both offered by Vanguard:
- A fund tracking the FTSE Developed All Cap Choice index (ISIN: IE00B5456744)
- A fund tracking the FTSE Emerging All Cap Choice index (ISIN: IE00BKV0W243)
Through Growth you invest in over 7,500 companies and the portfolio has returned approximately 8.5% annually since 2005:
Investing in Growth through the Curvo app comes with benefits, but also some downsides.
Sustainable investing is challenging because everyone has different ethical beliefs and values. The funds in the Growth portfolio focus on one guiding principle: they don't support companies that are considered destructive to the planet. This means the following sectors are excluded:
- non-renewable energy (nuclear power, fossil fuels)
- vice products (adult entertainment, alcohol, gambling, tobacco)
- weapons (civilian firearms, military weapons)
- controversial companies, which are companies that do not meet the labour, human rights, environmental and anti-corruption standards defined by the United Nations Global Compact
Automated savings plans
You can invest in the Growth portfolio in an automated way by setting up a monthly savings plan. Every month, the amount of your choice will be debited from your bank account and automatically invested for you in the portfolio.
(for Belgian investors 🇧🇪) No Belgian transaction tax (TOB)
There’s a tax on the transaction every time you buy or sell a security, called the transaction tax ("beurstaks" or "taxe boursière" or TOB). The rules concerning the tax rate are complicated, also for ETFs. Even brokers are confused because they use different tax rates for the same ETF. But contrary to all the ETFs listed here, there’s no transaction tax to be paid or declared when investing in any of the portfolios available through the Curvo app!
Thanks to NNEK's support of fractional shares, you can buy fractions of the Growth portfolio. This means that all your money is invested for you. Most brokers force you to buy units of stocks, with the consequence that you always have cash on the side not working for you.
The downside of Curvo is the price. It's likely more expensive than buying ETFs through a broker. The price starts from 0.6% “all-in” per year for the service, as a percentage of your total investments. But, it’s easier than having to open a brokerage account and managing your own portfolio of ETFs!
Read more below about how Curvo helps you prepare for your financial future by making good investing really easy.
4) Vanguard FTSE Emerging Markets (VFEA)
VFEA (ISIN: IE00BK5BR733) is offered by Vanguard and tracks the MSCI Emerging Markets Index. The index consists of roughly 2,018 companies from 10 countries that economists qualify as "emerging": China, Taiwan, India, Brazil, South Korea, Mexico, Thailand, Indonesia and Malaysia. Through this ETF, you get significant diversification as you get a variety of companies in different industry sectors ranging from technology to health care.
Historically it has performed well and the index has returned an average annual return of 9.96% since December 1987:
There are downsides of investing solely in emerging markets.
Focused on only one part of the world
Choosing the makeup of your portfolio is a difficult task and figuring out how to build the correct allocation that meets your needs isn’t easy. Many choose to have more diversification and combine this ETF with another fund in order to get more diversification across the globe.
Carries more risk than investing in developed markets
Investing in emerging markets is considered more risky than an investment in "developed" markets. This is both a downside as a benefit. Volatility is higher, which means that you need a stronger stomach to handle your investments. At the same time, you get rewarded for the additional risk by a higher expected return.
VFEA tracks the performance of over 2,000 companies of all types around the world, you can't consider it to be sustainable in terms of environmental, social, and corporate governance criteria (ESG). Investing in this ETF means you're investing in companies that manufacture and sell controversial weapons. The lack of ethical concerns in the selection of companies within the ETF can be tough on investors wishing to follow responsible investment ethics.
5) Vanguard Global Aggregate Bond (VAGF)
All the ETFs we've seen up until now invest only in stocks. VAGF (ISIN code IE00BG47KH54) is one of the most popular bond ETFs for investors with a fund size of €451m.
Governments and companies issue bonds to borrow money from investors that they then spend on public services or to grow their company. Essentially, a government bond is a loan to the government.
This ETF is composed of bonds from a variety of markets and countries. What this essentially means is that you have diversification and exposure to the following countries: United States, Japan, France, Italy, Germany, Spain, United Kingdom, Canada, Spain, Australia. Also, the ETF is hedged to the euro. This essentially means that you remove the impact of fluctuating currency rates, as for instance the United States issues its bonds in US dollar.
Whereas stocks are very exciting (and scary when they sharply drop), bonds are very boring. They don't fluctuate as much. So one way bonds are used in your portfolio is to tame the volatility of stocks. As Ben Felix explained in his interview with us, bonds are designed not to seek return, but to decrease volatility and stabilise a portfolio. Portfolios with more bonds relative to stocks will be better suited for investors with a lower appetite for risk. This means that going for a 100% stocks strategy or not should come in line with how smooth you wish your returns to be, to offset the potential impact of a downturn over your investment journey.
Beyond their role of stabilising a portfolio, bonds are also great diversifiers. It turns out that oftentimes when stocks are dropping, bonds are rising, and vice versa. So the losses of one type of asset can be partially offset by the gains of the other. In finance speak, we say that there is little correlation between stocks and bonds.
Also note that bonds held by Belgian investors are subject to the Reynders tax, which is 30% charged on capital gains. Yet this doesn’t outweigh the argument for holding bonds in your portfolio to stabilise your investments.
Learn about the role of bonds in a portfolio of ETFs.
Less return than stocks
In comparison to the other stock ETFs, the fund hasn't delivered significant returns. But again, that may not necessarily be the role of bonds in a portfolio!
Comparison between Vanguard ETFs
Curvo: the easiest way
The difficulties of managing your own portfolio of ETFs
Choosing a single ETF, for instance VWCE, is not the entire story when investing your life savings. Stocks are a risky asset class, and not everyone can psychologically handle their fluctuations. To bring success over the long term, you need to build a portfolio of ETFs that is suited to your goals, your appetite for risk and your capacity for taking risks. But this is not an easy task as there are thousands of ETFs to choose from. Furthermore, this portfolio of funds needs to be kept in balance over time, and adapt to changes in your life situation. When managing your own portfolio, these responsibilities fall onto you.
We saw most of our friends not investing because of these difficulties. Or they tried but stopped after a while because they didn't trust themselves enough to make the right financial decisions for their future. Yet, we think investing in ETFs or index funds is a powerful tool to improve our financial well-being. That's why we built Curvo: to take care of all the complexities of good investing so you don't have to worry.
Index investing without hassle
Curvo addresses the challenges of managing your own investments through a broker and trying to select ETFs yourself:
- Portfolio of index funds built for you. You are asked a few questions at the start to learn about you and your goals. Based on your answers, you are matched with the best portfolio of index funds for you. This can be Growth, but also any of the other portfolios. The point is that you don't need to decide which ETFs to buy. Each portfolio is managed by NNEK, a Dutch investment firm supervised by the Dutch regulator (AFM).
- Diversification. We firmly believe in the power of diversification to lower risk and seek investment returns. Each portfolio consists of over 7,500 companies, diversified across sectors and countries.
- Invest sustainably. Your investments focus on one guiding principle: don’t invest in companies that are considered destructive to the planet. Sectors like non-renewable energy, vice products, weapons and controversial companies are all excluded.
- Rebalancing done for you. No need to worry about keeping your portfolio in balance, rebalancing is done for you through NNEK's management of the portfolios.
- Fractional shares. All your money is invested. There’s no cash left sitting on the side.
- Automated monthly investing. Set up your monthly plan and get peace of mind that your money is working for you.
- Start from €50. No need for a large lump sum to get started.
- Project your savings into the future. Through Curvo you can see how much your portfolio is expected to be worth in the future. You can answer questions like “how will increasing my monthly contribution by €50, €100 or €200 affect my long-term savings?” to give a concrete idea for the “future you”.
- Withdraw anytime. There’s no long-term contract or exit fees if you wish to stop investing.
We covered five of the most popular Vanguard ETFs for European investors, and highlighted their pros and cons. We hope the list was helpful in making a choice! Whichever ETF you end up choosing, you’ve already made the right choice as ETFs are a great investment that provide diversification at a fairly low cost.
However, it can be intimidating to get started investing through a broker. There are quite a few questions you need to answer before you can start:
- Which broker to choose?
- What is the right mix of stocks and bonds for you?
- Which mix of ETFs are best able to help you reach your goals?
- What are the tax implications for each ETF in your portfolio?
- … and more
If you’re feeling a little overwhelmed, don’t hesitate to explore Curvo’s app. After all, our goal is to take care of all the complexities of good investing for you!
Questions you may have
What is Vanguard's best performing ETF?
It entirely depends on when you would have started your investment journey. However, we can see that historically the following two ETFs have performed well:
- Vanguard FTSE All-World (VWCE) (IE00BK5BQT80)
- Vanguard S&P 500 (VUAA) (IE00BFMXXD54)
Which Vanguard ETF is recommended by Warren Buffett?
Warren Buffet famously gave asset allocation instructions for when he passes in his 2013 shareholder letter for his investment firm Berkshire Hathaway:
My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.
As we've shown in the article, the Vanguard S&P 500 ETF is a great ETF to put your money to work, and a choice that Warren Buffett would agree with.
What are the best ETFs to invest in?
Unfortunately, there's no direct answer because it depends on you and your goals. However, we suggest you go through our list of best ETFs (which aren't necessarily by Vanguard).