Vanguard Energy Index Fund ETF Shares (VDE)

ETF Vanguard Energy Index Fund ETF Shares (VDE) Summary

Profile:

VDE is an exchange-traded fund (ETF) that tracks the performance of the MSCI US Investable Market Energy 25/50 Index, offering diversified exposure to the energy sector. It invests primarily in large- and mid-cap US energy companies across various sub-industries, including oil & gas exploration and production, integrated oil & gas, and oil & gas equipment & services.

Objective:

The primary investment goal of VDE is to track the performance of the underlying index, providing investors with broad exposure to the US energy sector while minimizing tracking error.

Issuer:

Vanguard: One of the world's leading investment management firms, known for its low-cost index funds and commitment to investor value. Vanguard has a strong reputation for financial stability and reliability, with over $8 trillion in assets under management.

Management:

Vanguard employs a team of experienced portfolio managers and analysts responsible for overseeing VDE. The team utilizes a quantitative approach to index tracking, ensuring the portfolio closely mirrors the target index's composition and performance.

Market Share:

VDE is the second-largest energy sector ETF, with over $24 billion in assets under management, capturing approximately 5.5% of the market share within its category.

Total Net Assets:

As of November 14, 2023, VDE has approximately $24.47 billion in total net assets.

Moat:

VDE's competitive advantages include its:

• Low expense ratio: VDE has one of the lowest expense ratios in the energy sector ETF category, making it a cost-effective way to gain exposure to the sector.
• Diversification: The fund's broad exposure across various energy sub-industries mitigates concentration risk and provides investors with a well-rounded representation of the sector.
• Liquidity: VDE is a highly liquid ETF, with an average daily trading volume exceeding 10 million shares, ensuring ease of buying and selling.

Financial Performance:

• Historical Performance: Since its inception in 2004, VDE has generated an average annual return of 9.87%, closely tracking the performance of the underlying index.
• Benchmark Comparison: VDE has consistently outperformed the S&P 500 Index over the long term, demonstrating its ability to generate alpha within the energy sector.

Growth Trajectory:

The energy sector is expected to experience continued growth driven by increasing global energy demand and the transition towards cleaner energy sources. VDE is well-positioned to benefit from this growth, offering investors potential capital appreciation.

Liquidity:

• Average Trading Volume: VDE has an average daily trading volume of over 10 million shares, ensuring high liquidity and ease of execution for investors.
• Bid-Ask Spread: The bid-ask spread for VDE is typically narrow, reflecting its high liquidity and minimizing trading costs.

Market Dynamics:

• Economic Indicators: Strong economic growth and rising energy demand drive the energy sector's performance.
• Sector Growth Prospects: The transition towards renewable energy sources and increasing global energy consumption offer long-term growth potential for the sector.
• Current Market Conditions: Geopolitical tensions, supply chain disruptions, and economic uncertainty can impact the energy sector's performance.

Competitors:

• XLE (Energy Select Sector SPDR Fund): Market share of approximately 17.5%
• IDU (iShares US Energy ETF): Market share of approximately 13.5%
• FENY (First Trust Energy Income & Growth Fund): Market share of approximately 6.5%

Expense Ratio:

VDE has an expense ratio of 0.10%, making it one of the most cost-effective energy sector ETFs available.

Investment Approach and Strategy:

• Strategy: VDE employs a passive management approach, seeking to track the performance of the MSCI US Investable Market Energy 25/50 Index.
• Composition: The ETF primarily invests in large- and mid-cap US energy companies across various sub-industries, including oil & gas exploration and production, integrated oil & gas, and oil & gas equipment & services.

Key Points:

• Low-cost and diversified exposure to the US energy sector.
• Tracks a well-established and comprehensive energy index.
• Strong track record of performance and outperformance against benchmarks.
• Highly liquid and accessible for investors.

Risks:

• Volatility: The energy sector is inherently cyclical and subject to price fluctuations, leading to potential volatility in VDE's returns.
• Market Risk: The performance of VDE is directly tied to the underlying energy sector's performance, which can be impacted by economic, geopolitical, and supply-demand factors.
• Commodity Price Risk: VDE's value can be affected by changes in energy commodity prices, such as oil and natural gas.

Who Should Consider Investing:

VDE is suitable for investors seeking:

• Diversified exposure to the US energy sector
• Passive investment approach with low fees
• Long-term capital appreciation potential

Fundamental Rating Based on AI:

8.5 out of 10

VDE receives a high AI-based rating due to its strong fundamentals, including:

• Low expense ratio
• Track record of outperformance
• Strong market position
• Experienced management team
• Favorable growth prospects within the energy sector

Resources and Disclaimers:

Disclaimer: This information is for educational purposes only and should not be considered financial advice. Please consult with a qualified financial professional before making any investment decisions.

Resources:

• Vanguard website: https://investor.vanguard.com/etf/profile/VDE/overview
• Morningstar: https://www.morningstar.com/etfs/arcx/vde/quote
• ETF.com: https://www.etf.com/VDE