Should You Double Down and Buy the 4 Vanguard Sector ETFs That Just Made New All-Time Highs?

Investment management firm Vanguard offers 11 low-cost exchange-traded funds (ETFs) that mirror the performance of each stock market sector

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Vanguard Information nology ETF The Vanguard ETF is heavily weighted in Nvidia, Microsoft, and Apple

Other top holdings include chip and network vider Broadcom, software giants Salesforce and Palantir nologies, and well-known legacy companies Oracle, Cisco Systems, and International Machines

However, that outperformance has stretched the valuations of many stocks

VOO data by YCharts companies have historically grown into their valuations over time

So investors who want exposure to top growth stocks and have a long-term time horizon may still want to invest in the Vanguard ETF

However, investors who already have sizable positions in megacap stocks should be mindful that the ETF will vide little diversification

Vanguard Communications Services ETF Communications is one of the most dynamic market sectors because it offers a blend of legacy telecommunications and media companies, social media giants Alphabet and Meta Platforms, as well as newer media companies Netflix

So again, if you aren't looking to add to existing positions in these names, this ETF may be a bad fit

But it could be a good long-term buy if you the ETF's top holdings and don't mind the concentration

It's also worth mentioning that communications is much cheaper than from a valuation standpoint

The Vanguard Communications ETF sports a mere 20. 8 price-to-earnings (P/E ratio) compared to 38. 8 for the ETF

Again, this is mainly because many stocks Nvidia and Microsoft have seen their valuations climb as their stock prices have outpaced earnings growth, while Meta (and especially Alphabet) have significantly lower valuations

All told, the communications sector may be a better fit than for folks looking for growth stocks at a better value

Vanguard Industrials ETF The industrials sector tends to be cyclical -- benefiting from economic growth while also being vulnerable to economic downturns

The top 10 holdings comprise just over a quarter of the ETF

I could see industrials being one of the biggest beneficiaries of artificial intelligence (AI) in the future

Right now, a lot of AI excitement is concentrated at the top of the value chain through the companies that are powering data centers Nvidia with its graphics cessing units; cloud computing giants Amazon Web Services, Microsoft Cloud, and Google Cloud; and companies building AI models and software

As the nology matures and becomes integrated across major corporations, the industrial sector could experience an overall lift in efficiency, which could boost earnings growth

The industrials sector may be a great buy for long-term investors looking for a unique way to invest in AI

Vanguard Financials ETF The financial sector includes conglomerates Berkshire Hathaway, big banks, payment cessors and card issuers, investment banks, rating agencies, insurance firms, and more

Financials offer a unique blend of growth potential, dividend income, and reasonable valuations

However, many financial companies have seen their valuations expand, so investors interested in the sector will have to pay a premium price

Therefore, some folks may prefer to go with a basket of individual financial stocks rather than buy an ETF

If I were apaching the sector, I'd focus on Berkshire Hathaway due to its diverse portfolio of controlled companies, positions in public equities, and phenomenal balance sheet -- as well as payment cessors Visa, Mastercard, and American Express

These companies have reasonable valuations, high margins, and near-perfect models that support buybacks and dividend growth

The best sector ETF to buy now will depend on what you already own, your risk tolerance, and your investment objectives. , communications, industrials, and financials are all hitting all-time highs because the top companies in these sectors are doing very well

In many cases, valuations have gone up as investors are willing to pay more for future growth potential

So it's vital to temper expectations and understand that these companies may need time to bridge the gap between their existing earnings and jections

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors

American Express is an advertising partner of Motley Fool Money

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors

Daniel Foelber has positions in Nvidia

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