Want to Avoid the "Magnificent Seven" and Generate Passive Income? This Vanguard ETF May Be for You

2 weeks ago 6

Daniel Foelber, The Motley Fool

Mon, Apr 28, 2025, 5:45 AM 5 min read

The "Magnificent Seven" -- Apple, Microsoft, Nvidia (NASDAQ: NVDA), Amazon, Alphabet, Meta Platforms, and Tesla -- took the marketplace by tempest successful 2023 and 2024 by contributing a sizable information of gains successful large indexes similar the S&P 500 and Nasdaq Composite.

But that momentum has crushed to a halt this year. As of the clip of this writing, each 7 stocks are underperforming the S&P 500 successful 2025. The champion of the bunch, Microsoft, is down 8.1% year-to-date, portion Tesla has tumbled implicit 35% adjacent erstwhile factoring successful its post-earnings rebound connected Wednesday and Thursday.

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Here's wherefore investors looking for low-cost exchange-traded funds (ETFs) that don't see the Magnificent Seven whitethorn privation to instrumentality a person look astatine the Vanguard High Dividend Yield ETF (NYSEMKT: VYM).

A idiosyncratic smiling portion sitting astatine a array and looking astatine a laptop computer.

Before diving into the charismatic qualities of the Vanguard High Dividend Yield ETF, it's worthy mentioning that it's a mistake to bail connected the Magnificent Seven conscionable due to the fact that their banal prices are little this year.

The radical boasts galore competitory advantages and robust equilibrium sheets. And the sell-off has lone made their valuations much charismatic for semipermanent investors. Risk-tolerant investors whitethorn privation to see apical names successful the Magnificent Seven, specified arsenic Meta Platforms, which has beardown escaped currency flow, an inexpensive valuation, and a wide runway for aboriginal growth.

However, determination are besides compelling reasons not to bargain Magnificent Seven stocks. The simplest is that you already person your desired vulnerability to the group, either by straight investing successful idiosyncratic names oregon done Magnificent Seven-heavy ETFs.

The Magnificent Seven are truthful ample that they comprise a monolithic magnitude of the large indexes. The Vanguard S&P 500 ETF has 29.9% successful the Magnificent Seven, and the Invesco QQQ Trust -- which mirrors the show of the Nasdaq-100 -- has a staggering 40.5% successful the group.

Investors seeking to deploy caller superior successful a diversified ETF portion avoiding the Magnificent Seven whitethorn privation to see income and worth funds. One money that is particularly appealing close present is the Vanguard High Dividend Yield ETF.

Many of the apical holdings successful the Vanguard High Dividend Yield ETF are industry-leading companies from non-tech-focused sectors -- similar JPMorgan Chase and Bank of America for financials; ExxonMobil and Chevron for energy; UnitedHealth Group, Johnson & Johnson, and AbbVie for healthcare; and Procter & Gamble, Coca-Cola, and Walmart for user staples. The tech stocks the ETF holds -- similar Broadcom, Cisco Systems, and International Business Machines -- wage increasing dividends.