Balancing risk and reward in active investing

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Compared with the individual ETFs, the model portfolio reduces tracking error and neutralizes style risk more than stock-specific risk, thus keeping active risk focused on security selection

Style factor tilts versus Russell 1000 Index

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Projected tracking error versus Russell 1000 Index

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_{Notes: The illustrative model portfolio is 50% Vanguard Wellington U.S. Growth Active ETF (VUSG), 30% Vanguard Wellington U.S. Value Active ETF (VUSV), and 20% Vanguard Wellington Dividend Growth Active ETF (VDIG).}

_{Sources: Vanguard, using Axioma data, as of September 30, 2025.}

Customizing the portfolio for your goals 

Of course, your goals might be different. For example, if you want a more defensive portfolio, it may make sense to increase your exposure to VDIG over VUSG and VUSV. It’s all a question of tradeoffs.  

We believe that, for investors who have already gravitated toward incorporating active ETFs as key components in their portfolios, it’s worth finding a baseline allocation that maximizes stock-selection alpha by minimizing other relative risk factors. From that baseline, you can adjust depending on your convictions and goals. 

 

Important information

For more information about Vanguard funds or Vanguard ETFs, visit advisors.vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing. 

Vanguard ETF Shares are not redeemable with the issuing fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

All investing is subject to risk, including possible loss of principal. 

Vanguard Mexico is not responsible for and does not prepare, edit, or endorse the content, advertising, products, or other materials on or available from any website owned or operated by a third party that may be linked to this email/document via hyperlink.  The fact that Vanguard Mexico has provided a link to a third party's website does not constitute an implicit or explicit endorsement, authorization, sponsorship, or affiliation by Vanguard with respect to such website, its content, its owners, providers, or services.  You shall use any such third-party content at your own risk and Vanguard Mexico is not liable for any loss or damage that you may suffer by using third party websites or any content, advertising, products, or other materials in connection therewith.

The sale of the VUSV, VUSG and/or the VDIG qualifies as a private placement pursuant to section 2 of Uruguayan law 18.627. Vanguard represents and agrees that it has not offered or sold, and will not offer or sell, any VUSV, VUSG and/or the VDIG to the public in Uruguay, except in circumstances which do not constitute a public offering or distribution under Uruguayan laws and regulations. Neither the VUSV, VUSG and/or the VDIG nor issuer are or will be registered with the Superintendency of Financial Services of the Central Bank of Uruguay to be publicly offered in Uruguay.”

The VUSV, VUSG and/or the VDIG correspond to investment funds that are not investment funds regulated by Uruguayan law 16,774 dated 27 September 1996, as amended.