Vanguard’s brand was built on the idea that you can’t “beat the market,” so you should just “buy the market.” But that hasn’t stopped the firm from slicing and dicing the market baloney into passive and active investment options—including sector funds and ETFs.
Vanguard got its start in sector investing almost 40 years ago, in May 1984, with the launch of five actively managed funds. Only two survive largely unchanged today—Health Care (VGHCX) and Energy (VGENX). (Though Vanguard expanded Energy’s remit in October 2020.)
Of the other three original active sector funds, Vanguard long ago merged two out of existence. And Precious Metals & Mining was overhauled in 2018 and is now Global Capital Cycles (VGPMX). A sixth fund, focused on utilities and launched in 1992, eventually morphed into Dividend Growth (VDIGX).
Sector investing is now primarily an indexing affair at Vanguard. As I recently covered the sector index funds (and ETFs) in detail, today, I’ll focus on the two remaining active sector funds—Health Care and Energy.
Because I don’t have an edge in trading the sectors, I approach these funds as a long-term investor. I’ll briefly lay out the case for investing in each sector, then give you my pick between the active and passive options in the health care and energy fields.