The Motley Foolยท2025-04-28 12:45Core Viewpoint - The "Magnificent Seven" stocks, which include Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta Platforms, and Tesla, have significantly underperformed the S&P 500 in 2025, with Microsoft down 8.1% and Tesla down over 35% year-to-date, prompting investors to consider alternatives like the Vanguard High Dividend Yield ETF [1][2]. Group 1: Performance of the Magnificent Seven - The Magnificent Seven stocks contributed significantly to market gains in 2023 and 2024 but have seen a halt in momentum in 2025 [1]. - As of the current writing, all seven stocks are underperforming the S&P 500, with Microsoft down 8.1% and Tesla down over 35% [2]. Group 2: Vanguard High Dividend Yield ETF - The Vanguard High Dividend Yield ETF is highlighted as an attractive alternative for investors seeking low-cost ETFs that do not include the Magnificent Seven [2][7]. - This ETF has an expense ratio of 0.06%, which is slightly higher than the Vanguard S&P 500 ETF's 0.03%, but the difference is minimal for most investors [9]. - The Vanguard High Dividend Yield ETF targets companies with strong dividend growth and offers a more balanced sector exposure compared to the S&P 500 [9]. Group 3: Sector Exposure and Dividend Yield - The Vanguard High Dividend Yield ETF has a 2.9% dividend yield, roughly double that of the Vanguard S&P 500 ETF at 1.4% [10]. - The ETF is overweight in sectors such as financials (20.4%), healthcare (14.3%), and energy (9.4%), compared to the S&P 500 [10]. - The ETF's lower price-to-earnings ratio of 18.1 compared to the S&P 500's 23.9 indicates a more attractive valuation [10]. Group 4: Investor Suitability - The Vanguard High Dividend Yield ETF is suitable for risk-averse investors, income investors, and those looking for balanced exposure without increasing their holdings in the Magnificent Seven [11]. - During market volatility, the ETF serves as a reliable option for investors focusing on value and income [12].