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If you wish to know the best Vanguard funds to buy, you are on the right page.
Vanguard stands out as a prominent investment giant due to its exceptional reputation for low costs and a customer-friendly corporate structure. The company’s success can be attributed to its commitment to minimizing fees associated with its funds, which ultimately benefits investors by allowing them to retain a larger portion of their returns.
Vanguard’s customer-focused approach is reflected in its mutual ownership structure, where the investors in its funds essentially own the company itself. This alignment of interests fosters a strong sense of trust and transparency, reassuring investors that their best interests are at the forefront. Consequently, Vanguard has become a go-to choice for many investors seeking reliable and cost-effective options to grow their wealth over the long term.
Vanguard has a lineup of 266 mutual funds and 82 ETFs, here’s a look at seven of the best Vanguard funds to buy and hold:
1. Vanguard Total Stock Market ETF (VTI)
The Vanguard Total Stock Market ETF (VTI) is an investment option that aims to provide investors with a way to achieve the average long-term returns of the U.S. stock market. It accomplishes this by closely mirroring the performance of the CRSP US Total Market Index. This index includes more than 3,800 domestic stocks, covering all 11 market sectors.
These stocks encompass both equity and growth styles, and they represent companies of various sizes, ranging from small to mid- and large-cap companies. The cost-effectiveness of VTI is notable, as it maintains a low expense ratio of only 0.03%.
In terms of performance, VTI has demonstrated strong results. Over the decade leading up to July 31, 2023, the ETF has delivered an annualized return of 12.1%, taking into account dividends that are reinvested. Moreover, in the current year up to July 31, 2023, VTI has exhibited a substantial increase of 20.3%. When considering a comprehensive investment in the long-term performance of the U.S. stock market, few alternatives—be it other ETFs or mutual funds—can match the extensive coverage and affordability that VTI provides.
2. Vanguard S&P 500 ETF (VOO)
The Vanguard S&P 500 ETF (VOO) is a widely known option for tax-loss harvesting, often used in conjunction with VTI. Both VOO and VTI come with an expense ratio of 0.03%, making them cost-efficient choices. However, VOO tracks the narrower S&P 500 index, which consists of around 500 large- and mid-cap stocks, unlike the CRSP US Total Market Index. Despite this difference, their shared market-cap weighted approach has led to similar historical performance. For instance, VOO has shown an annualized return of 12.6% over the past ten years.
Throughout history, the S&P 500 has proven to be an excellent choice for long-term investors who are comfortable with risk due to its strong performance. This is evident in the results of the recent S&P Indices Versus Active (SPIVA) scorecard by S&P Dow Jones. The scorecard, based on data until December 31, 2022, highlights that a substantial 93.4% of all U.S. large-cap funds have failed to outperform the S&P 500 over the preceding 15 years. This emphasizes the consistent competitive advantage the S&P 500 has provided to patient, buy-and-hold investors.
3. Vanguard Total Bond Market Index Fund ETF (BND)
The Vanguard Total Bond Market Index Fund ETF (BND) is a recommended option for buy-and-hold investors with varying risk tolerance and time horizons. These investors have different preferences – some are comfortable with higher volatility for potential long-term growth, while others prioritize the safety of their investment over a shorter time frame. For those in the latter category, allocating funds to bonds can be beneficial, as it helps mitigate volatility and minimizes declines in value. BND, offered by Vanguard, stands out as a suitable choice. With an expense ratio of just 0.03%, BND presents an economical option.
According to Jordan Taylor (an independent financial advisor at Core Planning), BND offers a straightforward solution for including fixed income exposure in a portfolio and diversifying away from certain equity-related risks. BND’s strategy involves tracking a modified version of the Bloomberg U.S. Aggregate Bond Index, which results in a well-rounded exposure. This exposure covers more than 10,000 U.S. government Treasury bonds and investment-grade corporate bonds. The maturities of these bonds span from one to over 25 years, enhancing the diversity of the fund’s holdings. This diversified approach makes BND a reliable means of accessing the fixed income market while managing risk effectively.
4. Vanguard Balanced Index Fund Admiral Shares (VBIAX)
The Vanguard Balanced Index Fund Admiral Shares (VBIAX) presents an efficient option for investors aiming to build a diversified investment portfolio that comprises both U.S. stocks and bonds. By skillfully combining two key Vanguard funds, namely the Vanguard Total Stock Market ETF (VTI) and the Vanguard Total Bond Market ETF (BND), investors can tailor their portfolio according to their individual risk tolerance.
This strategy involves crafting a balanced mix of these two funds in varying proportions. However, it’s worth noting that this approach requires periodic adjustments, involving the purchase of additional shares, rebalancing the portfolio to maintain the desired asset allocation, and reinvesting earned dividends.
For individuals seeking an even more hands-off investment approach, the Vanguard Balanced Index Fund Admiral Shares (VBIAX) offers a practical alternative. VBIAX operates as a moderate allocation mutual fund, effectively combining 60% of its total assets in stocks, which are tracked by the CRSP US Total Market Index, and allocating the remaining 40% to bonds represented by the Bloomberg U.S. Aggregate Float Adjusted Index. This asset allocation strategy, commonly referred to as the “60/40 portfolio,” has demonstrated a historical track record of achieving a favorable balance between risk and potential return.
An attractive aspect of VBIAX lies in its cost-efficiency, with a minimal expense ratio of just 0.07%. However, prospective investors should be aware that an initial investment of at least $3,000 is required to access this fund. In summary, the Vanguard Balanced Index Fund Admiral Shares (VBIAX) presents a streamlined and relatively hands-off approach for investors looking to build a diversified portfolio of U.S. stocks and bonds, with a proven allocation strategy and a cost-effective structure.
5. Vanguard Total World Stock Index Fund Admiral Shares (VTWAX)
Vanguard Total World Stock Index Fund Admiral Shares (VTWAX) is an appealing investment option for those seeking to overcome a limitation found in ETFs like VTI and VOO, as well as mutual funds like VBIAX. The drawback of these funds lies in their lack of international diversification, as they solely encompass U.S. stocks within their allocation. While the historical performance of the U.S. stock market has been strong, there’s no certainty it will maintain this trend in the future.
For investors committed to a long-term buy-and-hold strategy, it’s prudent to contemplate expanding their diversification to encompass both developed and emerging market stocks on an international scale.
A particularly advantageous solution is the VTWAX mutual fund, which offers a comprehensive approach. This fund meticulously tracks a modified version of the FTSE Global All Cap Index. This index doesn’t limit itself to U.S. equities; it also encompasses stocks from Europe, the Pacific region, and emerging markets such as China, Brazil, and India. With an attractive 0.1% expense ratio, VTWAX presents a cost-effective option for investors. The fund requires a minimum investment of $3,000, making it accessible to a wide range of individuals aiming to enhance their portfolio diversification and potential for long-term returns.
6. Vanguard LifeStrategy Growth Fund (VASGX)
The Vanguard LifeStrategy Growth Fund (VASGX) is a managed investment option designed to provide investors with increased diversification and simplicity. This fund maintains a balanced portfolio allocation, aiming for 80% of its assets invested in stocks and 20% in bonds, both of which are spread across global markets. Periodically, VASGX adjusts its holdings to ensure they align with this intended allocation, contributing to a consistent risk level.
The fund’s target composition consists of 48% allocated to the CRSP US Total Market Index, 32% to the FTSE Global All Cap ex US Index, 14% to the Bloomberg U.S. Aggregate Float Adjusted Index, and 6% to the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Index. Notably, VASGX adheres to Vanguard’s standard for Admiral Shares funds, necessitating a minimum investment of $3,000. The fund comes with a competitive expense ratio of 0.14%, making it a cost-effective choice for investors seeking broad exposure to a diverse range of assets.
7. Vanguard Target Retirement 2060 Fund (VTTSX)
The Vanguard Target Retirement 2060 Fund (VTTSX) is a specific investment option offered by Vanguard that falls under the category of target-date funds. Unlike Vanguard LifeStrategy funds, such as VASGX, which maintain a fixed allocation of assets over time, VTTSX is tailored to address the changing risk preferences of investors as they approach their intended retirement date in 2060. This fund is structured to adapt its asset mix in response to the shifting risk tolerance that typically accompanies advancing age.
As of now, VTTSX’s portfolio is divided into approximately 90% stocks and 10% bonds, with both asset classes being spread across global markets for diversification. However, what sets VTTSX apart is its “glide path” strategy. Over the course of the years leading up to 2060, VTTSX will systematically adjust its allocation of assets. This entails a gradual reduction in the proportion of stocks and an incremental increase in the share of bonds. By following this approach, the fund aims to mitigate risk as investors approach their retirement date.
The ultimate objective of VTTSX is to align its asset allocation with a more conservative stance by the time 2060 arrives. By doing so, it aims to safeguard the capital accumulated by investors over the years and provide them with a more stable financial position as they transition into retirement. This means that when the fund’s target year of 2060 arrives, VTTSX will have transitioned to a significantly higher proportion of bonds compared to its initial allocation, thereby minimizing exposure to potential stock market volatility.
Investors who are planning to retire in or around 2060 may find VTTSX appealing due to its dynamic approach to asset allocation. With an expense ratio of 0.08%, the fund offers a cost-effective option for individuals seeking a hands-off investment strategy that adapts to their changing risk preferences over time.
What are Vanguards biggest funds?
Vanguard manages several significant funds. One of its largest funds is the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX), with assets under management totaling $1.3 trillion. This fund seeks to track the performance of the entire U.S. stock market and is designed to provide investors with broad exposure to a wide range of U.S. companies. It is known for its low expense ratio and has gained popularity as a core holding in many investment portfolios.
Which is better for retirement: Vanguard or Fidelity?
When comparing Vanguard and Fidelity for retirement, Fidelity emerges as the superior choice overall. However, specifically for retirement savers, Vanguard stands out as the optimal option. This is due to Vanguard’s specialized platform, which provides dedicated tools and educational resources tailored to retirement planning. While Fidelity holds a general advantage, Vanguard’s emphasis on retirement-related services makes it particularly well-suited for individuals focused on planning for their retirement years.
Is Vanguard good for beginners?
Vanguard is an excellent choice for both beginners and experienced investors. It offers a wide range of low-cost mutual funds and ETFs through an easy-to-use brokerage platform, making it ideal for those looking to start investing or those who are more experienced and want access to diversified investment options without high fees.
Is Vanguard S&P 500 a good investment?
The Vanguard S&P 500 ETF (VOO) is a good investment for individuals seeking a cost-effective way to diversify their portfolio. With an expense ratio of just 0.03 percent, the annual cost for every $10,000 invested is only $3. This ETF is particularly beneficial for investors aiming to establish a well-diversified foundation in their portfolio through a low-cost index fund.
How much can I invest in Vanguard?
Most Vanguard mutual funds require a minimum investment of $3,000. However, there are exceptions to this rule. You have the option to invest in Vanguard Target Retirement Funds or Vanguard STAR® Funds with a minimum of $1,000. It’s worth mentioning that some funds have higher minimums exceeding $3,000, which is in place to safeguard the funds from frequent short-term trading.
Who owns Vanguard?
Vanguard is owned by the Vanguard funds, and these funds are in turn owned by their shareholders. This distinct ownership arrangement enables Vanguard to minimize costs, ensuring that custormers retain a larger portion of your returns and thereby enhancing your long-term earnings.
How much does Vanguard charge to withdraw money?
Vanguard does not impose any fees for withdrawing money, meaning it charges $0 for withdrawal. The withdrawal procedure is typically completed within a span of 2 days. Vanguard is a trustworthy brokerage firm, subject to oversight from at least one leading regulatory authority. It is important to note that fund withdrawals can solely be directed to accounts registered in your own name.
Can I invest in Vanguard myself?
Absolutely, you can definitely invest in Vanguard on your own. Getting started with a Vanguard investing account is a straightforward process. Not only is opening an account free of charge, but it’s also designed to be user-friendly and time-efficient. In fact, the entire setup procedure usually takes just about 5 to 10 minutes. This streamlined process ensures that you can quickly begin your investment journey with Vanguard and take advantage of their range of investment options and resources.
Is it free to open a Vanguard account?
Opening a Vanguard account does not incur any fees. It’s important to note that while there’s no cost associated with setting up an account, some financial products do have a minimum investment requirement.