The best Vanguard mutual funds are well-known for their reputation for providing customers with affordable prices while yet maintaining a high level of quality. This has led to a huge rise in the popularity of these products.
As of May 2023, Vanguard had a market share of 22% in the amount of assets that were managed by mutual funds, which amounted to $5 trillion.
This number is over fifty percent more than the market share that is owned by Fidelity Investments, which is the company that comes in second place in this respect.
It should come as no surprise that mutual funds offered by Vanguard are among the most popular choices for retirement savings and taxable investment accounts alike.
The company gives customers access to a wide variety of investment opportunities, including a total of 431 funds all over the world, of which 204 funds are only accessible for purchase inside the United States.
Mutual fund solutions from Vanguard include both passively managed Vanguard index funds and actively managed that are actively invested in the market.
The business is responsible for managing a variety of well-known and varied stock funds, bond funds, and balanced portfolios. The complex offers a diverse selection of solutions that put an emphasis on a number of different industries and geographical regions.
Here is a list of the best Vanguard mutual funds that are seen to be the best options for building an investment portfolio, with an emphasis on long-term goals such as retirement or other long-term financial goals.
These funds were chosen because they are considered to be the best options available. Diversified funds, which successfully reduce risk by spreading investment allocations over many holdings, have been given the lion’s share of the focus in recent years.
As a consequence of this, these funds are regarded as being very appropriate for use as primary, long-term components inside investment portfolios.
Table of Contents
What is a Vanguard Mutual Fund?
Vanguard is a prominent asset management organization that provides individuals with the opportunity to access investment accounts and a diverse range of products, including equities and mutual funds.
Vanguard has developed a portfolio of more than 430 funds and caters to a clientele exceeding 30 million investors.
Vanguard mutual funds are financial instruments that aggregate capital from several investors in order to acquire stocks, bonds, and various other assets.
Vanguard mutual funds provide a financially efficient means of constructing a diversified portfolio, whereby funds are allocated among several investments rather of being concentrated in a single company. This approach eliminates the need for individual selection and management of assets.
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Best Vanguard Mutual Funds
Vanguard Health Care Fund Investor Shares (VGHCX)
Some think that Vanguard mutual funds are comprised of generic index funds that invest in a variety of market subsets.
This is a plausible argument. In spite of this, it is important to point out that the Vanguard Health Care Fund Investor Shares (VGHCX, $213.49) also have a focus on a certain industry or sector.
The prospective growth-oriented investment fund has over one hundred assets, the vast majority of which are held by well-known healthcare companies.
Notable members include UnitedHealth Group (UNH), a significant insurance firm, in addition to well-established pharmaceutical corporations like Eli Lilly (LLY), Pfizer (PFE), and AstraZeneca (AZN). Other notable constituents include AstraZeneca (AZN).
One of the unfortunate features of the healthcare system in the United States is its emphasis on maximizing profits, which contributes to the ever-increasing costs that are connected with purchasing drugs.
Since the year 2000, the cost of receiving medical treatment in the United States has almost tripled, according to the findings of a number of different studies. For investors who are looking for ways to lessen the effect of their ever-increasing costs, VGHCX may be a useful asset to use as a hedging tool.
Healthcare shares have defensive characteristics that might potentially act as a stabilizing influence for investment portfolios in the case of a prospective recession, which Kiplinger estimates has a probability of occurrence of 50-50 for occurring later on in this year.
It is essential to point out that VGHCX should not be mistaken for its equivalent, the “Admiral Shares” fund, which has a cost ratio that is a little bit lower than average. The latter option, on the other hand, requires an extremely high minimum commitment of $50,000.
Vanguard S&P 500 ETF (VOO)
Investors who are looking for a simple and low-cost way to invest passively in the U.S. stock market may want to consider buying VOO, an exchange-traded fund that replicates the S&P 500 index’s performance.
VOO is a good option for these investors. According to Taylor, VOO gives investors the option to participate in the stocks of 500 well-established public enterprises in the United States economy at a cost ratio of 0.03%.
These 500 firms are all part of the economy of the United States. Companies such as Apple Inc. (AAPL), Microsoft Corporation (MSFT), Amazon.com Inc. (AMZN), and a number of others are now included on the roster.
Actively managed funds have encountered considerable obstacles throughout history in their efforts to surpass the S&P 500, particularly when considering protracted durations.
This is especially true when looking at longer periods of time. According to the most recent S&P Indices Versus Active (SPIVA) scorecard that was published by S&P Dow Jones, it was determined that as of December 31, 2022, a significant majority of 93.4% of United States large-cap funds had exhibited poorer performance when compared to the S&P 500 index over the preceding 15-year period.
This was determined based on the findings of a study that was conducted by S&P Dow Jones.
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)
After substantial shifts in the environment of interest rates over the course of the preceding year, there has been a revival of interest in bond market investment in the year 2023.
The conventional stock market has given way to a growing interest in investing in the bond market, which has arisen as an alternative to traditional stock investments. The Federal Reserve has been gradually raising interest rates in an effort to battle inflation over the last several years.
The bond market, which was formerly characterized by passivity and has seen a comeback in interest owing to the phenomena of investment-grade bond rates exceeding the yield supplied by generally preferred dividend shares, has experienced a rebound in activity and attention.
There has been a rise in the rates of fixed-income investments, as stated by Michelle Wan, an investment strategy specialist at the Wells Fargo Investment Institute.
This may be contrasted to the levels that these rates were at a year ago. As a consequence of this, these yields may provide potential income prospects to investors that go beyond stock dividends and investments in real estate.
Admiral Shares of the Vanguard Total Bond Market Index product (VBTLX; $9.65) are generally recognized as one of the most successful bond mutual funds offered by Vanguard. This product gives investors extensive exposure to the bond market.
It is widely acknowledged among a variety of asset managers as being one of the products that are the biggest and most well-established. The organization has a substantial collection of over 10,000 bonds that are categorized as “investment grade.”
This term refers to financial instruments of superior creditworthiness that are issued by companies or government entities with a decreased probability of defaulting on their obligations.
It follows from this that including a variety of bonds from a number of different issuers in an individual’s investment portfolio not only makes it easier to diversify but also guarantees a higher degree of safety and peace of mind.
For the sake of clarity, one may claim that the bond market is more stable than the stock market; nonetheless, it is essential to recognize that this quality can have both good and bad repercussions for the market.
It is quite difficult to think of bonds producing quick principal rises of 10% or 20%, yet the stock market has had a number of instances during which it has achieved such results. Bonds have a far lower probability of producing such results.
If, on the other hand, a reliable source of income is more important to an individual than investments with higher degrees of risk, then having this specific Vanguard mutual fund in one’s portfolio may be seen as beneficial.
The Admiral Shares of the Vanguard Total Bond Market Index Fund is also offered in the form of an ETF called the Vanguard Total Bond Market ETF (BND).
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX, $100.31) is a mutual fund that gives investors a simplified method of acquiring exposure to the whole of the U.S. stock market with a single investment.
This product is available to clients via Vanguard’s mutual fund platform. Over 4,000 unique shares are included in the offering as a whole. These equities represent a wide range of domestic market subsectors as well as businesses operating in a variety of sizes.
However, it is very important to keep in mind that the specific mutual fund that is supposed to reflect the whole stock market does not give the same amount of weight to each of the various different assets that make up the fund.
In point of fact, the fund has a preference for the biggest firms; the trillion-dollar technological behemoths Apple and Microsoft (MSFT) alone account for around 12% of the fund’s entire composition. This indicates that the fund has a bias toward the largest companies.
Although the VTSAX has had a positive performance in 2023 because of the outperformance of the technology sector, it is essential to recognize that this scenario may change if the firms in this area begin to underperform.
This is why it is necessary to realize this possibility. It is feasible that a very little unfavorable occurrence might result in a significant decrease in the performance differential within the technology sector.
This is the case when taking into consideration the sizeable gain that was seen across a variety of technology stocks over the course of the previous three months.
However, despite the fact that the VTSAX has a little tilt toward bigger assets, it is tough to argue against this fund’s reputation for being clear and having a wide-ranging focus.
As a consequence of this, it is regarded as being among the best Vanguard mutual funds that can be invested in. At the present time, the total investments made by all of the variants of the Vanguard Total Stock Market funds surpass one trillion dollars, as shown by the letter “T” in the previous sentence.
Individuals who pick a long-term investing plan and decide for buy-and-hold index funds will find themselves in the company of other investors who have similar investment philosophies, despite the fact that these strategies are not extremely complicated.
In addition, investors may purchase the Vanguard Total Stock Market Index Fund Admiral Shares in the form of an ETF, which is referred to as the Vanguard Total Stock Market ETF (VTI).
Vanguard Emerging Markets Stock Index Fund Admiral Shares (VEMAX)
Investing in well-established regions such as Japan and the United Kingdom is certainly a worthy endeavor; yet, when contemplating foreign investments, many investors look to the expansion opportunities presented by businesses located in emerging countries.
Consider investing in the mutual fund known as Vanguard Emerging Markets Stock Index Fund Admiral Shares (VEMAX, $33.88) if you have a proclivity for high-growth foreign stocks that come with a high level of risk. Doing so would be advisable for individuals who have such a proclivity.
This index fund, along with other names featured in the list of the best Vanguard mutual funds available for purchase, illustrates the quality of being simple and economical at the same time.
The doubt that may have been caused by a method that some people would consider to be complicated is essentially removed as a result of this.
The VEMAX makes available a solitary and basic portfolio, which is composed of around 5,700 different equity holdings. Notable stocks include long-standing companies with a strong market presence, such as Alibaba Group Holdings (BABA) and Tencent Holdings, both of which are regarded as giants of the Chinese internet industry.
In addition, there are a number of promising new market opportunities, such as the shopping site Meituan, which is situated in Beijing, but which may not have received significant notice.
China has the biggest representation among all countries in terms of assets, accounting for 35% of the total, followed by Taiwan with 18%, India with 16%, and Brazil with 6%. Taiwan is the country with the highest representation among all nations in terms of assets.
There is also an ETF version of the Vanguard Emerging Markets Stock Index Fund Admiral Shares. This ETF is known as the Vanguard FTSE Emerging Markets ETF (VWO).
Vanguard Dividend Appreciation Index Fund Admiral Shares (VDADX)
After such a volatile year as 2022, many investors are looking for ways to reduce their exposure to risk and build portfolios with lower levels of volatility.
The importance of dividend-paying stocks cannot be overstated in this setting. Companies that have considerable and continuous profits, in addition to demonstrating a firm determination to continually give a percentage of their created cash to their shareholders, are prime candidates for the title of “most optimal dividend companies.”
A feeling of safety and comfort may also be gained by investing in businesses that have established histories of regularly raising their dividend payments year after year.
It is an indication of a firm’s solid financial stability and its unshakable loyalty to its shareholders when the company continues to boost the dividend distribution year after year, even in the face of economic downturns, geopolitical conflicts, stock market falls, and other forms of adversity.
Among the mutual funds offered by Vanguard, the Vanguard Dividend Appreciation Index Fund Admiral Shares (VDADX) is widely regarded as being an outstanding option for investors that place a high priority on the investing approach that was previously discussed.
The price of the fund is now at $42.52 according to the most recent estimate. The stock holdings in the mutual fund have all shown a stable history of dividend payments as well as modest growth, which enables the fund to facilitate steady growth.
Exxon Mobil (XOM), a major leader in the oil business, Microsoft, a leading corporation in the area of technology, and Procter & Gamble (PG), a stock representing consumer staples, are just a few of the noteworthy entities that are included in the selected selection of more than 300 shares.
The constant payment of dividends to their shareholders enables these companies to maintain a high level of stability during their extended operating histories.
The yield on the Admiral Shares of the Vanguard Dividend Appreciation Index Fund has just increased to 2.0%.
The Admiral Shares of the Vanguard Dividend Appreciation Index Fund are also offered in the form of an ETF, which is referred to as the Vanguard Dividend Appreciation ETF (VIG).
Vanguard Total Bond Market Index Fund ETF (BND)
It’s possible that some investors don’t have the level of risk tolerance that’s required to successfully handle the volatility that comes along with investing in a 100% equity fund like VOO or VTSAX.
The above-mentioned investors may find that having an allocation towards fixed-income assets of better quality in their portfolios is an effective way to manage risk, especially in the case of an economic crisis or market downturn.
Investors who are looking for a low-cost investment vehicle have the option of putting their money in the BND bond ETF that is offered by Vanguard.
BND is intended to match the performance of the Bloomberg U.S. Aggregate Float Adjusted Index while keeping its cost ratio at a lowly 0.03%. This is made possible because of the fund’s design.
According to Taylor, the BND provides a simple method for including fixed income in an investment portfolio and minimizing some of the risks associated with equity investing.
The ETF displays a substantial amount of diversity due to the fact that its benchmark index includes over 10,000 investment-grade corporate bonds and U.S. government-issued Treasurys.
These bonds have maturities that range from one year all the way up to more than 25 years in the future. However, the ETF does not contain bonds that are intended to protect against inflation explicitly, nor does it include bonds that grant tax-exempt status.
Vanguard Balanced Index Fund Admiral Shares (VBIAX)
Investors who are interested in having exposure to both bonds and stocks inside a single fund may find VBIAX to be an intriguing choice. VBIAX is an ETF.
This fund adheres to a balanced investment approach, often allocating sixty percent of its assets to equity and forty percent of its assets to fixed-income securities.
This allocation is made with the goal of generating both capital appreciation and consistent income at some point in the future.
The product has a cost ratio that is very low, coming in at 0.07% of the total price. To participate in this fund, however, a minimum investment of $3,000 is necessary. It is imperative that this fact be brought to your attention.
Those investors who are looking to attain portfolio diversification across major asset classes may find that VBIAX is the best solution available to them.
The strategy makes use of a dual-index technique, in which it monitors the CRSP US Total Market Index in order to identify the equity component, and it monitors the Bloomberg U.S. Aggregate Float Adjusted Index in order to ascertain the bond component.
Both of these indices are from the United States. This investing approach ensures comprehensive market coverage across a wide variety of U.S. stocks and bonds with a range of maturities.
Vanguard Target Retirement 2070 Fund (VSVNX)
There is a possibility that the investment strategy proposed by VBIAX would not live up to the requirements of some long-term investors.
To begin, it is important to point out that the fund does not give an allocation to foreign stocks or bonds, and as a result, the fund may be losing out on the potential benefits of diversification that such investments may provide.
In addition, the investment plan uses a fixed allocation strategy consisting of 60% stocks and 40% bonds, which may not be suitable for all individuals depending on their individual circumstances.
The VSVNX target-date fund is one viable solution that will endure throughout time.
Because it is structured as a “fund of funds,” VSVNX distributes its holdings among four separate Vanguard mutual funds.
These funds invest in a wide variety of stocks and fixed-income assets that are generated from both domestic and international markets. The glide path strategy is one that VSVNX utilizes.
This approach entails the systematic modification of its asset allocation over the course of a length of time in order to adopt a more risk-averse posture.
This stance is defined by an increasing percentage of bonds and a decreasing proportion of stocks in its portfolio. The expense ratio of the fund is 0.08% of its total assets.
It is important to understand that the investment vehicle that was just discussed is a kind of fund known as a target-date fund, and it was developed particularly for those who want to retire in the year 2070.
Nonetheless, it is important to highlight the fact that persons of all ages are eligible to apply for assistance from this fund.
It is essential to keep in mind that an individual’s investment portfolio may have a greater degree of aggressiveness depending on their risk tolerance if the person is still ten years away from retiring. This is something that should be taken into consideration.
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
Investors who are looking for a thorough diversification plan should be aware that in addition to considering firms of varied sizes and sectors, they also need to take into consideration shares from a variety of different geographical regions. This is necessary in order to achieve the desired level of diversity.
In this scenario, the mutual fund known as Vanguard Total International Stock Index Fund Admiral Shares (VTIAX; $30.34) is one alternative that is practical and workable.
The investment at issue with Vanguard is a mutual fund that falls under the category of “ex-U.S.,” meaning that it has been constructed on purpose to avoid investing in companies that are headquartered in the United States.
In addition to providing exposure to international firms, which is a characteristic that many investors want, this strategy makes it easier to implement a basic overlay that reduces the presence of duplicative domestic equities holdings inside an investor’s mutual funds.
Due to the presence of this trait, it is regarded as one of the best Vanguard mutual funds for financial investments.
In spite of the fact that it covers the whole planet, the list of around 8,000 companies contains a number of recognizable brands.
Both Tencent Holdings, a big technological conglomerate in China, and Nestle, a notable Swiss consumer goods company, are positioned among the top companies in their respective sectors. Nestle is a prominent Swiss consumer goods firm.
As one moves further down the list, it becomes clear that a sizeable number of international stocks, many of which are traded in countries outside of the United States, are not easily available for purchase on the stock markets in this country.
In terms of geographical distribution, around 15% of the assets are allotted to Japan, while only 10% of the total are held in the United Kingdom. It is estimated that around 9% of the total population in China fits into this group.
It is possible to purchase the Admiral Shares of the Vanguard Total International Stock Index Fund in the form of an ETF that is referred to as the Vanguard Total International Stock ETF (VXUS).
Vanguard Dividend Appreciation ETF (VIG)
By using an ETF such as VIG, investors who follow a “buy and hold” strategy and lean toward a dividend-oriented investing strategy have the potential to kick off a “dividend snowball” effect.
The aforementioned ETF is intended to mimic the performance of the S&P U.S. Dividend Growers Index, which gives preference to companies that have a track record of sustained dividend growth above those that have a high dividend yield.
In point of fact, the Vanguard Information Technology ETF (VIG) provides a yield to the SEC that is just 1.8% after a period of 30 days.
In contrast, the ETF puts a special focus on companies that have shown a continuous pattern of dividend rise for a minimum period of 10 years in a row. This requirement ensures that the fund is investing in companies that are likely to continue to raise their dividends.
By placing a higher emphasis on companies that have shown a history of yearly dividend growth, the Vanguard Dividend Growth ETF (VIG) has demonstrated greater performance when compared to its high-yield cousin, the Vanguard High Dividend Yield ETF (VYM).
When dividends are taken into account, it can be seen that VIG has generated an annualized return of 11.6% over the course of the last decade.
This is in contrast to the return of 9.9% that VYM has generated over the same time period. The expense ratio of the ETF is also rather low, coming in at only 0.06%.
Vanguard Total World Stock ETF (VT)
VT is the most comprehensive equity ETF that Vanguard has to offer in terms of geographical coverage; it is designed for investors that utilize a buy-and-hold strategy and wish to attain the highest possible level of diversity in their stock holdings.
This exchange-traded fund tracks the performance of the FTSE Global All Cap Index very closely. The ETF in question now manages a portfolio of more than 9,500 shares, obtained from both developed and developing nations all over the world.
These companies range in market capitalization from small to huge, and they are all classified as having different market capitalizations.
In addition to this, it takes into account both growth and value equity types, which enables it to provide extensive coverage throughout all 11 market sectors.
Acquiring and holding on to VT is a smart move that long-term investors should do in order to position themselves favorably for the continued rising trajectory of the global market.
Concerns about the poor performance of some market sectors or individual national markets are alleviated by this strategy.
An exchange-traded fund, often known as an ETF, is a kind of investment vehicle that gives investors the option to participate in the growth of economies all over the globe while also enjoying the benefits of geographical diversity, which has the power to dampen the effects of market volatility. The ratio of VT’s expenditures comes in at 0.07%.
Vanguard 500 Index Fund Admiral Shares (VFIAX)
Vanguard’s second-largest fund strategy, the Vanguard 500 Index Fund Admiral Shares (VFIAX, $383.51), has around $793 billion in total net assets, making it the second-largest Vanguard fund overall.
This kind of investment vehicle, which is meant to replicate the results of the S&P 500 Index but has lower expenses than that index fund, is also referred to as a low-cost index fund. The S&P 500 Index is a ranking of the 500 most valuable companies based in the United States.
The names that have been discussed belong to well-known blue chip corporations like Apple (AAPL), Johnson & Johnson (JNJ), and JPMorgan Chase (JPM), therefore the reader should be familiar with them.
The fact that there is a plethora of other S&P 500 index funds available on the market renders this product unremarkable due to the fact that it lacks a unique selling point.
VFIAX, however, provides a large magnitude and a highly inexpensive framework that is difficult to compete with. This is especially true when taking into consideration the normally more cost structure of existing exchange-traded funds.
A Vanguard exchange-traded fund is also considered a part of this discussion, as should be pointed out here as a further point of emphasis.
The Vanguard S&P 500 ETF (VOO), which is an exchange-traded fund, uses a method that is very similar to the one described above. However, the already low fee structure has been reduced by 0.01%, which has resulted in an annual cost ratio of 0.03% for the VOO fund.
Vanguard Real Estate Index Fund Admiral Shares (VGSLX)
A sector fund that focuses only on the real estate business is represented by the Vanguard Real Estate Index Fund Admiral Shares (VGSLX, $117.19), which may be purchased by investors.
A number of people who consider the yield of other alternatives on our collection of the best Vanguard mutual funds to be unimpressive have a favorable opinion of VGSLX and give it a high rating.
When it comes to the world of Wall Street, the real estate investment trusts (REITs) that are considered to be the most extraordinary are often the source of the largest financial gains.
This is due to the fact that this specific form of company is supplied with operational tax benefits in order to fulfill the capital-intensive features of real estate and property management
The reason for this can be found in the fact that this particular kind of business is provided with operational tax incentives.
On the other hand, Real Estate Investment Trusts (REITs) are compelled to transfer ninety percent of their taxable revenue to their shareholders in the form of dividends. This serves as a trade-off for favorable tax treatment.
Over 170 separate Real Estate Investment Trusts (REITs) are included in the aforementioned Vanguard mutual fund’s holdings.
Due to the fact that the aforementioned businesses comprise not only residential and office buildings but also the well-known industrial warehousing firm Prologis (PLD) and the telecoms tower operator American Tower (AMT), a wide variety of investments are made available.
In addition, it is important to note that the yield of 4.1% offered by VGSLX is much higher than the yield offered by the S&P 500 as a whole by a multiple that is more than three.
In addition, investors may purchase the Vanguard Real Estate Index Fund Admiral Shares in the form of an ETF, which is referred to as the Vanguard Real Estate ETF (VNQ).
Final Thoughts
Investors who are looking for an efficient and low-cost way to diversify their portfolios across a variety of assets have contributed significantly to the Vanguard mutual funds’ meteoric rise in popularity.
However, similar to other types of investments, real estate investments are subject to certain risks, such as those related to the management of the property and the market.
It is necessary for investors to do an in-depth analysis of their investing goals and ability to tolerate risk before making any purchases of the best Vanguard mutual funds or any other kind of financial instrument.
It might be beneficial for an individual to investigate other investing opportunities, such as bond mutual funds, small-cap funds, T. Rowe Price funds, or Fidelity funds, depending on the particulars of their own situation.
