Best vangaurd funds

Best vangaurd funds DEFAULT

Founded by John C. Bogle in 1975, Vanguard is one of the world's largest investment management companies. With around $7.2 trillion of assets under management, the company offered nearly 209 domestic funds and 232 funds for foreign markets as of Jan 31, 2021. It offers asset management and financial planning services to clients throughout the globe.

Vanguard stands apart from the other mutual fund companies because it is owned by the funds themselves. The company believes that this structure helps management focus better on shareholder interests. Among the advantages, Vanguard claims to offer is low-cost, no-load funds.

The initial investment of the majority of mutual funds from the family ranges from $0 to $3,000. As of Jun 30, 2021, none of the Vanguard mutual funds carried any load.

Vanguard invests in a variety of sectors that are sensitive, cyclical and defensive. From the sensitive sectors, most investments were made in the technology sector. Among the cyclical sectors, the fund family has invested the maximum in the financial services sector, while among the defensive sectors it has invested heavily in healthcare.

Financial Select Sector SPDR Fund (XLF) and the Technology Select Sector SPDR Fund (XLK) have climbed 24% and 17.2% in the year to date period, respectively.

4 Best Funds to Buy Now

We have highlighted four Vanguard mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy). These funds have encouraging three and one-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Vanguard Equity-Income Fund Investor Shares VEIPX aims to provide a level of current income that is above-average and decent long-term capital growth. The fund invests mainly common stocks of medium-sized and large companies that are undervalued compared to similar stocks and pay above-average levels of dividend income.

This Large Cap Value product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and one-year benchmarks are 11.9% and 32.7%, respectively. VEIPXhas an annual expense ratio of 0.28%, which is below the category average of 0.94%.

Vanguard Short-Term Investment-Grade Fund Investor Shares VFSTX fund seeks income while maintaining limited price volatility. VFSTX invests in a variety of high-quality and, to a lesser extent, in medium-quality fixed income securities. The lion’s share of its assets is invested in short- and intermediate-term investment-grade securities.

This Inv Grade Bond-Short product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and one-year benchmarks are 4% and 1.5%, respectively. VFSTX has an annual expense ratio of 0.20%, which is below the category average of 0.68%.

Vanguard Explorer Value Fund Investor Shares VEVFX seeks appreciation of capital over the long term. The fund invests primarily in stocks of small and mid-size domestic companies, picking stocks considered by the fund’s advisor as undervalued. Also, such stocks may have above-average dividend yields.

This Small Cap Blend product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and one-year benchmarks are 8.3% and 53.9%, respectively. VEVFX has an annual expense ratio of 0.64%, which is below the category average of 1.03%.

Vanguard PRIMECAP Core Fund Investor Shares VPCCX seeks long term capital appreciation. The fund invests primarily in stocks that offer a good balance between reasonable valuations and attractive growth prospects relative to their peers. VPCCX invests across different industries and all market capitalizations.

This Large Cap Growth product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and one-year benchmarks are 14.6% and 38.4%, respectively. VPCCX has an annual expense ratio of 0.46%, which is below the category average of 0.84%.

Want key mutual fund info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Get Your Free (VFSTX): Fund Analysis Report
Get Your Free (VEIPX): Fund Analysis Report
Get Your Free (VPCCX): Fund Analysis Report
Get Your Free (VEVFX): Fund Analysis Report
To read this article on click here.


10 Best Vanguard Funds to Hold for the Long-Term

Vanguard funds are much like buy-and-hold investing because there is a great selection of high-quality, low-cost mutual funds and ETFs. These features make Vanguard funds ideal choices for long-term investors.

Vanguard offers about 209 U.S. funds (including variable annuity portfolios) and about 232 additional funds and ETFs in markets outside the United States, as of Jan. 31, 2021.

Pros and Cons of Vanguard Mutual Funds

There are some pros and cons when it comes to investing in mutual funds from Vanguard, but this is the case with any mutual fund company.

  • Vanguard's low-cost index funds are designed to replicate the performance of a particular market index (i.e. S&P 500).

  • Bond funds may provide better diversification.

  • International stock funds could provide even more diversification.

  • You must decide whether you're in it for the long term or the short term to make good fund choices.

  • Vanguard's large number of funds requires research before choosing.

  • Some funds have minimum investment requirements.

Vanguard has dozens of funds to choose from. You'll have to spend some time researching them to find the best for your personal finance needs.

This list can help you get started with your Vanguard fund review. It narrows the selection to the 10 best funds to hold for the long term.

Are You a Long-Term Investor?

Decide whether you're a long-term investor before buying Vanguard funds.

You could hear 10 different explanations about what "long-term" means if you talk with 10 different financial planners. You'd be long-term if you have at least 10 years before you'd need to begin withdrawing from your accounts. This also holds true for long-term bonds and long-term bond funds. 

Saving for a new car is not long-term investing. You should look for the best funds for short-term investments in that case.

Retired investors make a common mistake by thinking of themselves as "short-term." They might be making withdrawals to bolster their retirement income, but they may easily have a life expectancy of at least 10 more years. The average life expectancy in the U.S. is almost 79 years.

You'd still have 13 years to invest if you were to retire at age 65. Depending on your sources of income and your overall financial picture, you'll need to invest at least a portion of your retirement assets in long-term investments, which can include stock mutual funds.

Choosing the Right Funds for Your Needs

The best long-term investments generally consist of stock mutual funds, especially index funds.

Stock mutual funds may be a good choice if you have at least three years before starting withdrawals.

Index funds also make smart choices for long-term investing. Vanguard's index funds are among the top choices for long-term investors. They've attracted such a large amount of assets that Vanguard has become the largest mutual fund company in the world.

Vanguard index funds make smart choices for long-term investing because index funds are passively managed. They have lower expense ratios than actively managed funds. They also offer a long-term edge for performance, because their expense ratios are so low. This happens because most active fund managers don't beat the major market indexes for periods longer than 10 years.

You might as well invest in funds that match the market at a lower cost rather than try to beat the market. Beating the market is very hard to do consistently over the long run.

10 Best Vanguard Funds for Long-Term Investing

Now that you know which fund types work best for the long term, these are the 10 best Vanguard funds to buy and hold, in no particular order.

1. Vanguard Total Stock Market Index (VTSAX)

Vanguard's VTSAX is the largest mutual fund in the world. It's a diversified stock index fund. Its expenses are very low. The portfolio provides exposure to the entire U.S. stock market, including small-, mid-, and large-cap stocks. This mix includes over 3,500 securities. The expenses are only 0.04% or $4 for every $10,000 invested. The minimum initial investment is $3,000 for Admiral Shares.

2. Vanguard Wellesley Income (VWINX)

VWINX is a balanced fund from Vanguard. It holds a conservative (low-risk) allocation of about 40% stocks and 60% bonds. VWINX can be the right choice for long-term investors with a somewhat low tolerance for risk or retired investors looking for both income and growth. Expenses for VWINX are very low for an actively managed fund at .23%. The minimum initial investment is $3,000.

3. Vanguard 500 Index (VFIAX)

This index fund tracks the S&P 500, so it holds about 500 of the largest U.S. stocks. VFIAX shareholders get exposure to stocks like Apple (AAPL), Facebook (FB), Amazon (AMZN), and Alphabet (GOOG, GOOGL), the parent company of Google.

VFIAX is a smart choice for building a portfolio that includes other stock funds, such as small- and mid-cap funds. The expense ratio for VFIAX is 0.04%. The minimum initial investment is $3,000.

4. Vanguard Total Bond Market Index (VBTLX)

Long-term investing is often associated with stocks, but most investors will need to have a portion of their portfolios invested in bonds.

VBTLX is a smart choice for the same reason as most other index funds. They're well-diversified, and they're low-cost. The VBTLX portfolio consists of more than 9,000 U.S. government and corporate bonds. The expense ratio for VBTLX is 0.05%. The minimum initial investment is $3,000.

5. Vanguard STAR (VGSTX)

You may have noticed that you'll need $3,000 to start investing in funds, but VGSTX has a lower minimum of just $1,000. It's also a "fund of funds," which means that it invests in other mutual funds, all in one fund option.

The STAR fund invests in a diversified mix of 11 Vanguard funds, making it a solid option for beginning investors or those who want a single fund solution. The expense ratio is 0.31%, but Vanguard claims that it's still 62% lower than funds with similar holdings.

6. Vanguard Total International Stock Market Index (VTIAX)

Most investors will include international stock funds to build a complete long-term portfolio. VTIAX is one of the best Vanguard funds for this purpose.

VTIAX tracks an index that includes over 6,000 non-U.S. stocks. It includes both developed markets (Europe and Japan) and emerging markets (China, India, and Brazil). Shareholders can gain exposure to the entire stock market outside the U.S. for a low expense ratio of just 0.11%. The minimum initial investment is $3,000.

7. Vanguard Growth Index (VIGAX)

Investors who are willing to take more risk in exchange for higher returns than the broad market indexes can take a look at VIGAX. This index fund holds large-cap growth stocks that have historically outperformed the S&P 500, especially for periods of 10 years or more. Expenses for VIGAX are 0.05%. The minimum initial investment is $3,000.

8. Vanguard Balanced Index (VBIAX)

Vanguard has a small but very nice selection of balanced funds—mutual funds or ETFs that invest in stocks and bonds. VBINX has a moderate (medium risk) allocation of about 60% stocks and 40% bonds. The stock portion invests in a total stock index. The bond portion invests in a total bond index. The expenses are 0.07%. The minimum initial investment is $3,000.

9. Vanguard Mid-Cap Index (VIMAX)

Historically, small- and mid-cap stocks have performed better than large-cap stocks in the long run, but mid-cap stocks can be the wisest choice of the three. Although mid-cap stocks generally have a higher market risk, they typically have a lower risk than small caps.

Investors often consider mid-caps to be the sweet spot of investing, because of their returns in relation to risk. VIMAX has a low expense ratio of 0.05%. The minimum initial investment is $3,000.

10. Vanguard Target Retirement Funds

There are several Vanguard Target Retirement Funds to choose from. Some investors are wise to consider this unique investment type. As the name suggests, the strategy of these funds is geared toward the target retirement year that is specific to the fund.

For example, Vanguard Target Retirement 2040 (VFORX) has an asset allocation of about 85% stocks and 15% bonds, which is about right for an investor who will be retiring near the year 2040.

Vanguard's Target Retirement Funds are good choices for investors who want to buy and hold one mutual fund until retirement. Some planners call these "set-it-and-forget-it" funds because you don't need to build a portfolio of funds or manage a portfolio.

NOTE: The Balance does not provide tax or investment advice or financial services. This information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor, and it might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal. 

  1. Train toy youtube
  2. Dap spray foam insulation kit
  3. Sunseeker predator 75
  4. Displayport video splitter
  5. 250 motocross results

The Best Vanguard Funds for 401(k) Retirement Savers

No other fund firm in the country has a bigger hand in retirement savings than Vanguard.

Among the 100 most widely held funds in 401(k) plans, roughly a third are Vanguard funds. So in this, our annual review of the biggest retirement savings plan, we take a closer look at some of Vanguard's most popular funds in 401(k) accounts, and rate them Buy, Hold or Sell.

Several are index funds, which we do not rate. It's not that we don't like them. We do. But decisions to buy an index fund generally hinge on whether you seek exposure to a certain part of the market. And for the most part, index funds fulfill their purpose – they track the indexes they mirror, less expenses.  

But actively managed funds are different.

Some are better than others. Managers change, which can affect a fund's returns. Underperforming funds might be lagging for a good reason; say, its investment style is simply out of favor. That's why we analyze only the actively managed funds from Vanguard in this story. We also review the firm's two target-date series, Institutional Target Retirement and Target Retirement, which are among Vanguard's most popular 401(k) funds and are due to merge (more on that below). Both series hold mostly index funds, but active decisions are made on asset allocation.

This story – as well as our upcoming reviews of other big fund firms in the 401(k) world, including Fidelity, T. Rowe Price and American Funds – is meant to help savers make good choices among the funds available in their 401(k) plan.

Let's look at some of the best Vanguard funds for your 401(k) plan … and weed out a few lesser options, too. For simplicity's sake, and to make comparisons more even, where possible we cite data and returns for Vanguard's Investor share class, which is open to retail investors.

Returns and data are as of Oct. 6. In each review, we refer to the symbol, returns and expense ratio of the share class that is available to most investors. The reason for this is that the share classes of specific funds offered in 401(k) plans can vary, depending in part on the size of the plan.

1 of 10

Vanguard Equity-Income: BUY

American dollars
  • Symbol:VEIPX
  • Expense ratio: 0.28%
  • 1-year return: 32.0%
  • 3-year annualized return: 11.1%
  • 5-year annualized return: 12.3%
  • 10-year annualized return: 13.6%
  • Rank among the top 401(k) funds: #52
  • Best for: Investors looking for a steady dividend fund.

Two longtime fund managers recently stepped down at Vanguard Equity-Income, which is a member of the Kiplinger 25 – our favorite actively managed no-load funds. But we're not adjusting our Buy recommendation for the fund – yet.

Although manager changes can be tricky, in VEIPX's case, the managers who left are part of Vanguard's in-house quantitative equity group, which relies on a complex algorithm to choose stocks. That computer model shouldn't change with the new guard. Plus, the quant group runs just one-third of the portfolio.

However, the lion's share of the portfolio is run by Wellington Management's Michael Reckmeyer, who recently announced plans to retire in June 2022. That could affect our thoughts on the fund moving forward, so stay tuned.

Since Reckmeyer arrived in mid-2007, Vanguard Equity-Income has returned 9.2% annualized. That lags the 10.6% gain in the S&P 500, but it beats 89% of funds that invest in large-company stocks trading at a value. It's important to bear in mind that value stocks have lagged their fast-growing growth stock counterparts for much of the past five years. Compared with a value-tilted index, the S&P 500 Value, Vanguard Equity-Income comes out ahead by an average of 1.6 percentage points per year.

Reckmeyer favors high-quality companies that pay increasingly higher dividends over time. "We focus on sustainable payouts and companies that increase dividends on an annual basis," he says, "because over the long haul, dividends drive 40% of returns over the years."

But Reckmeyer likes a good bargain. He prefers to step in when the market overreacts to bad short-term news. "It's a bit of a contrarian take to dividend investing," he says. He picked up shares in the paint and coatings company PPG Industries (PPG) in early 2020, for instance, after shares in the economically sensitive stock plummeted as global economies fell into a recession. Reckmeyer had long been watching the stock and saw a deal in shares in the global company, which boasts a strong balance sheet and steady cash flow. Since then, PPG shares have recovered 77%.

Vanguard Equity-Income might not beat the S&P 500 over time. But it's not too far behind, and the ride is smoother than that of the broad index. Plus, the fund's dividend yield, 2.2%, beats the current 1.30% yield of the S&P 500.

Learn more about VEIPX at the Vanguard provider site.

2 of 10

Vanguard Explorer: BUY

A school of little fishes chasing a large fish
  • Symbol:VEXPX
  • Expense ratio: 0.41%
  • 1-year return: 37.9%
  • 3-year annualized return: 17.6%
  • 5-year annualized return: 19.0%
  • 10-year annualized return: 16.7%
  • Rank among the top 401(k) funds: #78
  • Best for: Aggressive growth minded investors looking for exposure to small-company stocks.

Vanguard Explorer holds stock in growing, small to midsize companies. It's one of a handful of small-company stock funds that rank among the top 100 401(k) funds. But while many are index-based, this one is actively managed. In fact, in keeping with the Vanguard way, many have a hand in VEXPX.

Managers from five different firms work independently, applying their own process to run their portions of the fund's assets:

  • Wellington Management, for example, picks stocks with higher growth potential relative to their valuations.
  • ClearBridge Investments focuses on industry leaders that generate substantial free cash flow (money left over after necessary expenses to sustain the business) and make wise capital allocation decisions.
  • ArrowMark Colorado Holdings prefers high-quality companies with strong competitive advantages in industries with high barriers to entry.
  • Stephens Investment Management and Vanguard's quantitative equity group round out the investing subadvisory team.

The hodgepodge management team results in returns that are just above-average. But the portfolio is enormous, with close to 780 stocks, and the fund has $24.5 billion in total assets, which makes VEXPX the biggest actively managed small-company fund in the country. Finally, multiple changes in subadvisory managers over the years – and even recently – makes it difficult to confidently assess how the fund will fare over a full market cycle.

Seven of the 10 managers on the fund have been in place for nearly five years. And in each of the four full calendar years since the start of 2017, Vanguard Explorer has outpaced the Russell 2000. In other words, you have been better off in Explorer than in a small-company index fund over that time.

Just bear in mind: Because small-company stocks tend to be more volatile than large-company stocks, VEXPX should be a held as a complement to a core holding in large-company stock fund or a total stock market fund.

Learn more about VEXPX at the Vanguard provider site.

3 of 10

Vanguard Inflation-Protected Securities: BUY

Stack of pennies
  • Symbol:VIPSX
  • Expense ratio: 0.20%
  • 1-year return: 5.7%
  • 3-year annualized return: 4.3%
  • 5-year annualized return: 2.9%
  • 10-year annualized return: 4.3%
  • Rank among the top 401(k) funds: #76
  • Best for: Older investors in small doses to hedge against inflation.

With inflation running higher than it has in nearly a decade, Treasury Inflation-Protected Securities (TIPS) are more in the news. Annual inflation for the 12-month period ending in August, the most recent data available, was 5.3%. That's more than double the roughly 2% rate of annual inflation over each the previous five calendar years.

Investors who want to stay ahead of rising consumer prices typically turn to TIPS because on top of a guaranteed rate of interest, the principal of the bond moves in step with the rate of inflation.

But yields on TIPS have been negative for months. Vanguard Inflation-Protected Securities' current yield, for instance, is negative 1.7%. That doesn't mean, however, that you will earn a negative return in this fund. Rather, the fund's return will be the rate of inflation less the negative yield. Over the past 12 months, for instance, despite negative yields, VIPSX has gained 5.7%.  

Longtime fund manager Gemma Wright-Casparius favors short-term maturity TIPS these days. Almost half of the fund's assets are invested in TIPS with maturities of less than five years. Vanguard studies show that short-term TIPS are more stable during periods of inflation surprises than medium- and long-term TIPS.

Vanguard Inflation Protected Securities is best for retired, or nearly retired, investors. Younger investors can fend off inflation with the returns in their hefty stock portfolios, and annual salary raises will help, too. However, retirees typically don't have either of those advantages.

Learn more about VIPSX at the Vanguard provider site.

4 of 10

Vanguard International Growth: BUY

Cityscape of Guiyang at night, Jiaxiu Pavilion on the Nanming River. Located in Guiyang City, Guizhou Province, China.
  • Symbol:VWIGX
  • Expense ratio: 0.44%
  • 1-year return: 20.3%
  • 3-year annualized return: 22.6%
  • 5-year annualized return: 19.2%
  • 10-year annualized return: 14.1%
  • Rank among the top 401(k) funds: #36
  • Best for: Foreign stock exposure.

We have long lauded Vanguard International Growth as a superstar for delivering above-average returns with below-average risk. But we're feeling a little cautious these days because a key manager is leaving in April 2022.

Investment firm Baillie Gifford is one of two subadvisers that run the fund, but it manages the biggest chunk (70%) of the assets. And James Anderson, a manager since 2003, is leaving. Comanager Thomas Coutts remains, however, and he's been in place since late 2016. Lawrence Burns was named comanager in 2020.

Managers from Schroders run the remaining 30%, and nothing is changing there. Simon Webber has been with the fund since late 2009, though he too, has a new comanager in James Gautrey, who joined in late 2020.

The two firms, both U.K.-based, have slightly different approaches to picking growth stocks; Vanguard chose them to complement each other. Baillie Gifford is willing to pay up for stocks with explosive growth. Schroders' ideal stock is underappreciated but growing fast.

The portfolio holds roughly 120 stocks, mostly in large companies domiciled in developed countries. But China stocks make up 17% of the assets. Chinese internet powerhouses Tencent Holdings (TCEHY) and Alibaba Group (BABA), for instance, are two of the portfolio's biggest holdings and make up nearly 8% of assets. Those stocks have underperformed recently because of a regulatory crack-down on tech firms and other shake ups in China. But other top holdings have posted triple-digit percentage gains over the past 12 months, including biopharmaceutical Moderna (MRNA) and ASML Holding (ASML), which makes lithography systems that helps semiconductor makers to make smaller and smaller chips.

VWIGX has long been one of our favorite international stock funds. But we'll be watching it carefully over the next year or two. Fund manager changes can sometimes (but not always) result in some portfolio volatility as new managers settle in and make their mark.

Learn more about VWIGX at the Vanguard provider site.

5 of 10

Vanguard Primecap: BUY

Finance and investment concept. Button on car dashboard. There is sales text on the button and it is pointing high efficiency.
  • Symbol:VPMCX
  • Expense ratio: 0.38%
  • 1-year return: 30.7%
  • 3-year annualized return: 14.4%
  • 5-year annualized return: 17.4%
  • 10-year annualized return: 17.5%
  • Rank among the top 401(k) funds: #7
  • Best for: A core holding for aggressive investors with long time horizons.

Vanguard Primecap was closed to all investors long ago, but if it's offered in your 401(k) plan, you can still put away up to $25,000 a year. Consider yourself lucky. Vanguard Primecap is a superb fund run by five of the best stock-pickers in the country.

The managers – Theo Kolokotrones, Joel Fried, Alfred Mordecai, M. Mohsin Ansari and James Marchetti – work independently managing their own slice of the fund's assets. But they each aim to invest in growing companies that trade at bargain prices. In particular, they look for a catalyst – a new product, new executives at the helm or a restructuring – that they think will push a stock price higher over the next three to five years.

Once they buy a stock, they tend to hang on. The fund's 6% turnover ratio is a fraction of the 55% to 87% turnover of typical U.S. stock funds that invest in large companies.

"Because the Primecap team is buying stocks facing near-term uncertainty, it often takes time for their ideas to work out," says Dan Wiener, editor of The Independent Adviser for Vanguard Investors. "But in contrast to many other growth managers, the Primecap team is willing to wait, and on average holds onto a stock for a decade."

VPMCX's record isn't blemish-free, of course. Despite a 10-year annualized record that beats the S&P 500, Vanguard Primecap has lagged the index in five of the past 10 full calendar years, most recently in 2020. A sizable helping of airlines stocks – including Southwest Airlines (LUV), United Airlines (UAL) and American Airlines (AAL) – hurt the fund when the economy shut down for COVID-19.

But over the long haul, Vanguard Primecap shareholders have gotten a lot richer. A $10,000 investment 20 years ago in VPMCX would be worth nearly $80,000 today; a similar investment in Vanguard 500 Index fund would be worth $55,000. And that doesn't include any regular monthly 401(k) contributions you might make.

This is an aggressive fund, best for investors with long time horizons and a stomach for some volatility.

Learn more about VPMCX at the Vanguard provider site.

6 of 10

Vanguard U.S. Growth: BUY

A white arrow going up a set of blue stairs
  • Symbol:VWUSX
  • Expense ratio: 0.38%
  • 1-year return: 25.5%
  • 3-year annualized return: 26.6%
  • 5-year annualized return: 24.4%
  • 10-year annualized return: 20.3%
  • Rank among the top 401(k) funds: #91

Best for: Steely investors with a long time horizon who want exposure to fast-growing, large companies and can withstand a lot of volatility.

Vanguard U.S. Growth has put up some good returns in certain years – lately, a 59% return in 2020 – but it has had to deal with a lot of change. For starters, it has twice absorbed the assets of a poorly performing peer fund – Growth Equity in 2014 and Morgan Growth in 2019.

Then there's the constant rotation of subadvisers at the fund. According to Morningstar, eight partial manager changes have occurred at the fund since 2010. The latest on took place in early 2021. Vanguard jettisoned investment firm Jackson Square as a manager after 11 years. Four subadvisers remain: Wellington Management, Jennison Associates and Baillie Gifford – each runs roughly 28% of assets – and Vanguard's in-house quantitative equity group, which runs the rest. This year, the quant group is undergoing its own reshuffling; longtime members of the team James Stetler and Binbin Guo both retired.

All that moving around of parts is troubling, and it makes assessing the long-term merits of a fund tricky. But based on more recent performance, things are going swimmingly. VWUSX's five-year annualized return beats the S&P 500, most of its peer group and even Vanguard Primecap, the firm's venerated growth-company fund. It has been a bumpy ride, though. Over the past five years, this Vanguard fund has experienced above-average volatility compared with all large-company growth funds.

If U.S. Growth is the only actively managed large-company growth fund offered in your 401(k), and you have the stomach for a lot of volatility, it's a solid option. If you're not that kind of investor, however, you might consider other options in your plan that come with less uncertainty (as far as management goes) and a little more steadiness in performance.

Learn more about VWUSX at the Vanguard provider site.

7 of 10

Vanguard Wellesley Income: BUY

A field of dollar bills
  • Symbol:VWINX
  • Expense ratio: 0.22% 
  • 1-year return: 11.7%
  • 3-year annualized return: 9.4%
  • 5-year annualized return: 7.5%
  • 10-year annualized return: 8.0%
  • Rank among the top 401(k) funds: #96
  • Best for: Conservative investors.

Vanguard Wellesley Income celebrated its 50th anniversary in July. But it's not the oldest stock-and-bond fund in Vanguard's stable. That honor goes to Vanguard Wellington, which we'll get to momentarily.

But unlike Wellington, Wellesley Income tilts more toward bonds than stocks. Two-thirds of its assets are bonds, while the rest is stocks. (Wellington holds more stocks than bonds).

The hefty bond holding makes for a steady fund. Over the past half century, according to Dan Wiener, editor of The Independent Adviser for Vanguard Investors, Wellesley Income's "standout feature is its steadiness."

Steadiness and muted returns often go hand in hand, however. Over the past 15 years, VWINX's 7.2% annualized return doesn't keep pace with the broad market, but it beats 96% of its peers: funds that allocate 30% to 50% of assets to stocks.

Michael Reckmeyer runs the stock side and Loren Moran picks the bonds. Both managers are veterans of Wellington Management – an investment firm with long-term ties that subadvises many of Vanguard's best-known actively managed funds. Similar to Vanguard Equity-Income, which Reckmeyer also helps to manage, we'll need to keep an eye on VWINX going forward.

With the heavy load of bonds in its portfolio, Wellesley Income is best suited to conservative investors.

Learn more about VWINX at the Vanguard provider site.

8 of 10

Vanguard Wellington: BUY

Stack of bills
  • Symbol:VWELX
  • Expense ratio: 0.24%
  • 1-year return: 21.2%
  • 3-year annualized return: 12.4%
  • 5-year annualized return: 11.7%
  • 10-year annualized return: 11.4%
  • Rank among the top 401(k) funds: #10
  • Best for: Moderately conservative investors who seek an all-in-one portfolio that holds stocks and bonds.

Vanguard Wellington has a long history and a standout long-term record. Founded in 1929, it is the nation's oldest balanced fund. Roughly two-thirds of the fund holds stocks; rest of the portfolio is devoted to bonds.

VWELX – another member of the Kiplinger 25 – has undergone a bit of a changing of the guard at the top. Daniel Pozen, a comanager since 2019, took over as sole manager of the stock side of the fund in July 2020; Loren Moran, a comanager on the bond side since 2017, is now the fund's sole bond picker after a comanager retired in June 2021.

On the stock side, Pozen favors high-quality large companies with a competitive edge over peers. Alphabet (GOOGL), Microsoft (MSFT) and Facebook (FB) were top holdings at last report. He has trimmed the number of stocks in the portfolio from the high 80s to the high 60s since taking over.

"There are only so many great ideas in the market at any time that we should lean into the best ideas and make sure they can impact shareholders' investment outcomes," Pozen says.

Stocks aren't required to pay a dividend to be considered for the portfolio, but roughly 85% of the stocks in the fund do.

On the bond side, Moran tilts heavily toward high-quality corporate debt, but spices up returns with investment-grade asset-backed securities and taxable municipal bonds. She holds roughly one-quarter of the fixed-income portfolio in Treasuries and agency bonds to maintain liquidity – easy access to cash – in VWELX. That's less than the typical 30% of assets that peer balanced funds hold on average.

"Our liquidity buffers are something we focus on," Moran says. But with interest rates so low, "shareholders aren't being paid a lot," she adds, so she has dialed her cash position down.

Vanguard Wellington is a moderate-risk investment choice because it holds both stocks and bonds. But it still packs a punch. Compared with other balanced funds, VWELX boasts above-average returns and below-average volatility. Over the past five years – which includes the period that Moran has been with the fund – Vanguard Wellington beats 88% of its peers with an 11.7% annualized return. It yields 1.2%. But yet again, we'll be watching the fund closely given the manager change.

Learn more about VWELX at the Vanguard provider site.

9 of 10

Vanguard Windsor II: HOLD

Sale tag on red blouse
  • Symbol:VWNFX
  • Expense ratio: 0.34%
  • 1-year return: 41.4%
  • 3-year annualized return: 15.4%
  • 5-year annualized return: 15.0%
  • 10-year annualized return: 14.5%
  • Rank among the top 401(k) funds: #35

We're upgrading the recommendation on Vanguard Windsor II this year a tad, to a Hold from a Sell.

In last year's review of Vanguard's most popular 401(k) funds, we said that investors who had chosen an S&P 500 index fund over Vanguard Windsor II would have done better over the past decade. That's still true.

But context matters. VWNFX focuses on value-priced stocks – and those stocks have lagged growthier shares by a wide margin. And relative to its peers – funds that invest in value-priced large companies – Vanguard Windsor II is starting to shine brightly. Over the past two years, the fund's 23.8% annualized return ranks among the top 3% of all large value funds.

A change in management might be behind the fund's recent fortunes. In late 2019, Vanguard dismissed two subadvisers and added a new one: Aristotle Capital Management. Aristotle joins three other firms: Lazard Asset Management, Sanders Capital and Hotchkis & Wiley Capital Management.

Each firm has a value bent but slightly different approaches. Lazard focuses on highly profitable companies trading at low relative valuation. Hotchkis & Wiley favors measures such as tangible assets, sustainable cash flow and the potential for business performance to improve. Sanders looks for companies that trade at a discount to its assessment of expected total return. And Aristotle likes to invest in high-quality businesses all over the world that trade at attractive prices and that have a catalyst to kick share prices up over a three- to five-year period. The firms run slivers of the portfolio independently. As a whole, the fund holds roughly 180 stocks.

Since adding Aristotle, the fund has taken a heavier tilt toward technology from the high-single digit exposure of previous years, says Morningstar Analyst Alec Lucas. At last report, tech stocks made up 20% of the fund. Alphabet, Apple (AAPL) and Microsoft sit near the top of the portfolio.

The good news: That has been good for performance. The bad news: It means VWNFX is a tad more growthy than some of its large-company value fund peers. But Windsor II still retains a distinct value profile: The portfolio's price-to-earnings (P/E) ratio of 18 is higher than the 16 P/E of other large-value funds, but it's a far cry from the 31 P/E ratio of the typical growth fund. We're comforted, too, by how well the fund performed between mid November 2020 and June 2021 when value stocks soared over fast-growing companies. During that roughly 6.5-month period, Vanguard Windsor II held up fabulously, beating the S&P 500 by nearly nine percentage points. It beat 61% of its peers, too. Of course, that is a blip of a time period, especially for retirement savers who are investing for the long term. Even so, it's a good indication that the fund firm has finally got a winning combination of managers.

We're more optimistic about the future of Windsor II, but we're still watching it closely, which explains the Hold recommendation.

Learn more about VWNFX at the Vanguard provider site.

10 of 10

Vanguard Target Retirement Funds: BUY

A middle-aged couple looking at retirement plans
  • Rank among the top 401(k) funds: #11 (VTHRX, 2030); #12 (VTTVX, 2025); #15 (VTTHX, 2035); #19 (VFORX, 2040); #23 (VTWNX, 2020), #25 (VTIVX, 2045), #29 (VFIFX, 2050); #65 (VFFVX, 2055); #82 (VTXVX, 2015); #88 (VTINX, Income)
  • Best for: Savers who want to make one investment decision and leave the rest to the experts.

Target-date funds hold stocks and bonds and are designed to help people invest appropriately for retirement. Experts make the investing decisions, rebalance the portfolio when needed and shift holdings to a more conservative mix as you age. When the fund hits its target year, the work doesn't stop. Vanguard Target Retirement funds continue to shift its blend of stocks and bonds for seven years after the target year. At that point, the money in the fund automatically rolls into Vanguard Target Retirement Income, which holds a static allocation of roughly 30% stock and 70% bond.

A small change is ahead for Vanguard's target-date funds. The firm actually has two target-date series: the Institutional Target Retirement funds and the Target Retirement funds. They are run with exactly the same strategy, same glide path (the blend between stocks and bonds that shifts over time as the target date nears). But Institutional Target Retirement was created for specifically for defined contribution plans; Target Retirement is available to retail investors as well as in some defined contribution plans. Come February 2022, however, the Institutional series will be absorbed into the Target Retirement series and expense ratios across all target-year funds will fall to 0.08%.

That's a bonus for retirement savers, some more than others. VanguardTarget Retirement 2045, 2050 and 2055 currently charge 0.15% in annual expenses, so this fee cut represents a nearly 50% drop in fees. Expenses aren't uniform across the target-date series currently, so shareholders in the nearer dated funds stand to save a little less. The investor share class of Vanguard Target Retirement 2030, for instance, charges 0.14% per year. In any case, Vanguard fees are already about 75% cheaper than most of its peers – one feature we've always liked about the series.

Another thing this series has going for it is simplicity. Vanguard Target Retirement funds hold just five to six index funds in their portfolios, depending on the target year. Four of the funds are total market funds – Vanguard Total Stock Market Index (VTSAX), Vanguard Total Bond Market Index (VBTLX), Vanguard Total International Stock Index (VTIAX) and Vanguard Total International Bond Index (VTABX). The series also includes a short-term inflation-protected securities index fund in the nearer-dated years.

Investors should feel confident choosing a Vanguard Target Retirement fund for their retirement savings. These products are straightforward, low-cost and do all of the work for you.

Learn more about Vanguard's Target Retirement Funds at the provider site.

Vanguard Lifestrategy VS Target Retirement Funds - This is where Vanguard get's it wrong

Opinion: The 9 best Vanguard funds for retirees

Read: To get rich investing, the power of time beats a lucky stock pick

Why Vanguard

Vanguard has more than $7 trillion under its management and is the only mutual fund company with a financial structure built to benefit the shareholders in its mutual funds.

The company’s funds are known for low expenses and the lower tax exposure that comes from low turnover. It should go without saying that Vanguard funds are no-load funds. No sales commission, no sales pressure.

From Vanguard’s offering of excellent funds, here are nine that I like for retirees.  

Vanguard Short-Term Investment Grade Fund VFSUX,

This is the first fund my wife and I invest in every year. In January, we make our annual withdrawal from long-term investments to cover our expenses for the year ahead. This fund is also where we keep our emergency cash.

Because this fund holds no stocks, our finances are remarkably emotion-free. No matter what’s happening in the stock market at any given moment, we know that won’t affect us until the following calendar year. If you’ve never tried managing your money like this, I recommend it.

You won’t get rich in this fund, but you’ll probably earn nearly 100 times as much as you’d get in a typical bank savings account paying (this is really disgusting!) 0.01% interest.

Over the past 15 years, this fund appreciated at 3.27%.

Read: It’s never too late to have a happy retirement

Balanced funds: boringly beautiful

Balanced funds hold both stocks and bonds. Over the years their shareholders are statistically likely to have above-average success as investors.

Why is that? Not because the funds themselves have any magic. It’s because the combination of growth and stability make you more likely to be content to leave your money where it is instead of trying to figure out when to buy and when to sell.

None of the following eight balanced funds is designed to normally hold much more than about 60% in equities. That means they aren’t likely to suffer the sort of major losses of all-equity funds.

Any one of these could make a good one-fund portfolio for a retiree. But don’t choose at random; the differences matter.

Vanguard Target Retirement 2015 VTXVX,

If you’re already retired, this fund of funds has your back. With an equity stake of only about 35% and the diversification of (indirectly) owning more than 10,000 stocks and 24,000 bonds, you just won’t go very far wrong. You’ll get some growth plus a good measure of stability.

If you like the target date concept but want a bit more equity exposure, it’s easy to pick a variation focused on a later year such as 2020 or 2025.

Vanguard LifeStrategy Funds

These funds of funds come in varying combinations of equity exposure, from 20% to 80%, though I’m excluding the most aggressive one from this discussion. All the bonds in these funds, by the way, are investment grade. No junk.

LifeStrategy Income Fund VASIX, typically holds only about 20% of its portfolio in equity funds, with the rest in bonds, perhaps a good fit for investors with ample resources (more than they think they’ll ever need, in other words) and those who are very skittish about the stock market.

LifeStrategy Conservative Growth VSCGX, doubles that equity stake to about 40%, perhaps the right choice for conservative retirees who want some growth but are not willing to go very far out on a limb to get it.

LifeStrategy Moderate Growth VSMGX, is very similar, but with a 60/40 split of equities and bonds. This provides more growth, although still without much excitement.

Two funds for retirees who don’t know a lot about investing

Often over the past 20 years I have recommended Vanguard Wellesley Income Fund VWIAX, and/or Vanguard Wellington Fund VWENX, .

For conservative retirees that I don’t know well, Wellesley has become what I regard as my best piece of advice.

Wellesley has been taking good care of investors since 1970. Its portfolio is normally 40% in equities, 60% in bonds. This is a low-cost actively managed fund, holding about 70 large-cap stocks (mostly value stocks) and about 1,300 bonds.

For those who are less conservative, Wellington is my go-to suggestion, especially for people who value a very long track record.

Wellington has been in business since 1929 and was the industry’s very first balanced fund.

Wellington’s typical 60/40 split of equities and bonds mirrors the way the trustees of many large pension funds invest. They know they need reliable long-term growth and that their portfolios must, in all circumstances, be able to pay their pensioners.

Wellington is actively managed, with about 60 large-cap stocks and about 1,100 bonds.

Note: My wife and I prefer an overall 50/50 allocation of equities and bonds. If that appeals to you, you could achieve that by splitting your money evenly between Wellesley and Wellington.

Two other Vanguard balanced funds are worth considering.

Vanguard Balanced Index Fund VBIAX, is index driven, holding about 60% of its portfolio in 3,300 U.S. mostly growth-oriented stocks and the rest in about 10,700 bonds.  

Vanguard Tax-Managed Balanced Fund VTMFX, is managed to minimize capital gains distributions and other taxable income, with a typical equity/bond split closer to 50/50. If you like that allocation along with lower tax bills, this fund could be for you.

Returns and risks

As you can see in the table below, levels of risk and return are indeed linked, but not always exactly what you would expect.

Funds are listed in order of their trailing 15-year compound annual growth rate (as of early October). For each, you’ll also see its performance during 2008, the worst calendar year for investors in a long time.

Table 1: Vanguard funds compared
Fund 15-year return 2008
Wellington 8.7% -22.2%
Balanced Index 8.33% -22.1%
Tax-Managed Balanced 7.51% -18.32%
Wellesley Income 7.26% -9.79%
LifeStrategy Moderate 6.65% -26.5%
Target Retirement 2015* 5.99% -24.1%
LifeStrategy Conservative 5.69% -19.52%
LifeStrategy Income 4.73% -10.53%
Short-Term Investment Grade 3.27% -4.65%
*Statistics for this fund reflect a period when the fund had a more aggressive allocation than it does now.

For more on these funds (plus four all-equity funds), check out a video presentation I made last year: “My 12 Favorite Vanguard Funds for Retirees.”


Vangaurd funds best

15 Best Vanguard Mutual Funds for Investors of All Stripes

When it comes to Vanguard mutual funds, you might think the universe of offerings is so large that it's impossible to pick the right options. We wouldn't blame you: Vanguard is one of the world's leading asset managers, with a staggering $7 trillion under management.

However, the truth is that Vanguard's mutual funds have risen to such dominance not because they are overly complex or numerous. The investment giant actually only offers about 130 or so mutual funds – many of which have been around and followed the same plan for decades.

That's the appeal of Vanguard: a tried-and-true approach to cost-effective, hands-off investing. You'll find super cheap index funds that are typical from Vanguard on this list of top mutual funds, but you'll also find actively managed options for investors who simply need help making sense of the markets.

Here are 15 of the best Vanguard mutual funds that span a variety of investing strategies. No matter what type of investor you are, you should be able to find at least a couple useful, low-cost options that align with your goals.

Data is as of July 22. Fund yields represent the trailing 12-month yield, which is a standard measure for equity funds, unless otherwise noted. Minimum initial investment for all funds listed here is $3,000.

1 of 15

Vanguard 500 Index Fund Admiral Shares

Vanguard 500 Index Fund Admiral Shares
  • Fund category: Large blend
  • Assets under management: $241.2 billion
  • Yield: 1.3%
  • Expense ratio: 0.04%, or $4 annually for every $10,000 invested

Vanguard 500 Index Fund Admiral Shares (VFIAX, $403.40) became Wall Street's very first index fund in 1975 at the behest of Vanguard founder Jack Bogle. Today, it remains one of the most popular ways to gain diversified exposure to the U.S. equity market in a single holding.

Sign up for Kiplinger's FREE Closing Bell e-letter: Our daily look at the stock market's most important headlines, and what moves investors should make.

This Vanguard mutual fund is deceptively simple, offering investors exposure to 500 mostly U.S.-based large- and mid-cap companies, which currently includes popular stocks such as Apple (AAPL), Microsoft (MSFT) and Nvidia (NVDA). In fact, because many of the largest companies on the planet are tech giants like these, information technology makes up about 27% of the entire fund.

Generally, Vanguard 500 Index is seen as a diversified and cost-effective core holding for almost any investor type that wants exposure to publicly traded U.S. companies. That makes it one of the best Vanguard mutual funds for just about any style of investor.

Note: VFIAX also trades as an ETF, the Vanguard S&P 500 ETF (VOO).

Learn more about VFIAX at the Vanguard provider site.

2 of 15

Vanguard Total Stock Market Index Fund Admiral Shares

Vanguard Total Stock Market Index Fund Admiral Shares
  • Fund category: Large blend
  • Assets under management: $257.6 billion
  • Yield: 1.3%
  • Expense ratio: 0.04%

Looking beyond just the biggest stocks on Wall Street, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX, $109.58) allows investors to take exposure to some 3,800 total positions. As the name implies, this accounts for almost the entire domestic stock market.

However, because VTSAX is weighted by size, it's still heavily invested in big tech stocks, with the sector accounting for the same share (27%) as VFIAX thanks largely to the same group of trillion-dollar Silicon Valley giants. Furthermore, the top 10 positions overall make up 22% of the entire portfolio despite the fact that thousands of other companies have fractional stakes in the makeup of this Vanguard mutual fund.

That results in a portfolio with a 70-17-6 large-mid-small blend for VTSAX, versus 85-15-0 for VFIAX – so, mildly more diversified by size, but still beholden to large-cap stocks. But that's enough of a difference for many investors to prefer Vanguard Total Stock Market Index over Vanguard 500.

Note: VTSAX also trades as an ETF, the Vanguard Total Stock Market ETF (VTI).

Learn more about VTSAX at the Vanguard provider site.

3 of 15

Vanguard Total International Stock Index Fund Admiral Shares

Vanguard Total International Stock Index Fund Admiral Shares
  • Fund category: Foreign large blend
  • Assets under management: $48.6 billion
  • Yield: 2.4%
  • Expense ratio: 0.11%

Looking beyond U.S. stocks, the Vanguard Total International Stock Index Fund Admiral Shares (VTIAX, $34.88) allows investors to supplement their core holding of U.S. stocks with international stocks – without overlapping positions. That's because VTIAX is ex-U.S., meaning it excludes all domestic stocks from the list of some 7,500 total holdings.

Right now, the region that dominates Vanguard Total International Stock Index is Europe, with about 40% of total assets in stocks such as Swiss foods giant Nestle SA (NSRGY) and French fashion and consumer goods giant LVMH Moet Hennessy Louis Vuitton (LVMUY). However, emerging markets are still well represented with more than 25% of assets tied up in regions including China, India and Brazil.

If you want to stick with the best Vanguard mutual funds as you supplement your core domestic holdings, VTIAX is a cheap and simple way to do so.

Note: VTIAX also trades as an ETF, the Vanguard Total International Stock ETF (VXUS).

Learn more about VTIAX at the Vanguard provider site.

4 of 15

Vanguard International Explorer Fund

Vanguard International Explorer
  • Fund category: Foreign small/mid growth
  • Assets under management: $2.8 billion
  • Yield: 1.0%
  • Expense ratio: 0.39%

Of course, a huge list of multinational stocks might not ultimately give you more diversification. Nestle is, after all, just as dependent on U.S. consumer tastes as many other domestic food companies. So, why not layer a more qualitative approach to your international investments instead of just picking big overseas stocks?

That's what Vanguard International Explorer Fund (VINEX, $22.46) does. The actively managed portfolio of roughly 530 foreign companies takes a more strategic tack than simply investing in big multinationals with recognizable names. For instance, top holdings include Dutch semiconductor company ASM International NV (ASMIY) and Japanese pharmaceutical firm Nippon Shinyaku – two firms that most U.S. investors probably haven't heard of, but that have nonetheless greatly outperformed the S&P 500 so far in 2021.

Furthermore, many of Vanguard International Explorer's holdings aren't easily accessed by the typical domestic investor. That's the real value of VINEX over the typical ex-U.S. index fund that focuses on high-profile multinationals.

If you're looking for true overseas growth potential, VINEX is likely one of the best Vanguard mutual funds for you.

Learn more about VINEX at the Vanguard provider site.

5 of 15

Vanguard Dividend Growth Fund

Vanguard Dividend Growth Fund
  • Fund category: Large blend
  • Assets under management: $51.2 billion
  • Yield: 1.5%
  • Expense ratio: 0.26%

The Vanguard Dividend Growth Fund (VDIGX, $37.40) emphasizes stability and income growth in a simple and cost-effective way.

How simple? Just more than 40 stocks make up this fund right now, with companies including healthcare giant Johnson & Johnson (JNJ), fast food icon McDonald's (MCD) and insurer UnitedHealth Group (UNH) near the top of the list.

Manager Donald Kilbride's mission is to target high-quality, typically large-cap companies that demonstrate the potential for (and typically the existing practice of) raising dividends. But sheer yield isn't the point – hence the 1.5% current yield, while modestly better than the S&P 500's 1.3% yield, is hardly a game-changing amount of income.

It's worth noting that while these entrenched stocks are more stable than the typical growth-oriented tech company that doesn't pay a dividend, this stability can result in investors leaving profits on the table when things are going well for Wall Street. Case in point: Even accounting for dividends, VDIGX has underperformed the S&P so far in 2021.

But if stability and income growth are important to you, VDIGX is one of the best Vanguard mutual funds you can buy. Morningstar notes that the fund offers extremely low risk compared to its peers in the large blend category.

Learn more about VDIGX at the Vanguard provider site.

6 of 15

Vanguard Selected Value Fund

Vanguard Selected Value Fund
  • Fund category: Mid-cap value
  • Assets under management: $6.7 billion
  • Yield: 1.1%
  • Expense ratio: 0.31%

Value investing involves looking for companies that have inherent value in their operations and aren't as reliant on future growth plans or the whims of Wall Street.

The Vanguard Selected Value Fund (VASVX, $30.26) is a respected option for those interested in this strategy. VASVX comprises about 120 stocks, primarily (93%) in the U.S., and commands a little less than $7 billion in assets under management.

Unlike some of the bigger and more passive index funds out there, actively managed Vanguard Selected Value's targeted approach and a focus on mainly mid-sized companies allows it to chase "deep value" investments instead of just the typical list of large cap consumer staples stocks you normally might see.

Case in point: Top holdings right now include Dublin-based airport lease company AerCap Holdings (AER), Canadian apparel company Gildan Activewear (GIL) and midsize American enterprise computing firm Arrow Electronics (ARW).

If you're stuck in the same old blue chips, this is one of the best Vanguard mutual funds for a breath of fresh air.

Learn more about VASVX from the Vanguard provider site.

7 of 15

Vanguard Explorer Fund

Vanguard Explorer Fund
  • Fund category: Small growth
  • Assets under management: $24.3 billion
  • Yield: 0.1%
  • Expense ratio: 0.41%

The flip side of value, of course, is growth. And the Vanguard Explorer Fund (VEXPX, $143.96) represents one of the best Vanguard mutual funds for those wanting to look beyond large-cap stocks to find growth opportunities off the beaten path.

The portfolio at present boasts 750 or so total positions, but a median market capitalization of just $6.4 billion. That could be appealing to investors who are skeptical that mature trillion-dollar companies can continue to outperform and grow at significant rates forever.

VEXPX's managers have heavily concentrated more than two-thirds of assets into just three sectors: Information technology (23%), healthcare (22%) and industrials (20%). Top holdings at present include Irish medical diagnostics company Icon (ICLR), apparel retailer Burlington Stores (BURL) and Silicon Valley cloud software firm Five9 (FIVN).

Smaller companies carry more risk, naturally, but they also theoretically possess much more potential over the long term. VEXPX is an inexpensive way to harness this potential.

Note: VEXPX also trades as Admiral class shares (VEXRX).

Learn more about VEXPX at the Vanguard provider site.

8 of 15

Vanguard Global Minimum Volatility Fund Investor Shares

Vanguard Global Minimum Volatility Fund Investor Shares
  • Fund category: World small/mid stock
  • Assets under management: $2.8 billion
  • Yield: 1.9%
  • Expense ratio: 0.21%

After the volatility of 2020, many investors started looking around for funds with a lower risk profile that would help preserve their nest egg in tough times. That's where the Vanguard Global Minimum Volatility Fund Investor Shares (VMVFX, $14.84) comes in, delivering a strategy that is designed to smooth out the bumps in the road for your portfolio.

To be clear, no investment is 100% risk free. But the actively managed fund specializes in both U.S. and foreign stocks that tend to "wiggle" less than their peers, which means VMVFX is more likely to hang tough when things go awry for Wall Street.

Perhaps unsurprisingly, the list of about 300 stocks is biased a bit toward healthcare (16%), technology (15%) and consumer staples (14%). Big tech mainstays such as Microsoft are among the top holdings, as this enterprise giant is too entrenched to go anywhere anytime soon, as are leading U.S. healthcare giants including J&J and Amgen (AMGN) that can rely on medical "customers" regardless of the broader economic environment.

A word of warning, however: While short-term disruptions are painful, the long-term trend of the stock market as a whole has always been higher. In fact, Vanguard warns in its official documentation that "we caution against expecting any low or minimum volatility investment to outperform, or even match, the global equity market over the long term."

In other words, VMVFX isn't an ideal path for growth. But it is one of the best Vanguard mutual funds for investors in need of a shorter-term insurance policy.

Note: VMVFX also trades as Admiral class shares (VMNVX).

Learn more about VMVFX at the Vanguard provider site.

9 of 15

Vanguard FTSE Social Index Fund Admiral Shares

Vanguard FTSE Social Index Fund Admiral Shares
  • Fund category: Large growth (ESG)
  • Assets under management: $13.8 billion
  • Yield: 1.0%
  • Expense ratio: 0.14%

While recent events on Wall Street may have many thinking about volatility, recent events on Main Street also have many investors thinking hard about social responsibility in their portfolio – and how they can have confidence that they're backing companies that align with their personal values.

The Vanguard FTSE Social Index Fund Admiral Shares (VFTAX, $42.78) is one answer to this question. This fund is benchmarked to the FTSE4Good US Select Index, a market cap-weighted index composed of just under 500 large- and mid-capitalization stocks that are screened for environmental, social, and corporate governance criteria – known by the acronym of ESG by most investors.

To be clear, this is an "exclusionary" index, meaning it simply kicks out stocks that do not meet minimum human rights standards or that engage in gambling or fossil fuel production. So in many ways, the list is quite similar to your typical large-cap index fund, with search giant Alphabet (GOOGL), EV maker Tesla (TSLA) and big bank JPMorgan Chase (JPM) near the head of the class.

Still, if you're looking for a simple and cost-effective way to cut out Big Oil or firearms manufacturers, VFTAX could be a good fit.

Learn more about VFTAX at the Vanguard provider site.

10 of 15

Vanguard Total Bond Market Index Fund Admiral Shares

Vanguard Total Bond Market Index Fund Admiral Shares
  • Fund category: Intermediate-term core bond
  • Assets under management: $80.0 billion
  • SEC yield: 1.3%*
  • Expense ratio: 0.05%

So far there have been a lot of Vanguard mutual funds on this list to play the stock market in various ways. However, bonds remain an important part of any well-rounded and long-term portfolio, both to provide reliable income as well as a way to smooth out volatility and reduce your risk profile.

The Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX, $11.42) is one of the best Vanguard mutual funds for fixed-income investors. It's a massive, simple and inexpensive way to gain broad exposure to U.S. "investment-grade" bonds. 

Primarily, the fund invests in U.S. Treasuries and mortgage-backed securities (MBSes) of all maturities, from bonds due in just a few years to long-term issues that won't mature for a few decades. About two-thirds of the fund is in these government-backed bonds, while the rest is in top-tier corporations including issuers such as Bank of America (BAC).

Unfortunately, with interest rates steadily sliding lower over the last several years, Vanguard Total Bond Market Index yields a mere 1.3%. However, that's about the same as the S&P 500 – and considering the U.S. Treasury and high-quality corporate bonds are a lot more stable than your average stock, that payday comes with a significantly lower risk profile.

Just be aware that, as with other bond funds out there, increases in interest rates might cause the price of the bonds in the portfolio to decrease in face value. So if rates start to rise, VBTLX could experience some short-term pain.

Note: VBTLX also trades as an ETF, the Vanguard Total Bond Market (BND).

* SEC yield reflects the interest earned after deducting fund expenses for the most recent 30-day period and is a standard measure for bond and preferred-stock funds.

Learn more about VBTLX at the Vanguard provider site.

11 of 15

Vanguard Short-Term Treasury Fund Investor Shares

Vanguard Short-Term Treasury Fund Investor Shares
  • Fund category: Short-term government bond
  • Assets under management: $7.9 billion
  • SEC yield: 0.0%
  • Expense ratio: 0.20%

If stability and safety are your primary goals, the Vanguard Short-Term Treasury Fund Investor Shares (VFISX, $10.71) is an alternative to VBLTX's whole universe of investment-grade bonds, instead focusing solely on short-term Treasury bonds.

This reduces your risk profile significantly in two important ways. For starters, you're not taking on any corporate debt and instead rely wholly on the U.S. government as the borrower of choice. If Uncle Sam goes bankrupt, we all have much bigger problems than our 401(k), after all.

Secondly, it's important to understand that the "duration" of these loans to the government are only just a few years; right now, the average duration of bonds held by VFISX is just 1.9 years, which effectively means a 1-percentage-point increase in rates should cause VFISX to decline by just 1.9%.

The farther out in time you go the harder it is to predict things, but even if you believed Washington was going to be doomed eventually, a mere two years isn't a lot of time for the entire Treasury Department to fall apart.

The big tradeoff for this level of certainty is the small premium investors get paid on these loans to the federal government. Specifically, the yield on VFISX right now is a measly 2 basis points (0.02%). Even in times of meager inflation, that return on your investment capital likely won't maintain its purchasing power over the next few years.

That's why many investors use this kind of fund as a short-term holding place for cash until they're ready to redeploy it.

Note: VFISX also trades as Admiral class shares (VFIRX).

Learn more about VFISX at the Vanguard provider site.

12 of 15

Vanguard Inflation-Protected Securities Fund Investor Shares

Vanguard Inflation-Protected Securities Fund Investor Shares
  • Fund category: Inflation-protected bond
  • Assets under management: $37.0 billion
  • SEC yield: -1.7%
  • Expense ratio: 0.20%

Speaking of inflation, the actively managed Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX, $14.69) offers an interesting investment or hedge for those that are worried about rising prices over the long-term. This fund is designed to protect your portfolio through a focus on Treasury Inflation Protected Securities, or TIPS.

This special class of bonds is not only backed by the full faith and credit of the federal government, but it's also indexed to inflation. In other words, should runaway inflation hit, you will see the value of VIPSX increase in kind to protect you.

This might sound so good, you wonder why any investor would ever go after conventional bonds in an inflationary environment. However, it's important to note that the potential gain in principal value you'll enjoy is offset – or depending on market conditions, sometimes more than offset – by a reduction in yield. Consider that the specter of inflation has caused the yield on recently issued TIPS to actually turn negative, with VIPSX yielding -1.7% at present.

This is a real risk in TIPS, which saw negative yields for the first time in 2010 after fears of inflation in the wake of the global financial crisis and related government bailouts. It's also worth noting that despite these fears, inflation ran at a roughly 1.6% annualized rate in 2010 – hardly enough to justify those negative yields.

But if you're really concerned about inflation, VIPSX is one of the best Vanguard mutual funds you can buy.

Note: VIPSX also trades as Admiral class shares (V).

Learn more about VIPSX at the Vanguard provider site.

13 of 15

Vanguard High-Yield Corporate Fund Investor Shares

Vanguard High-Yield Corporate Fund Investor Shares
  • Fund category: High-yield bond
  • Assets under management: $29.6 billion
  • SEC yield: 2.8%
  • Expense ratio: 0.23%

If you're interested in income from the bond market, then the Vanguard High-Yield Corporate Fund Investor Shares (VWEHX, $6.00) is worth a look. This actively managed fund is well established, with about $30 billion in total assets under management, and ranks as one of Kiplinger's 25 favorite mutual funds.

VWEHX seeks a higher level of income than is normally provided by more credit-worthy borrowers in the bond market by investing primarily in corporate securities from slightly tarnished firms. Among the positions in the fund right now are bonds from printing producer Xerox (XRX) and casino operator Caesars Entertainment (CZR). Obviously, there's more risk in lending to companies like this than mega-cap mainstays, but there's also a better rate of return on that investment if these companies continue to make good on their debt payments.

How much better is that rate of return? The current SEC yield of 2.8% is more than double the yield on the S&P 500, and considerably better than most large-cap dividend funds and investment-grade bond funds.

Also, with more than 600 different bonds to build in some diversification, chances are that even if a few of these investments go south, Vanguard High-Yield Corporate will remain a solid performer in the long term.

Note: VWEHX also trades as Admiral class shares (VWEAX).

Learn more about VWEHX at the Vanguard provider site.

14 of 15

Vanguard Wellington Fund Investor Shares

Vanguard Wellington Fund Investor Shares
  • Fund category: Allocation (50%-70% equity)
  • Assets under management: $120.3 billion
  • Yield: 1.7%
  • Expense ratio: 0.24%

The nearly century-old Vanguard Wellington Fund Investor Shares (VWELX, $49.03) isn't just one of the best Vanguard mutual funds on offer. It's also the oldest, and it also claims to be the nation's oldest "balanced" fund, looking to allocate investors into a mix of stocks and bonds for a more diversified approach than sticking to just one asset class.

Founded in 1929, this Kiplinger 25 selection aims to keep about two-thirds of the portfolio in stocks and the other third in bonds for broad diversification. Though bonds are the "smaller" part of the portfolio, VWELX still holds nearly 1,100 different debt issues, giving this fund a very diversified view of this asset class.

Conversely, while stocks represent two-thirds of the total portfolio, Wellington's managers only have 60 total positions at the moment. That said, the mix of industries is still decent; technology is the largest sector by weighting (20%), but five other sectors rank around 10% or more for a broad look at the equities market.

All this balance comes at a very low cost, with a fee structure that is quite affordable when compared with other diversified asset allocation funds.

Editor's note: VWELX and the Admiral class VWENX shares are currently closed to new investors unless they purchase directly through a Vanguard brokerage account.

Learn more about VWELX at the Vanguard provider site.

15 of 15

Vanguard LifeStrategy Growth Fund

Vanguard LifeStrategy Growth Fund
  • Fund category: $20.8 billion
  • Assets under management: $20 billion
  • Yield: 1.6%
  • Expense ratio: 0.14%

Rounding out this list of the top Vanguard mutual funds is one of its premier "funds of funds" – the Vanguard LifeStrategy Growth Fund (VASGX, $44.11), which is an amalgamation of other offerings, including some of the picks already mentioned on this list.

The idea is pretty simple: If you're an investor who wants to cover multiple asset classes and take a holistic approach to your portfolio instead of picking and choosing individual positions, VASGX will balance things out for you.

Right now, VASGX's five holdings include domestic equity fund Vanguard Total Stock Market at 49% of the fund, foreign stock fund Vanguard Total International (32%), Vanguard Total Bond Market II (VTBIX, 14%) to represent investment grade U.S. bonds, and then Vanguard Total International Bond Fund (VTABX) and Vanguard Total International Bond II Index Fund (VTIIX) providing overseas fixed-income exposure to round out the fund.

You have all your bases covered in one fund here. This is all many investors need to approach their portfolio in a single position. However, be aware that if you don't like this mix, you don't really have much say in customization of the fund.

Learn more about VASGX at the Vanguard provider site.

The 7 Best Vanguard Index Funds To Buy For Financial Freedom

Vanguard Funds - 10 Best Vanguard Mutual Funds

Top-Rated Vanguard Mutual Funds as of 8/31/21

Fund Name, Ticker, Overall Rating, (Risk Grade)

  1. Vanguard OH Long Term Tax Exmpt Inv  (VOHIX) - Get Vanguard OH Long-Term Tax-Exmpt Fd Report A+ (C+)
  2.  Vanguard Info Tech Ind Adm  (VITAX) - Get Vanguard Information Tech Index Adm Report A+ (C) 
  3. Vanguard Russell 1000 Gro Idx Inst  (VRGWX) - Get Vanguard Russell 1000 Gr Indx Inst Report A+ (C) 
  4. Vanguard PA Long Term Tax Exmpt Inv  (VPAIX) - Get Vanguard PA Long-Term Tax-Exmpt Inv Report A+ (C+) 
  5. Vanguard Interm Term Tax Exempt Inv  (VWITX) - Get Vanguard Interm-Term Tax-Exempt Inv Report A+ (B-) 
  6. Vanguard Mega Cap Gr Index I  (VMGAX) - Get Vanguard Mega Cap Growth Idx Instl Report A+ (C) 
  7. Vanguard Comm Serv Admiral  (VTCAX) - Get Vanguard Communications Svcs Adm Report A+ (C+) 
  8. Vanguard Growth Index Adm  (VIGAX) - Get Vanguard Growth Index Adm Report A+ (C) 
  9. Vanguard Tax Exempt Bond Index Adm  (VTEAX) - Get Vanguard Tax-Exempt Bond Idx Admir Report A+ (C+)
  10. Vanguard HealthCare Index Adm  (VHCIX) - Get Vanguard Health Care Index Adm Report A+ (C+)

TheStreet Ratings' mutual fund rating model compiles and examines financial data on a monthly basis to gauge a mutual fund's risk-adjusted return compared to its competitors.

The model scores funds on various factors including: risk and reward. The aim is to deliver investors with investment ideas that we feel have the best chance at delivering top risk-adjusted returns.

The 10 Vanguard mutual funds (listed above) are ranked highest by TheStreet Ratings' methodology.

Best Mutual Funds For 2021

Mutual Fund Center


Now discussing:


239 240 241 242 243