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Today we’re going to focus on the best Vanguard funds that you should focus on in your portfolio. If you’re like most people, the whole process of learning what the best investments are and how to invest in them can be pretty overwhelming. But don’t worry, we’re here to help!
Vanguard is one of the largest investment companies globally, and they offer a wide variety of different funds to choose from. But they have so many options to check out that it can be mind-boggling to find the best options.
So if you want to know which are the cream of the crop to invest in, read on to learn more about Vanguard funds.
Table of Contents
Quick Picks
Since most funds have a minimum investment of $1,000 and $3,000, here are the top picks for each with a low expense ratio:
- Invest $1,000, Best Expense Ratio: Vanguard Target Retirement Funds (VTINX)
- Invest $3,000, Best Expense Ratio: Vanguard 500 Index Fund (VFIAX)
Besdies that, we figured you may want to know about some investment platforms we’ve used to invest online, so here are our 4 favorite apps:
- Best Robo-Advisor: Betterment
- Best App For Beginners: Robinhood
- Best Pre-Made Portfolios: M1 Finance
- Best For Investing Spare Change: Acorns
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Vanguard Index Funds
Many people prefer Vanguard index funds, a type of mutual fund that tracks an index, such as the S&P 500 (the “standard” or benchmark), and allows investors to invest in large-cap stocks at lower fees than most common shares.
The first index fund was introduced in 1976 by Vanguard. It tracked the Standard & Poor’s 500 Index (S&P 500), comprising 500 large-cap U.S. stocks. The S&P 500 is often used to benchmark the U.S. stock market.
One of the great things about Vanguard is that they offer both index funds andactively managed funds.So let’s talk about those quickly before we dive into the best Vanguard funds.
What Are Index Funds & Mutal Funds?
An index fund tracks a specific market index like the S&P 500; a team of professionals manages active funds; and target retirement funds, which automatically adjust your asset mix as you get closer to retirement age.
An index fund is a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor’s 500 Index (S&P 500).
When you invest in an index fund, you buy small pieces of many different stocks or other investments that represent companies across an entire stock index, which reduces your overall risk.
And, because index funds are passively managed, fund managers do not actively manage them. They have lower fees than actively managed funds.
A mutual fund is a collection of different investments – like stocks, bonds, etc. – that are managed by a team of professionals.
Actively-managed mutual funds are a bit different in that the team of professionals managing the fund actively buys and sells investments to outperform the market. And while they do have the potential to generate higher returns, they also come with higher fees.
Terms Your Should Know
Since you may be new to investing and the terminology can be hard to navigate, here’s a quick list of terms you should know:
- Exchange-Traded Fund(ETFs):ETFs are funds that trade on an exchange like a stock. They usually track an index, such as the S&P 500, but they can also track commodities, bonds, or a basket of assets.
- Diversified Portfolio:A diversified portfolio is an investment strategy that involves spreading your money across various asset types. The goal is to minimize risk by having a mix of investments that will perform differently in different market conditions.
- Expense Ratio:Theexpense ratiois the factor that reflects how much a mutual fund or ETF pays for its portfolio management, administration, and marketing costs. It is almost always shown as a percentage (instead of a dollar amount) of the fund’s average net assets.
- Index Funds:An index fund is a fund that invests in a group of securities that track a particular index. They offer investors a simple and efficient way to invest money in various companies.
- Mutual Funds: Mutual funds are a type of investment that pools together money from many investors and invests it in various securities, like stocks, bonds, and other assets.
- Minimum Investment:Minimum investment is the smallest amount of money you can invest in a fund. For example, many online brokerages have a minimum investment required to open an account.
- Robo-Advisor:A Robo-advisor is a digital platform that provides automated, algorithm-based financial planning services without human advisors.
- Mid-cap Stocks:Mid-cap stocks are stocks of companies with a market capitalization between $2 billion and $10 billion.
- Large-cap Stocks:Large-cap stocks have a market capitalization of $10 billion or more. They are the stocks of companies with a large market value.
- Asset Mix:When people refer to an “asset mix,” they usually talk about the different types of investments that make up a portfolio. For example, a portfolio with a 60/40 asset mix would have 60% of its money invested in stocks and 40% in bonds.
- Long-Term Bond Fund:A long-term bond fund is an investment fund that specializes in investing in bonds with long maturities, typically 10 years or more. They are less sensitive to interest rate changes than shorter-term bonds, making them an attractive option for investors who are looking for stability and income.
- Actively Managed Fund:An actively managed fund is a type of investment fund where a professional money manager, or team of managers, hand-picks the individual securities that will be held in the fund. The fund managers make decisions about what to buy and sell based on their research and analysis of the market and specific companies.
11 Best Vanguard Funds
1. Vanguard 500 Index (VFIAX)
PerMorningstar:
- Minimum Investment: $3,000
- Expense Ratio: 0.040%
The Vanguard 500 Index Fund Admiral is a mutual fund that tracks the Standard & Poor’s 500 Index, consisting of large-capitalization stocks.
Vanguard Group manages the fund, and it has been in operation since 1976. As of February 7, 2022, the fund had assets under the management of $251.2 billion.
The Vanguard 500 Index is one of the largest and most popular index funds globally, and it is often used as a benchmark by other investors. The fund has a low expense ratio of 0.040%, and it is available to investors through various brokerage firms.
2. Vanguard STAR (VGSTX)
PerMorningstar:
- Minimum Investment: $1,000
- Expense Ratio: 0.310%
If you’re looking for a lower-cost, diversified way to invest in stocks, Vanguard STAR (VGSTX) is worth considering.
This fund offers exposure to an investor share class of 10 actively managed Vanguard funds, making it an excellent choice for investors who want to build a well-rounded portfolio.
As of March 8, 2022, the ratio is just 0.310%, which is reasonable for an actively managed fund. And the minimum investment is just $1,000, making it accessible for investors with limited capital.
Overall, Vanguard STAR looks like a solid option for anyone interested in stocks.
3. Vanguard Growth Index Fund (VIGAX)
PerMorningstar:
- Minimum Initial Investment: $3,000
- Expense Ratio: 0.050%
The Vanguard Growth Index Fund Admiral shares (VIGAX) is a mutual fund that comprises mid and large-cap stocks that exhibit above-average growth potential.
VIGAX is a passively managed fund, so it relies on computer models to select and weigh the underlying securities in the index.
This hands-off approach helps keep expenses low, and these savings can add up over time.
Vanguard is well-known for offering some of the lowest-cost mutual funds, and VIGAX is no exception. The ratio for this fund is just 0.05%, which is significantly below the average for growth stocks.
Investors in VIGAX can choose between two share classes: Investor Shares (VIGRX) and Admiral Shares (VIGAX). Both share classes have identical holdings, but Investor Shares carry a higher expense ratio (0.17%) and require a minimum initial investment of $3,000.
As of July 19, 2021,Admiral Shareshave a lower expense ratio (0.170%) and require a minimum initial investment of $3,000.
4. Vanguard Target Retirement Funds (VTINX)
PerMorningstar:
- Minimum Initial Investment: $1,000
- Expense Ratio: 0.080%
Vanguard Target Retirement Funds (VTINX) are a great way to save for retirement without worrying about picking individual stocks or managing your portfolio yourself.
Depending on when you plan to retire, they offer various options and automatically adjust your asset mix as you get closer to your retirement date, so you’re not taking on too much risk.
They have low expense ratios as of February 24, 2022, which means you can keep more of your money.
Vanguard Target Retirement Funds are a great option if you’re looking for a hands-off approach to retirement savings.
5. Vanguard Wellesley Income (VWINX)
PerMorningstar:
- Minimum Initial Investment: $3,000
- Expense Ratio: 0.230%
Vanguard Wellesley Income (VWINX) is a conservative investment option that seeks to provide current income and limited capital appreciation.
The fund invests in a combination of stocks and investment-grade bonds, emphasizing large-cap dividend-paying stocks.
While the ratio for this fund is slightly higher than some of Vanguard’s other options, at 0.23%, it is still relatively low compared to other actively managed funds.
Vanguard Wellesley Income is worth considering for investors looking for a conservative income option.
6. Vanguard Balance Index (VBIAX)
PerMorningstar:
- Minimum Initial Investment: $3,000
- Expense Ratio: 0.070%
Vanguard Balance Index Fund Admiral Shares (VBIAX) is an investment index fund that invests in stocks and bonds and provides investors with a diversified portfolio that can generate long-term growth.
The fund has a lower ratio and a minimum $3,000 investment, making it accessible to many investors.
To balance growth through equities with stability through fixed-income investments, the fund mixes its assets between equities (about 60%) and bonds (about 40%).
If you’re looking for a low-cost index fund to help you reach your investing goals, the Vanguard Balance Index (VBIAX) could be a good option.
7. Vanguard Total Stock Market Index (VTSAX)
PerMorningstar:
- Minimum Investment: $ 3,000
- Expense Ratio: 0.040%
The Vanguard Total Stock Market Index Fund Admiral Shares tracks the investment results of the CRSP U.S. Total Market Index.
It is an excellent way to gain exposure to investing in the U.S. equity market. It includes over 3,000 stocks and tracks the performance of the entire U.S. stock market.
As of March 7, 2022, the fund has a lower ratio of just 0.04%, making it one of the most cost-effective ways to invest in U.S. stocks.
The fund is well-diversified, with asset allocation in small, mid, and large-cap stocks and value stocks.
This makes it an excellent choice for anyone looking for a simple, low-cost way to invest in the U.S. stock market.
8. Vanguard Total Bond Market Index (VBTLX)
PerMorningstar:
- Minimum Investment: $3,000
- Expense Ratio: 0.050%
The Vanguard Total Bond Market Index (VBTLX) is worth considering as a solid investment with a good track record.
It has a lower ratio of just 0.05%, which is impressive for a bond fund with broad exposure to the bond markets with 30% corporate bonds and 70% in U.S. government bonds.
And because it’s an index fund, you can expect a high level of diversification, with over 9,000 different investment-grade bonds included in the portfolio.
So if you’re looking for a safe and stable investment that has the potential to provide reasonable returns, VBTLX is worth checking out.
9. Vanguard Small-Cap Index Fund (VSMAX)
PerMorningstar:
- Minimum Investment: $3,000
- Expense Ratio: 0.050%
For investors who want to diversify away from more prominent public companies, the Vanguard Small-Cap Index Fund (VSMAX) is an index fund that targets smaller privately held firms.
The fund has a ratio of 0.05% and has a minimum investment is $3,000, and there is no load or transaction fee.
The fund has a four-star rating from Morningstar and has outperformed its benchmark index over the past three- and five-year periods.
10. Vanguard Total International Stock Funds (VTIAX)
PerMorningstar:
- Minimum Investment: $3,000
- Expense Ratio: 0.050%
The low-cost Vanguard Total International Stock fund allows investors to gain exposure to worldwide stocks in developed and emerging markets.
The fund is managed globally, except in the United States. It may be more volatile than a domestic fund because it invests in non-U.S. equities, including those from developed and emerging markets.
Long-term investors interested in adding a diversified international equity position to their portfolio may wish to consider this fund as an alternative.
11. Vanguard Real Estate (VGSLX)
PerMorningstar:
- Minimum Investment: $3,000
- Expense Ratio: 0.120%
Vanguard Real Estate Index Fund Admiral Shares (VGSLX) is an excellent investment for anyone interested in the real estate market.
For starters, the Vanguard Real Estate ETF has a low ratio of only 0.12%, so you won’t have to worry about eating into your profits with high fees.
This fund invests in real estate investment trusts (REITs) and firms that acquire office buildings, hotels, and other real estate property.
Because REITs have often behaved differently than equities and bonds, this fund may provide some diversification to a portfolio that is already comprised of stocks and bonds.
The fund’s dividend income may be higher than other funds’, but it comes with risk.
Because the fund focuses solely on real estate and is more volatile than more diversified stock funds, its limited scope exposes investors to greater market volatility.
How To Invest In Vanguard Funds
Index fund shares can be purchased in two ways: directly from Vanguard or by creating a brokerage account.
Purchasing Directly From Vanguard
Purchasing index funds directly from Vanguard requires opening a Vanguard account and then applying to purchase the desired fund.
- First, decide what type of Vanguard fund you want to invest in, such as Vanguard Exchange Traded Funds.
- Once you’ve decided on the type of fund you want to invest in, the next step is to figure out how much money you want to invest.
- Vanguard recommends starting with at least $3,000, but you can start with more or less in some accounts.
- From there, you’ll need to open up a Vanguard account online. Vanguard will review your account application. It can take up to five days for the review.
- Once your account is open, you can transfer money from your bank account into your Vanguard account.
- Now you’re ready to purchase your desired fund!
Purchasing Through A Brokerage Account
It’s important to remember that not all brokerages offer Vanguard index funds. When choosing a broker, be sure to check whether or not they offer access to Vanguard funds if that’s what you mainly want to invest in.
Another thing to remember is that some brokerages may charge a commission for each trade, so it’s essential to compare costs before deciding where you open the index fund account.
Fees & Cost
When it comes to fees, Vanguard index funds are hard to beat. The key advantage of index funds is that they provide diversification at a lower cost.
Thefees they chargeare:
Account fees
A $20 per year charge applies to each brokerage and mutual fund account.
Individual retirement accounts (IRAs), Simple IRAs, Individual 401(k)s, and Vanguard 529 Plan accounts all have annual service fees, ranging from $5 – $25 per year.
Personal Advisor Services asset management fee
Vanguard Personal Advisor Services® charges just 0.30% of assets under management each year, making it one of the more cost-effective investment companies available.
Digital Advisor asset management fee
The fee for Vanguard Digital Advisor is just 0.15% of assets under management.
Investing 101
How To Invest
It can be tough to figure out how to invest with so many choices like a Vanguard Mutual Fund, Vanguard Dividend Appreciation ETF, or bond fund.
But don’t stress – here are a few tips to get individual investors, like you, started on the right track.
First, think about what you’re trying to achieve with your investment. What are your investment objectives?
This will help narrow down your choices and make finding investments that align with your goals in investing money easier.
Next, take a look at your risk tolerance. This is important because investments can fluctuate in value, and you don’t want to lose money if the market takes a turn for the worse.
Finally, do some research before you jump into investing in an exchange-traded fund, mid-cap stocks, or long-term bond funds and their past performance.
There’s a lot to learn about investing, and it’s essential to understand the basics before putting your hard-earned money on the line.
Once you’ve done your homework, you’ll be better positioned to make smart investment decisions and start earning some passive income from the dividends.
Other Investment Platforms
There are a lot of different investment platforms out there, and it can be hard to know which one is right for you.
I’ve researched and compiled a list of some of the most popular options:
TD Ameritrade
TD Ameritrade is a popular online broker that offers a variety of investment products, including stocks, bonds, mutual funds, and ETFs.
The company also provides research and analysis tools to help customers make informed investment decisions.
Charles Schwab
Charles Schwab is another popular online broker that offers a wide range of investment products and services.
They have a great online platform that makes it easy to buy and sell stocks, and their fees are very reasonable. Plus, they offer plenty of resources to help you learn about investing.
Fidelity Investments
Fidelity Investments is a leading investment management and financial services provider. The company offers a wide range of products, including mutual funds, stocks, bonds, etc.
Fidelity also provides financial planning services, retirement planning services, and more.
Other Investment Options
When looking for other investment options, you want to look at all the features they offer. Some offer free stocks; others offer commission-free trading.
Here are some of our favorite options:
Robinhood
If you’re looking for something with a little more excitement, Robinhood might be a good fit. They offer commission-free trading on stocks and Exchange Traded Funds (ETFs).
Check out our Robinhood review for more info.
Get 2 Free Stocks Now From Robinhood
Betterment
Want hands-off investing? Betterment is a Robo-advisor that offers a variety of investment products, including stocks and ETFs.
Plus, they offer automatic rebalancing and tax-loss harvesting to help you maximize your returns.Find out more in our Betterment review!
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Acorns
Acorns is an app that allows you to invest spare change from your everyday purchases into ETFs and more.
So if you buy something for $3.50, Acorns will round up to $4 and invest the extra 50 cents.
Learn more in our Acorns review!
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M1 Finance
M1 Finance is perfect for those who want to invest in stocks and ETFs but don’t want to pay high broker fees.
With M1, you can create a custom portfolio that fits your needs or pick a pre-made portfolio. Our M1 Finance review will tell you everything you need to know.
Use Pre-Made Portoflios For Easy Investing
Fundrise
If you’re interested in investing in real estate but don’t have the cash to buy a property outright, crowdfunding could be a good option.
With platforms like Fundrise, you can invest in various real estate projects and share profits.
Invest In Real Estate For Less Here
Key Takeaways: Best Vanguard Funds
No matter your investment goals, there are sure to be other investment options that are perfect for you.
If you want to invest your money wisely and safely, don’t think twice before choosing one of the best Vanguard funds mentioned above. Index funds are a great way to diversify your portfolio and reduce investment risk.
By doing market research and investing in one of the best Vanguard funds, you’re putting money into stocks or bonds that will grow as the market grows – with little worry about losing any particular profits because they can come from so many sources!
So there you have it- a few tips to get you started investing and some smart investment options to pick from. With a bit of time and effort, you’ll be an investing pro in no time!
