#best #vanguard #bond #funds
The 8 Best Vanguard Funds That You Should Buy
We re big fans of Vanguard, but admittedly, it s a bit more complicated than Betterment. Today we ll break down what we think are the 8 best Vanguard funds, which balance both performance and cost.
Details are below but if you re looking for a deeper dive on our logic as well as some colorful commentary than check out the podcast episode we did on this:
1. Total Stock Market (ETF) VTI
This ETF is Vanguard s flagship fund and in our opinion, their best. It s a blend of Large, Mid and Small cap companies in the US. It s the lowest fee we ve ever seen on a fund, and it s largely because the fund tracks a few smaller indexes allowing it to be largely automated .
Often when people mention they re invested in Vanguard, they are referring to this fund.
2. Target Retirement 2050 Fund (Investor Shares) VFIFX
This fund is a lifecycle fund. so it starts out with mostly stocks and slowly tapers into bonds over time. The point is you take on risk now while you’re young and slowly reduce risk as you reach retirement age, so big market swings don’t wipe out your retirement money.
While this fund isn t their best regarding the fee, it covers a much-needed gap in most people s portfolio. As you know, we re big fans of buy and hold, and this fund fits in there perfectly.
2050 corresponds to your typical retirement date usually when you re 59 1/2. We often find ourselves picking funds with dates well past typical retirement age, so we get something a bit more growth focused early on.
3. 500 Index Fund (Admiral Class) VFIAX
This fund was the industries first for individual investors. Invest in 500 of the biggest, baddest companies based in the US. By definition, this fund is filled with the best Large Cap companies, and since it focuses on the biggest companies in the US, it s the closest to tracking the US economy.
The air is crisp in Admiral.
4. REIT Index Fund (Admiral Shares) VGSLX
Why own a property and rent it when your money gets stuck in the home, and there is so much work to be done? Instead, invest in a REIT and take rental profit and liquidity. Have your cake and eat it too. This index fund is not just a REIT but a fund of many REITs. so you’re heavily diversified in the rental game.
We ve seen how much work it takes to manage properties, so we prefer to offload that work to someone else and just take profits. This fund does that exceptionally well.
5. Growth Index Fund (Admiral Shares) VIGAX
With the Growth Index, Vanguard picks high-growth companies that will knock it out of the park for you. It’s a bit riskier, but the returns are solid.
Even though the focus is on high growth companies, the fund follows a buy and hold approach where once they locate a stable company they stay invested in them for awhile.
6. Strategic Equity Fund (Investor Shares) VSEQX
Like the Growth Index fund but smaller companies, potentially higher growth and a large portion of the fund’s composition is chosen by a computer. The fee is the highest here because proportionately the most amount of work goes into running this fund. 0.29% isn’t a big fee by a long shot, but I do think it’s important to note.
Also, again, this one’s the riskiest of the bunch. Of your Vanguard investments, we wouldn’t recommend making this one more than 10% of the total amount you invest .
7. Total International Stock Index Fund (Investor Shares) VGTSX
Similar in approach to our #1 choice, VTI, only this fund focuses only on companies outside the US. The fund covers both developed and emerging markets.
It s pretty volatile, so we keep it as a small portion of our portfolio to help offset our heavy US exposure.
8. Total Bond Market (ETF) BND
Any well-balanced portfolio has bonds in it. They re much less sexy than stocks but are also much less risky. When you re young, 10% of your portfolio should be in something similar to BND, and as you get older, you ll increase that percentage significantly. Not coincidentally, this approach is very similar to what is already baked into a lifecycle fund (fund #2). This ETF is by far the best bond fund that we have seen for the price.
All the bonds that are in this fund are investment grade, and it s recommended that you hold this fund in the medium to long term based on its contents.
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LMM Ultimate Investor Strategy Blueprint: Andrew s article that lays some of the above information out in greater details.
Great show, great website, and overall very informative. I am a new investor and please excuse my ignorance if this question is answered somewhere else in the articles:
Would there be any particular down fall to investing in some of the funds mentioned above by buying the ETFs instead of Investor or Admiral Shares? I like the zero minimum of the ETFs. Seems like I can get my feet wet with a few Vanguard Funds if there is no minimum.
I think it would be perfectly find to invest in the ETFs and in fact, I d highly recommend it. While there are a bunch of small nuanced differences between the two I think the biggest thing is you can t automatically invest in ETFs like you can with Mutual Funds. We re very big on consistent monthly investing (even in small amounts) that s why we recommend the Mutual Funds.
Also, if you buy the ETFs available with any brokerage account, you ll be hit with transaction fees so open an account directly with Vanguard.
Hope that helps!
It makes no sense to have a target fund if you are going to have other funds as well. To me, it is all or nothing with those funds.
There is a school of thought that VTI alone is enough. Though it is US focused, most of it s holding companies have sizable international revenues, anywhere from 20-80%. So, in effect, you are getting the benefit of global investing without the governance risks associated with international companies with opaque rules and less regulated capital markets.
True and to an extent I agree. That said, I do think there is value in small cap funds, emerging markets and real estate.
It s almost cliche to talk about diversification at this point but when you have a lot to lose you really want to make sure a bubble doesn t wipe you out.
the date of your articles should be prominently displayed. I couldn t find one for this article at all.
is there an additional fee for VFIFX if the initial investment is below a certain amount? I have seen minimums of both $3,000 (with no explanation of correlating fees) and $10,000 (fee being $20 annual). it showed an out if you work electronically, but I was confused as to whether that meant directly through Vanguard. I use tdameritrade to manage my Roth IRA. I just started saving and am only working with $800 right now, so I was trying to buy $300 worth, but cancelled the order cause I got spooked. (
My apologies if this is some basic bish ish not worth your time, no worries if you can t respond
Hah, no worries dude. Sometimes my slowness works to my benefit 😉
I would suggest opening a Vanguard account specifically since there are no transaction fees associated with it. This fund aside, if you re going to be DIY than most of what you ll buy will be Vanguard so it makes sense to consider future fees beyond that initial $50.