Many investors use funds as their primary way to put their money to work, and the Vanguard Group has been a leader in making low-cost funds available for their clients to invest in. In particular, Vanguard is especially well-known for its top-performing index funds, which are among its most popular fund offerings. But the company also has some highly rated funds that are actively managed. Below, we'll look at some of the best Vanguard funds in the market.
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The Best Vanguard Funds
Data source: Vanguard Group.
Sticking with the indexes
Many investors decide that index funds are the easiest way to invest. They won't offer the chance to beat the market, but they also don't run the risk of underperforming major market benchmarks. Given how the majority of actively managed mutual funds can't match up to the benchmarks that they strive to beat, index funds can be appealing, and Vanguard's index funds offer some of the lowest costs in the market.
The short list above gives only a tiny sampling of the dozens of index funds that Vanguard investors can choose. The 500 Index Fund was the pioneer in the indexing world, having been around since the 1970s and having as its goal the simple strategy of matching the returns of the S&P 500 Index. The Total Stock Market Index Fund takes a broader approach, adding in small-cap and mid-cap U.S. companies to present a more complete picture of the domestic stock market. With U.S. stocks having been so strong lately, these returns have been impressive.
Vanguard also caters to those with broader investing horizons. The Total International Stock Fund offers exposure to the entire global stock market outside the U.S., including both the industrialized economies of Japan, Europe, Canada, and Australia as well as the emerging-market economies of China, Latin America, and Asia. Returns have been muted because of the strong U.S. dollar, but longer-term performance has been more encouraging.
Image source: Vanguard.
Finally, to include other asset classes, funds like the Total Bond Market Index Fund and the REIT Index Fund bring fixed-income exposure to a portfolio. The Total Bond Market Index Fund includes a wide range of different types of bonds, including both government and corporate bonds, and they span the maturity spectrum from short-term bonds to securities that won't mature for decades to come. Meanwhile, the REIT Index Fund offers exposure to real estate investment trusts, which have benefited from the low interest rate environment and the strength in the residential and commercial real estate market in recent years.
For those seeking more tailored exposure to smaller sets of investments, Vanguard's other index funds can help you drill down on certain sectors, sizes of companies, and geographical regions of the world. Universally, low expenses and solid returns make Vanguard's index funds a solid choice.
Some active Vanguard fund choices
By contrast, Vanguard isn't well-known for active funds, but it does have some strong players. Vanguard Wellington has been around since 1929, giving investors a balanced exposure of about two-thirds to stocks and one-third to bonds. Even though it's an actively managed fund, its expenses are extremely low, and long-term performance has led Morningstar to award the fund its top five-star rating.
Another top choice is Vanguard PRIMECAP, which has also earned a five-star Morningstar rating. The fund is closed to new investors, but those who have the fund as an option in 401(k) plans at work might still be able to make contributions. The fund has taken an active approach toward emphasizing sectors of the market with high potential, and that can boost volatility but has also produced above-average returns.
Vanguard isn't the only choice for mutual funds, but many investors rely on the company as a leader in the mutual fund industry. These funds are among Vanguard's best and will serve you well in providing investment exposure in a way that's consistent with your own financial planning.
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