These funds are simple ways to build a diversified portfolio.
These days, investors have so many options for how to invest for the long term that managing a portfolio can be very time-consuming. “What to buy and what to avoid brings a lot of anxiety, so many people are going back or staying with the tried and true: index funds,” says Steve Azoury, owner of Azoury Financial in Troy, Michigan. Investing in funds, rather than individual stocks, can provide broad market exposure at a low cost. Vanguard offers some of the most competitive funds in the world. Known for its low-cost options, the company manages more than $7 trillion in assets. That’s second in the world only to BlackRock. Still, with more than 200 funds, it can be difficult for investors to decide which Vanguard investment is right for them. Vanguard’s offerings run the gamut from U.S. stock market funds to global funds to niche areas like real estate. Here are seven of the best Vanguard funds for buy-and-hold investors to consider.
Vanguard 500 Index Fund (ticker: VFINX)
The Vanguard 500 Index Fund is one of the most renowned index funds on the market today, and a good buy-and-hold option, according to Azoury. It gives you exposure to 500 of the largest U.S. companies trading on the stock market. If that sounds a lot like the S&P 500, that’s because it’s essentially the Vanguard version of that index, although it has no affiliation with the S&P 500. You’d need $3,000 to start investing in this one, but if you don’t have that you can also find this portfolio as an exchange-traded fund, or ETF, under the ticker VOO.
Vanguard Total Stock Market ETF (VTI)
VTI is another behemoth among index funds. At 0.03%, the fund maintains the lowest expense ratio of all the funds included here. This passively managed fund tracks the CRSP U.S. Total Market Total Return Index. This index includes nearly 4,000 components representing virtually the entire U.S. stock market. The fund has a gold rating from Morningstar, meaning analysts expect excellent future performance from VTI.
Vanguard Dividend Appreciation ETF (VIG)
Another great option for buy-and-hold investors, VIG yields 1.85%. Although this isn’t the highest yield around, when you couple it with the fund’s gold rating and 0.06% expense ratio, VIG is still a competitive offering. This passively managed fund tracks the S&P U.S. Dividend Growers Total Return Index. This index is composed of U.S. companies that have consistently increased their dividends over the past decade. VIG’s top five holdings are Microsoft Corp. (MSFT), UnitedHealth Group Inc. (UNH), Johnson & Johnson (JNJ), Procter & Gamble Co. (PG) and JPMorgan Chase & Co. (JPM).
Vanguard Total International Stock ETF (VXUS)
This gold-rated fund is an excellent choice for investors looking for diversified global exposure. Daniel Sotiroff, senior analyst at Morningstar, says this ETF “has few close rivals.” It’s a well-diversified fund with a low expense ratio of only 0.08%. Another passively managed fund, VXUS tracks the FTSE Global All Cap Ex-U.S. Index. This index includes companies of all sizes across both developed and emerging markets outside the U.S. Less than 9% of the fund’s total assets are in its top 10 holdings, keeping it from being too top-heavy. Sotiroff says the fund “is one of the broadest portfolios in the foreign large-blend category.” He says the fund’s broad portfolio and low cost should help it perform well once foreign markets start to rebound.
Vanguard FTSE All-World Ex-U.S. ETF (VEU)
VEU is another gold-rated international fund. This fund tracks the FTSE All-World Ex-U.S. Index. Unlike VXUS’ benchmark, this index only tracks large- and mid-cap stocks in developed and emerging markets outside the U.S. Due to foreign market underperformance, this fund has lost some value in recent months. But for buy-and-hold investors who want to maintain a position in larger global companies, this ETF is a good option. Sotiroff says VEU “is an excellent foreign-stock fund for the long haul.” He says the fund’s “low fee helped it outperform the category average by 79 basis points per year from its launch in March 2007 through November 2021.” VEU also has a 0.07% expense ratio, and only about 9% of its total assets are in its top 10 holdings.
Vanguard Total World Stock ETF (VT)
Sotiroff says VT offers “the entire global stock market in one low-cost package.” This passively managed fund tracks the FTSE Global All Cap Index. The main difference between this benchmark and VXUS’ or VEU’s is that this index is made up of companies across market caps and throughout developed and emerging markets, including the U.S. That means this fund offers buy-and-hold investors true global exposure. Sotiroff says VT “offers unrivaled diversification.” Morningstar gives this fund a gold rating, and it has an expense ratio of 0.07%. All of VT’s top 10 holdings are American companies, and these account for about 13% of its $22.8 billion in assets.
Vanguard Real Estate ETF (VNQ)
Real estate can offer a hedge against inflation, making VNQ, which also has a gold rating from Morningstar, a good option for long-term investors. According to Morningstar analyst Ryan Jackson, VNQ offers “low-cost, no-frills U.S. real estate exposure,” which many investors might be looking for to diversify their portfolios. This passively managed fund tracks the MSCI U.S. IMI Real Estate 25/50 Index. This index is composed entirely of U.S. real estate equities. At 0.12%, VNQ has the highest expense ratio on this list, but that’s still competitive with other real estate ETFs. To sweeten the deal, VNQ pays a hefty 3.04% yield. Jackson says this ETF’s “well-diversified, market-cap-weighted portfolio should be difficult to beat over the long term.”
7 best Vanguard funds to buy and hold:
— Vanguard 500 Index Fund (VFINX)
— Vanguard Total Stock Market ETF (VTI)
— Vanguard Dividend Appreciation ETF (VIG)
— Vanguard Total International Stock ETF (VXUS)
— Vanguard FTSE All-World ex-U.S. ETF (VEU)
— Vanguard Total World Stock ETF (VT)
— Vanguard Real Estate ETF (VNQ)
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7 Best Vanguard Funds to Buy and Hold originally appeared on usnews.com
Update 06/14/22: This story was published at an earlier date and has been updated with new information.
