For long-term investors looking for low-cost, broadly diversified funds, there aren’t many better places to start than with Vanguard Group.
With a current lineup of 266 mutual funds and 82 exchange-traded funds, or ETFs, the firm has a plethora of investment options to satisfy a variety of investor objectives and risk tolerances.
Vanguard’s organizational structure directly contributes to its focus on investor welfare. “Vanguard is investor-owned, meaning the fund shareholders own the funds, which in turn own Vanguard,” says Daniel Dusina, director of investments at Blue Chip Partners. “This aligns interests between the firm and its clients — since the clients are the owners of the firm, there are fewer conflicting priorities.”
Indeed, unlike some other investment companies that charge an arm and a leg for funds, Vanguard boasts some of the lowest fee structures in the industry, with a 0.08% asset-weighted average U.S. fund expense ratio as of Dec. 31, 2022. This feature has made Vanguard funds a household name among both retail investors and professional advisors.
“Very few, if any, investors should be paying 1% each year for basic investment advice and portfolio management,” says Jordan Taylor, a financial advisor at Core Planning. “Vanguard does a great job of trying to provide as many low-cost investment options as they can, something many asset management firms fail to do.”
Dusina agrees with Taylor, noting, “Cost is important, as a fund’s expense ratio comes directly out of the performance that an investor will earn.”
The firm’s current fund lineup is incredibly diverse, with passively managed index variants covering major asset classes like stocks, bonds and cash across U.S., international and emerging markets. For investors with advanced objectives, Vanguard also offers a suite of actively managed funds, in addition to alternative investments like commodities funds.
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Vanguard also offers some “smart beta” funds, which are a hybrid between passive indexing and active management. “These funds concentrate their investment resources based on factors like value, momentum, quality, growth or other criteria that could potentially enhance returns,” Taylor says.
The following seven Vanguard funds are great low-cost options for a long-term, buy-and-hold investor:
| Vanguard Fund | Expense Ratio |
| Vanguard Target Retirement 2065 Fund (ticker: VLXVX) | 0.08% |
| Vanguard Wellington Fund Admiral Shares (VWENX) | 0.17% |
| Vanguard S&P 500 ETF (VOO) | 0.03% |
| Vanguard Total Stock Market ETF (VTI) | 0.03% |
| Vanguard Total Bond Market Index Fund ETF (BND) | 0.03% |
| Vanguard Total International Stock ETF (VXUS) | 0.07% |
| Vanguard Total World Stock Index Fund Admiral Shares (VTWAX) | 0.1% |
Vanguard Target Retirement 2065 Fund (VLXVX)
A great investment for the most hands-off, buy-and-hold investor is a Vanguard target-date fund. “These funds are designed to provide a diversified portfolio of stocks and bonds based on your retirement date,” says Sean August, CEO of The August Wealth Management Group. As time goes on, VLXVX will increase its bond allocation and decrease its stock allocation on a “glide path” to become more conservative.
For Generation Z investors born between 1998 and 2003 who aim to retire in about 45 years, the target-date fund to consider is VLXVX. This fund is made up of 54% U.S. stocks, 37% international stocks, 7% U.S. bonds and 3% international bonds. This is a highly aggressive “90/10” stock/bond allocation suitable for younger investors looking for growth. The fund charges a 0.08% expense ratio, or $8 annually per $10,000 investment.
Vanguard Wellington Fund Admiral Shares (VWENX)
For investors who don’t mind paying higher fees for the chance to outperform, VWENX could be a compelling alternative. “This fund is managed by experienced investment professionals who aim to provide superior returns through active management,” August says. Indeed, since its inception in May 2001, VWENX has returned an annualized 7.5% against its benchmark’s return of 6.8%.
As the “Admiral” share class of Vanguard’s Wellington Fund (VWELX), VWENX comes in at a lower expense ratio of 0.17%, but it has a higher minimum investment of $50,000. The overall fund dates back to 1929, making it one of the oldest mutual funds in the U.S. Currently, VWENX is split at approximately 65% stocks and 34% bonds. The fund is concentrated, holding just 82 blue-chip U.S. stocks in out-of-favor industries selected for quality, above-average dividends and low valuation multiples.
Vanguard S&P 500 ETF (VOO)
For investors looking for the ability to trade shares throughout the day on an exchange, an ETF can be a good alternative to a mutual fund. For a highly liquid, popular and low-cost ETF, investors can choose VOO, which tracks the S&P 500 index. “VOO provides access to the stocks of 500 of the most established public companies in the U.S. economy at a 0.03% expense ratio,” Taylor says.
For the most risk-tolerant and high-conviction investors, a portfolio held 100% in a low-cost S&P 500 index ETF like VOO can be a way of outperforming most funds over the long term. Consider the latest S&P Indices Versus Active, or SPIVA, scorecard from S&P Dow Jones, which found that 93.4% of all U.S. large-cap funds had underperformed the S&P 500 index over the last 15 years, as of Dec. 31, 2022.
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Vanguard Total Stock Market ETF (VTI)
John “Jack” Bogle, the late founder and chairman of Vanguard, famously said: “Don’t look for the needle in the haystack — just buy the haystack.” At the end of the day, the S&P 500 does not fully capture the total investable U.S. market. Because its stocks are selected by a committee based on stringent criteria, it leaves out many mid- and small-cap stocks. An alternative that includes them is VTI, which costs 0.03%.
“VTI is a good option for broad-market U.S. equity exposure, as it tracks the CRSP US Total Market Index, which includes small-, mid- and large-cap stocks,” August says. Because VTI is market-capitalization weighted, most of the ETF is still dominated by S&P 500 stocks, which means VTI and VOO have a very similar historical performance. Therefore, VTI could be a good tax-loss harvesting partner for VOO.
Vanguard Total Bond Market Index Fund ETF (BND)
Both VOO and VTI are 100% equity investments. As such, they are highly exposed to the stock market’s movements and thus can be very volatile. For investors with a lower risk tolerance, a helping of high-quality government and corporate bonds can help lower volatility and lessen drawdowns. A good low-cost ETF pick here is BND, which charges a 0.03% expense ratio.
“BND is an easy solution for capturing fixed income in a portfolio and diversifying away from some equity risks,” Taylor says. Currently, the ETF holds over 10,000 bonds, including U.S. Treasurys, mortgage-backed securities and investment-grade corporate bonds of various maturities. However, it does exclude Treasury inflation-protected securities, or TIPS, and municipal bonds.
Vanguard Total International Stock ETF (VXUS)
For long-term investors, a healthy allocation to international stocks can be a good idea. While the U.S. market has outperformed over the past decade, there is no guarantee that it will do so 10, 20 or 30 years in the future. Indeed, the U.S. market has historically stagnated at times, like during the “lost decade” of 1999–2009. To diversify with international stocks, investors can use ETFs like VXUS.
By tracking the FTSE Global All Cap ex US Index, VXUS grants exposure to over 7,900 international stocks from both developed and emerging market countries. For the former, VXUS holds stocks from countries like France, the U.K., Japan, Canada, Switzerland and Australia. For the latter, VXUS holds stocks from nations such as China, India, Mexico and Brazil. This all comes at a low 0.07% expense ratio.
Vanguard Total World Stock Index Fund Admiral Shares (VTWAX)
Combining VTI and VXUS in various proportions gives investors a complete, globally diversified stock portfolio, but it does require periodic rebalancing. Investors must also fight the urge to tinker with their allocations. For a truly hands-off approach to equity investing, buy-and-hold investors can opt for VTWAX, a one-fund solution for global equities at a 0.1% expense ratio.
VTWAX currently holds more than 9,500 stocks, with an allocation of roughly 60% U.S., 30% international developed and 10% emerging markets to mimic the composition of the current global stock market. As world markets change over time, VTWAX will as well. For those looking to buy the world, VTWAX offers a low-cost and efficient way to do it.
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Update 06/02/23: This story was previously published at an earlier date and has been updated with new information.
