Building a solid retirement portfolio is mostly about getting three things right: You want a good mix of investment types, you don’t want to pay too much in fees, and you need an asset allocation that matches your anticipated retirement timeline and risk tolerance.
“A retirement portfolio should be diversified … and reflective of your risk tolerance and time horizon,” says Nilay Gandhi, senior wealth advisor at Vanguard. “Cost is another important factor to keep in mind, generally speaking, because lower-cost investments allow for greater investment returns to be kept for your retirement nest egg.”
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Vanguard is one of the go-to choices when you’re looking for this combination. In 2022, the average fee for Vanguard’s U.S. funds was only 0.08%, or roughly $8 annually for a $10,000 investment. Such a low fee structure is indicative of the company’s commitment to investor-centric practices that prioritize clients’ long-term gains over fleeting profits.
Plus, with 430 funds available globally as of Sept. 30 — 203 in the U.S. and 227 outside the U.S. — the firm offers a ton of choices. No matter how you feel about investing or what you think about the markets, there’s likely a low-cost Vanguard fund that fits your needs. And if you’re saving for retirement in a 401(k) plan, many of these funds might be available to you as an investor.
Here are seven of the best Vanguard funds for retirement today:
| Fund | Inception Date | Lifetime Annualized Return |
| Vanguard Total World Stock Index Fund Admiral Shares (ticker: VTWAX) | 2/7/2019 | 8.4% |
| Vanguard Target Retirement 2070 Fund (VSVNX) | 6/28/2022 | 7.6% |
| Vanguard Target Retirement 2025 Fund (VTTVX) | 10/27/2003 | 6.2% |
| Vanguard LifeStrategy Growth Fund (VASGX) | 9/30/1994 | 7.7% |
| Vanguard LifeStrategy Income Fund (VASIX) | 9/30/1994 | 5.3% |
| Vanguard Balanced Index Fund Admiral Shares (VBIAX) | 11/13/2000 | 6.2% |
| Vanguard Wellington Fund Investor Shares (VWELX) | 7/1/1929 | 8.2% |
Vanguard Total World Stock Index Fund Admiral Shares (VTWAX)
Young workers just beginning to invest for retirement can consider optimizing their portfolio for maximum growth via an all-equity mutual fund. By investing in a portfolio of 100% stocks, these investors can target greater long-term expected returns, as long as they can stomach the volatility. For a highly diversified all-equity mutual fund, consider VTWAX, which tracks the FTSE Global All Cap Index.
Buying shares of VTWAX is akin to purchasing small slices of the entire world’s investable stock market, represented by more than 9,700 companies in its underlying index. This includes a 61% allocation to U.S. stocks, as well as developed countries like Japan and France, and emerging markets like China and India. The fund charges a 0.1% expense ratio and requires a $3,000 minimum investment.
Vanguard Target Retirement 2070 Fund (VSVNX)
Investors who buy a fund like VTWAX may eventually have to add bonds and cash over time to reduce volatility. To automate this approach, consider outsourcing the work to a target-date fund like VSVNX, which offers a pre-built portfolio of stocks and bonds that adjusts to become more conservative and less risky as its target retirement date of 2070 draws near. VSVNX charges a 0.08% expense ratio and requires a $1,000 minimum investment.
“Retirement savers who hold target-date funds in their retirement plans benefit from continuous rebalancing, broad diversification, low costs and are less likely to trade than do-it-yourself investors,” Gandhi says. “According to Vanguard’s 401(k) research, in 2022 only 2% of pure target-date fund investors made an exchange, a rate five times lower than that of other investors.”
Vanguard Target Retirement 2025 Fund (VTTVX)
VSVNX currently holds a portfolio asset allocation of 90% in stocks and 10% in bonds, which is a fairly aggressive composition best suited for younger investors with a long time to go until retirement. Older investors on the verge of retirement may prefer a target-date fund like VTTVX, which targets a 2025 retirement date and has a far more conservative portfolio composition.
VTTVX currently holds around 32% and 22% of its portfolio in U.S. and international stocks, respectively. The remaining 45% is spread out across U.S. and international bonds, along with inflation-protected bonds to ensure a greater focus on capital preservation and income. As with VSVNX, this fund charges a 0.08% expense ratio and requires a $1,000 minimum investment.
Vanguard LifeStrategy Growth Fund (VASGX)
Vanguard also offers a variety of “LifeStrategy” funds, which offer a globally diversified stock and bond portfolio. “The LifeStrategy funds are an all-in-one solution, meaning once the investment is made, Vanguard handles the periodic rebalancing within its underlying index fund holdings,” says Paul Peeler, financial advisor at Integrated Financial Group.
However, unlike target-date funds, the Vanguard LifeStrategy funds adhere to a static asset allocation that does not change over time. For example, VASGX targets an 80% stock and 20% bond allocation. These funds may be suitable for investors who wish to avoid the “glide path” of a target-date fund. VASGX charges a 0.14% expense ratio and requires a $3,000 investment minimum.
[READ: Bonds vs. Stocks: Differences in Risk and Reward]
Vanguard LifeStrategy Income Fund (VASIX)
The opposite of VASGX in Vanguard’s LifeStrategy lineup is VASIX, which has an income focus instead of growth. Accordingly, the fund holds a very conservative asset allocation of 20% in stocks and 80% in bonds, making it suitable for investors with a short-to-medium time horizon. This can include investors on the verge of retirement or newly retired.
VASIX achieves its portfolio composition by allocation to four other Vanguard funds, with approximately 56% held in U.S. bonds, 24% in international bonds, 12% in U.S. stocks and 8% in international stocks. Periodically, the fund will rebalance itself back to these target weights to ensure it adheres to its 20/80 strategy. VASIX charges a 0.11% expense ratio and requires a $3,000 minimum investment.
Vanguard Balanced Index Fund Admiral Shares (VBIAX)
With its inception dating back to November 2000, VBIAX is a mainstay in Vanguard’s lineup. This fund adheres to the classic “60/40” strategy: a straightforward approach that involves allocating 60% to stocks and 40% to bonds. Historically, this blend has been lauded for striking a balance between risk and return, providing investors with growth potential from stocks while having the relative stability of bonds.
The stock portion tracks the CRSP U.S. Total Market Index, ensuring exposure to the broad U.S. equity market, while the bond side aligns with the Bloomberg U.S. Aggregate Float Adjusted Index, a comprehensive gauge of the U.S. bond market. However, investors should note that VBIAX does not venture into international stocks or bonds, hence it lacks in global diversification. The fund charges a 0.07% expense ratio and requires a $3,000 minimum investment.
Vanguard Wellington Fund Investor Shares (VWELX)
All six of the previous funds are passively managed in that they track a benchmark index. In contrast, VWELX is actively managed, meaning that its managers pick stocks and bonds to try and beat the market. This fund has been around since 1929 and has survived numerous adverse market events — not least of which was the Great Depression — to post a great annualized return of 8.2% since its inception.
VWELX’s portfolio composition usually consists of two-thirds in stocks and one-third in bonds. The current 77 stocks in its portfolio are large- or mid-cap stocks with above-average dividends, solid fundamentals and low valuations, while the bond side focuses on intermediate-duration investment-grade corporate bonds. VWELX charges a 0.25% expense ratio and requires a $3,000 minimum investment.
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7 Best Vanguard Funds for Retirement originally appeared on usnews.com
Update 10/30/23: This story was previously published at an earlier date and has been updated with new information.
