Warren Buffett, one of the greatest investors of our time, has often emphasized a long-term investment philosophy, famously stating, “Our favorite holding period is forever.”
He advocates for a patient, owner-centric approach to investing, focusing on acquiring undervalued, quality companies and holding onto them over extended periods.
This strategy, however, is facilitated by Buffett’s access to vast resources, deep market knowledge and a substantial risk tolerance that allows him to maintain significant stakes in companies through periods of volatility.
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Yet, for the average retail investor, adhering strictly to Buffett’s model of holding a concentrated portfolio indefinitely can be challenging. Having conviction in a company and being willing to hold it forever doesn’t always translate to market-beating returns over the long term.
Historical examples like General Electric Co. (ticker: GE) and International Business Machines Corp. (IBM) demonstrate the risks of such an approach, with shareholders of these once-dominant firms experiencing long-term total returns that have lagged behind the S&P 500 from 1986 to the present.
The key to mitigating these risks lies in diversification. By spreading investments across a variety of stocks from different sectors and even countries, investors can buffer against individual losses, allowing the better-performing assets to compensate over time.
For those looking to implement a diversified, long-term investment strategy with ease, Vanguard funds offer an ideal and accessible solution.
Vanguard boasts a vast array of options, with 86 exchange-traded funds, or ETFs, and 267 mutual funds that cover a broad spectrum of stocks and bonds, catering to investors with varying time horizons, risk tolerances and investment objectives.
Moreover, Vanguard’s unique shareholder-owned structure ensures that low fees are a hallmark of its fund lineup, enhancing the long-term value proposition for buy-and-hold investors.
“Very few, if any, investors should be paying 1% each year for investment advice and portfolio management,” says Jordan Taylor, an independent 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.”
Here are seven of the best Vanguard funds to buy and hold today:
| Fund | Expense ratio |
| Vanguard S&P 500 ETF (VOO) | 0.03% |
| Vanguard Total Stock Market ETF (VTI) | 0.03% |
| Vanguard Dividend Appreciation ETF (VIG) | 0.06% |
| Vanguard Value ETF (VTV) | 0.04% |
| Vanguard Total World Stock Index Fund Admiral Shares (VTWAX) | 0.10% |
| Vanguard Wellington Fund Investor Shares (VWELX) | 0.25% |
| Vanguard Target Retirement 2065 Fund (VLXVX) | 0.08% |
Vanguard S&P 500 ETF (VOO)
GE and IBM aren’t the only stocks to lag the S&P 500 over the long term. In fact, even most professionally managed funds do. According to the latest update to the S&P Indices Versus Active, or SPIVA study, 92.2% of all U.S. large-cap funds have underperformed the index over the past 15 years. Selecting the 7.8% of funds that do outperform ex-ante can be difficult to do consistently.
Thus, the path of least resistance here for a buy-and-hold investor is to just invest in the S&P 500. You can do this by buying VOO, which for the price of around $454 per share provides exposure to all the S&P 500 companies. Top holdings in VOO currently include Apple Inc. (AAPL), Microsoft Corp. (MSFT), Amazon.com Inc. (AMZN) and Nvidia Corp. (NVDA). VOO charges a 0.03% expense ratio.
Vanguard Total Stock Market ETF (VTI)
“I still believe that a quality ETF for a long-term growth portfolio from Vanguard is VTI, especially for investors who are not really near retirement and have the ability to invest monthly in up or down markets,” says Jim Penna, senior manager of retirement services at VectorVest Inc. This ETF tracks the CRSP U.S. Total Market Index, which is much broader compared to the S&P 500 Index.
VTI’s portfolio currently consists of more than 3,700 stocks, or roughly 3,200 more than VOO. The ETF also includes mid- and small-cap stocks excluded by VOO and the S&P 500. However, because VTI is weighted by market capitalization, it shares similar top holdings with VOO, albeit in slightly smaller proportions. It also charges the same low 0.03% expense ratio.
Vanguard Dividend Appreciation ETF (VIG)
Some of the best companies to buy and hold forever can be large blue-chip firms with a long history of increasing dividends. To easily access a portfolio of these stocks, investors can buy VIG, which tracks the S&P U.S. Dividend Growers Index. This ETF screens companies for a 10-year history of dividend growth, while excluding the top 25% yielding companies to remove potential yield traps.
The result is a portfolio of over 300 notable names such as Microsoft, Apple, JPMorgan Chase & Co. (JPM), UnitedHealth Group Inc. (UNH), Broadcom Inc. (AVGO), Exxon Mobil Corp. (XOM) and Johnson & Johnson (JNJ). All this can be had for a low 0.06% expense ratio. The 1.8% 30-day SEC yield paid by VIG isn’t the largest, but remember that this ETF focuses on growing dividends, not currently high yields.
Vanguard Value ETF (VTV)
Aspiring value investors who want to emulate Buffett’s style, but in a more passive hands-off manner, can do so via VTV. This ETF tracks the CRSP U.S. Large Cap Value Index, which is essentially the CRSP U.S. Total Market Index stripped down to focus on around 340 stocks deemed to have lower valuations in terms of price-to-earnings and price-to-book ratios. It charges a 0.04% expense ratio.
Currently, VTV’s top holdings comprise a number of large value-oriented companies. In the No. 1 spot is Buffett’s firm Berkshire Hathaway Inc. (BRK.B), followed by Broadcom, JPMorgan Chase, UnitedHealth Group, Exxon Mobil and Johnson & Johnson. Many of these companies pay dividends too, so it’s no surprise that VTV has a decent 30-day SEC yield of 2.4%.
[READ: 9 Best Blue-Chip Dividend Stocks]
Vanguard Total World Stock Index Fund Admiral Shares (VTWAX)
It’s important to note that despite its size and strong historical performance, the U.S. stock market is not the only option out there in terms of geography. Investors can also diversify internationally to developed markets like the U.K., Canada, Germany and France, or to emerging markets like China, India, Brazil, Mexico and South Africa. This can hedge against a period of U.S. market stagnation.
For an all-in-one mutual fund that offers global diversification, consider VTWAX. This fund tracks the FTSE Global All Cap Index, which currently consists of more than 9,700 stocks weighted by market cap. Right now, VTWAX is roughly divided into 60% U.S. stocks, 30% developed market stocks and 10% emerging market stocks. It charges a 0.1% expense ratio and requires a $3,000 minimum investment.
Vanguard Wellington Fund Investor Shares (VWELX)
Few Vanguard funds embody the “buy-and-hold forever” mentality as well as VWELX. This mutual fund was actually founded in 1929, making it the oldest balanced mutual fund in the U.S. Unlike the previous Vanguard funds, VWELX is actively managed, meaning that it does not replicate an index. Instead, Vanguard fund managers actively select and manage the stocks and bonds comprising it.
VWELX’s balanced portfolio is two-thirds in stocks with the remainder in bonds. For stocks, VWELX targets large- and mid-cap companies in out-of-favor industries that pay above-average dividends and have low valuations and good fundamentals. For bonds, the fund favors investment-grade corporate issues with intermediate duration. VWELX charges a 0.25% expense ratio and requires a $3,000 minimum.
Vanguard Target Retirement 2065 Fund (VLXVX)
Buy-and-hold investors looking to stay completely hands-off can consider using a target-date fund. These funds are automated to the extent that all an investor needs to do is reinvest dividends and contribute more periodically. They achieve this by providing a portfolio of globally diversified stocks and bonds and adjusting the ratios periodically as time goes on.
For example, VLXVX is intended for investors looking to retire around 2065. In 2024, the fund is 90% in stocks and 10% in bonds. As the years progress, VLXVX will gradually decrease its stock allocation and increase its bond allocation on a programmed “glide path” to become more conservative. By the target retirement date of 2065, this fund will be much more bond-heavy.
[The 7 Best Vanguard Funds for Retirement]
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7 Best Vanguard Funds to Buy and Hold originally appeared on usnews.com
Update 02/05/24: This story was published at an earlier date and has been updated with new information.
