In 1975, the financial industry witnessed the introduction of the first money market fund, and a year later the first equity index fund became available to retail investors.
These groundbreaking offerings provided individuals with access to diversified portfolios and stable, liquid investments, revolutionizing how everyday people could save and invest their money.
Then, in 1986, the introduction of the industry’s first bond fund marked a significant step forward for DIY investors. Prior to this innovation, individuals looking to invest in bonds were typically reliant on financial advisors or had to navigate the complexities of buying bonds over the counter.
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The bond fund simplified this process, offering a straightforward way for individual investors to gain exposure to a diversified portfolio of fixed-income securities, enhancing their ability to build a balanced investment portfolio on their own.
Another game changer was the 2001 introduction of exchange-traded fund, or ETF, share classes for mutual funds. This innovative approach allowed investors to minimize capital gains distributions across both share classes, effectively reducing the tax burden associated with their investments.
Behind all these pivotal moments in the industry stood Vanguard, a firm that has consistently been at the forefront of offering low-cost investment fund solutions tailored to the needs of retail investors.
Today, Vanguard remains a powerhouse, with a vast offering of 86 ETFs and 267 mutual funds across various asset classes, sectors, strategies and geographies, solidifying its position as a go-to provider for buy-and-hold investors seeking reliable portfolio building blocks.
“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 in 2024:
| Fund | Expense ratio |
| Vanguard Total Stock Market ETF (ticker: VTI) | 0.03% |
| Vanguard 500 Index Fund Admiral Shares (VFIAX) | 0.04% |
| Vanguard Wellington Fund Investor Shares (VWELX) | 0.25% |
| Vanguard Wellesley Income Fund Investor Shares (VWINX) | 0.23% |
| Vanguard Total World Stock ETF (VT) | 0.07% |
| Vanguard Balanced Index Fund Admiral Shares (VBIAX) | 0.07% |
| Vanguard Target Retirement 2070 Fund (VSVNX) | 0.08% |
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 offers buy-and-hold investors an affordable way to index the broad U.S. market at a 0.03% expense ratio.
By tracking the CRSP U.S. Total Market Index, VTI provides exposure to more than 3,700 small-, mid- and large-cap stocks from all 11 market sectors. VTI is a market-capitalization-weighted ETF, meaning larger companies are assigned higher allocations in the fund and make up its top holdings. The ETF is also available in mutual fund form as the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX), with a $3,000 minimum investment.
Vanguard 500 Index Fund Admiral Shares (VFIAX)
The First Index Investment Trust launched in 1975 still lives on today in the form of VFIAX. This mutual fund tracks the S&P 500, a market-cap-weighted benchmark of 500 stocks selected by an S&P committee and ruleset to represent the economy. It is a widely cited barometer among financial media and is frequently used by fund managers as a performance benchmark.
Because it is a market-cap-weighted index, the S&P 500’s composition resembles that of the CRSP U.S. Total Market Index, barring the omission of more than 3,000 small- and mid-cap stocks. Both VFIAX and VTI have similar top holdings, such as Microsoft Corp. (MSFT), Apple Inc. (AAPL), Amazon.com Inc. (AMZN) and Nvidia Corp. (NVDA). The fund charges a 0.04% expense ratio.
Vanguard Wellington Fund Investor Shares (VWELX)
Despite being known for its passive indexing expertise, Vanguard has longstanding and well-performing actively managed funds as well. A prime example is VWELX, which stands as the nation’s oldest balanced mutual fund, with an inception date of July 1929. This fund has returned an annualized 8.3% since inception, having survived numerous market downturns.
Today, the fund adheres to a balanced portfolio strategy of two-thirds in stocks and one-third in bonds. The fund focuses on large- and mid-cap stocks from out-of-favor industries, screening them for above-average dividends and low valuations. On the bond side, VWELX favors investment-grade corporate bonds. The fund charges a 0.25% expense ratio and requires a $3,000 minimum investment.
Vanguard Wellesley Income Fund Investor Shares (VWINX)
The more conservative alternative to VWELX is VWINX. This mutual fund dates back to 1970, and it has returned an annualized 9.2% since then. Currently, VWINX allocates one-third of its portfolio to 67 stocks with above-average dividends and low price-to-book and price-to-earnings ratios. The remaining two-thirds comprises investment-grade corporate and government intermediate bonds.
As its name suggests, the VWINX’s objective is to provide investors with a steady income stream, coupled with the potential for some capital appreciation. The fund pays quarterly distributions, and currently has a 30-day SEC yield of 4.1%. It is slightly cheaper than VWELX, with a 0.23% expense ratio. However, there is a $3,000 minimum investment requirement.
[READ: 8 Best Income ETFs to Buy in 2024]
Vanguard Total World Stock ETF (VT)
Some buy-and-hold investors may not be comfortable with how much fixed income VWELX and VWINX hold. While a bond allocation can help reduce volatility and drawdowns, it is susceptible to losses when interest rates rise, and can limit total returns over a long holding period. Therefore, younger investors with a higher risk tolerance may favor an all-equity ETF like VT.
This ETF is designed to offer one-ticker exposure to the world’s investable stock market by tracking the FTSE Global All Cap Index. By doing so, VT holds more than 9,800 market-cap-weighted stocks split approximately 60% from the U.S., 30% from international developed markets and 10% from emerging markets. All this comes at a very affordable 0.07% expense ratio.
Vanguard Balanced Index Fund Admiral Shares (VBIAX)
Despite their strong historical performance, it’s worth noting that both VWINX and VWELX are more expensive than your typical Vanguard fund, with expense ratios of 0.23% and 0.25%, respectively. While their stellar performance is not guaranteed to continue in the future, the effects of these higher expense ratios persist.
To access a balanced portfolio of stocks and bonds at a lower cost, investors can buy VBIAX. This fund holds 60% of its assets in stocks tracking the CRSP U.S. Total Market Index, while the remaining 40% fixed income allocation tracks the Bloomberg U.S. Aggregate Float Adjusted Index. It charges a 0.07% expense ratio and requires a $3,000 minimum investment.
Vanguard Target Retirement 2070 Fund (VSVNX)
The problem with balanced funds like VBIAX, VWELX and VWINX is that their asset allocation mix is designed to remain static. Barring an official change in strategy, investors in these three funds can expect balanced allocations of stocks and bonds, roughly 60-40 or two-thirds and one-third either way. This can be less than ideal for buy-and-hold investors who have shifting risk tolerance and objectives as time goes on.
In contrast, a target-date fund like VSVNX is designed to adapt as investors age. For instance, a young investor looking to retire around 2070 can buy VSVNX today to receive a portfolio of 90% global stocks and 10% global bonds. As the years go on, this fund will gradually adjust its allocation to become more conservative on a “glide path” by reducing stocks and increasing bonds. VSVNX charges a 0.08% expense ratio.
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7 Best Vanguard Funds to Buy and Hold originally appeared on usnews.com
Update 03/04/24: This story was previously published at an earlier date and has been updated with new information.
