The Vanguard Group differs greatly from most other asset managers and mutual fund companies. Vanguard is organized as a mutual company, meaning that the firm is ultimately owned by the shareholders who invest in its funds. When you invest in Vanguard funds, you become a partner as well as a customer.
Vanguard is widely credited with popularizing the index fund when it introduced the First Index Investment Trust in 1976. That trailblazing mutual fund was designed to passively track the S&P 500, and it is now known as the Vanguard 500 Index Fund (ticker: VFIAX). Before Vanguard made index funds available to the general public, index tracking was only done by institutional investors such as pension funds and insurance companies.
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Vanguard’s mission statement is as follows: “To take a stand for all investors, to treat them fairly, and to give them the best chance for investment success.” The company’s commitment to shareholders and its well-earned reputation for low fees and reasonable expenses make it especially well suited for long-term investing.
Here are seven of the best Vanguard Funds to invest in for retirement:
| Vanguard Fund | Expense Ratio |
| Vanguard Dividend Appreciation Index Fund Admiral Shares (VDADX) | 0.08% |
| Vanguard Core Bond Fund Investor Shares (VCORX) | 0.20% |
| Vanguard Emerging Markets Stock Index Fund Admiral Shares (VEMAX) | 0.14% |
| Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) | 0.04% |
| Vanguard Explorer Fund Investor Shares (VEXPX) | 0.45% |
| Vanguard Long-Term Treasury Index Fund Admiral Shares (VLGSX) | 0.07% |
| Vanguard Mid Cap Growth Fund (VMGRX) | 0.37% |
Vanguard Dividend Appreciation Index Fund Admiral Shares (VDADX)
VDADX is an index fund based on the S&P U.S. Dividend Growers index. To be included in that index and subsequently in VDADX, a company must be based in the U.S. and have a documented history of increasing its dividend for at least 10 consecutive years. From that pool, the index excludes the top 25% highest-yielding stocks, with the remainder making up the index.
The result is a low-cost index fund that provides investors with exposure to high-quality, large-cap stocks that have committed to growing their dividends over time.
This fund is recommended for investors looking for a diversified equity fund with a long-term focus and a consistent and growing dividend income stream.
There are 315 equity holdings in the VDADX portfolio, and the information technology sector is the fund’s largest sector weight, representing 23.6% of assets. The fund has an expense ratio of 0.08%.
Vanguard Core Bond Fund Investor Shares (VCORX)
Investors should not neglect fixed-income funds when constructing their retirement portfolios. That’s why VCORX is included among the seven best Vanguard funds to buy for retirement.
VCORX should be looked at as a core bond fund holding. It may own any domestic, investment-grade bond issues, but the fund invests predominately in a diversified portfolio of U.S. government and U.S. government agency bonds ranging in maturity from short to long term.
Vanguard is a leader in index investing, but indexing is not all it does. VCORX is an example of an actively managed Vanguard fund. Being actively managed, it carries an expense ratio that’s somewhat higher than some other funds on this list, but the 0.2% fee is still quite low compared to its peers.
Vanguard Emerging Markets Stock Index Fund Admiral Shares (VEMAX)
VEMAX provides retirement investors with a low-cost method of gaining exposure to the exciting and potentially lucrative area of emerging markets investing. The fund tracks the FTSE Emerging Markets All Cap China A Inclusion Index and has the stated objective of replicating the performance of that index, less fund expenses.
Investors should keep in mind that emerging market stocks are more volatile and carry more risk than stocks based in developed nations such as the U.S. As such, VEMAX may be more appropriate for younger investors who won’t be retiring for many years.
That said, with enhanced risk comes the potential for enhanced rewards over the long run. VEMAX has about 26% of its portfolio allocated to China, 22.5% in India, 19.4% in Taiwan, with 6.6% or less in countries like Brazil, Saudi Arabia, South Africa, Mexico, Thailand and others.
For investors who can both tolerate the risks and understand the value of international investing, VEMAX is a good option.
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Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
VTSAX is a well-established mutual fund designed to give retail investors — especially those saving for retirement — full exposure to the entire domestic stock market. This, of course, includes small-, mid- and large-cap stocks in both the growth and value categories.
What makes this fund exceptional for retirement saving is its incredible diversification and exceptionally low cost structure.
The fund mirrors the CRSP U.S. Total Market Index and is suitable for investors who understand the the risks associated with broad market equity investing and are looking for a high-quality, domestic core stock holding.
There are 3,747 stock holdings in VTSAX. About 32% of the fund’s $343 billion in assets are invested in the fast-growing technology sector.
Vanguard Explorer Fund Investor Shares (VEXPX)
VEXPX is an actively managed, small-cap stock fund. The portfolio managers who run the fund search out and invest in small-cap publicly traded companies that they believe have exceptional growth potential.
Small-cap investing comes with a unique set of risks. Smaller stocks tend to be more volatile and less predictable than their larger counterparts. But with greater risk comes the possibility of greater rewards over time.
What sets VEXPX apart from other funds it that it has a multiple advisor approach. In practice, that means that Vanguard relies on several different managers and advisors when making investment decisions. Each advisor to the fund brings their own unique perspective and is allowed to use their own proprietary strategies.
At any given time, investors can expect there to be more than 500 stocks in the portfolio. The hope is that this high level of diversification will help to reduce overall risk, although investors will still weather the volatility that comes with small-cap growth investing.
Vanguard Long-Term Treasury Index Fund Admiral Shares (VLGSX)
Many professional financial advisors and asset managers recommend that U.S. Treasury bonds be included in retirement portfolios. Treasurys are among the safest investments in the world when it comes to paying interest and returning principal on time and in full. That’s why VLGSX should have a place in any well-balanced retirement account.
VLGSX mirrors the Bloomberg U.S. Long Treasury Index and boasts a healthy 30-day SEC yield of 4.4%. This fund invests exclusively in long-term government bonds. Only 0.2% of its holdings consist of maturities of less than a year; the other 99.8% are in bonds with maturities of more than 10 years.
As with all long-dated, fixed-income funds, VLGSX is very sensitive to fluctuations in interest rates. Investors should expect the share price to fall when interest rates rise and climb when rates fall.
Vanguard Mid Cap Growth Fund (VMGRX)
While large-cap stock funds have an obvious appeal, mid-cap offerings should not be neglected by investors who are saving for retirement. VMGRX is an actively managed, domestic, mid-cap stock fund. The fund invests in mid-capitalization companies that the portfolio managers at Vanguard believe have above average revenue and growth potential over the long run.
This fund can be an excellent choice for investors looking to diversify their retirement holdings into high-quality, professionally chosen mid-cap stocks.
VMGRX is a $2.9 billion fund that currently holds 108 stocks. About 26% of the fund’s assets are invested in companies from the information technology sector. Health care is the second-largest sector, representing about 22% of the fund’s assets, followed by industrials at 19% and consumer discretionary at 10%.
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The 7 Best Vanguard Funds for Retirement originally appeared on usnews.com
Update 03/14/24: This story was published at an earlier date and has been updated with new information.
