The chairman of Berkshire Hathaway Inc. (ticker: BRK.A, BRK.B) and legendary value investor Warren Buffett may have once famously remarked, “Our favorite holding period is forever.” But don’t take him literally.
Despite being known for owning some of America’s largest blue-chip stocks for decades, such as Coca-Cola Co. (KO) and American Express Co. (AXP), the “Oracle of Omaha” is not above selling shares when they no longer meet his value investing thesis.
Notably, according to an SEC filing, Buffett sold nearly 19.2 million shares of Bank of America Corp. (BAC) for proceeds of around $779 million from July 30 to Aug. 1. Even more notable was Berkshire’s recent second-quarter earnings report, which revealed that the firm had sold around 49% of its stake in Apple Inc. (AAPL).
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Whatever Buffett’s reasoning, there’s a takeaway for retail investors: If you’re going to invest in single stocks, you not only have to identify an attractive entry point, but you also have to determine the right price to sell. Until you have an exit plan, any gains are only on paper.
If you want a true buy-and-hold-forever investment, the best idea is to invest in the hundreds, even thousands of stocks that make up broad market benchmarks. For example, this could be the 500 large U.S. companies in the S&P 500 index or the 2,000 up-and-coming ones in the Russell 2000.
You can put this in play easily with low-cost mutual funds and exchange-traded funds (ETFs) from asset management firms like Vanguard.
“Vanguard funds as well as other low-cost investment options are an efficient way for investors to gain exposure to both the overall market as well as specific market sectors,” says Robert F. Draper Jr., founder and chief investment officer of Draper Asset Management. “The usage of Vanguard funds removes the burden of specific security analysis.”
Here are seven of the best Vanguard funds to buy and hold today:
| Fund | Expense ratio |
| Vanguard Total Stock Market ETF (VTI) | 0.03% |
| Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) | 0.04% |
| Vanguard S&P 500 ETF (VOO) | 0.03% |
| Vanguard Total World Stock ETF (VT) | 0.07% |
| Vanguard Dividend Appreciation ETF (VIG) | 0.06% |
| Vanguard Wellington Fund Investor Shares (VWELX) | 0.26% |
| Vanguard Target Retirement 2060 Fund (VTTSX) | 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 tracks the CRSP U.S. Total Market Index, which holds over 3,600 value and growth stocks from all 11 sectors.
VTI’s index is market-cap-weighted, which means that larger stocks occupy proportionately higher weights within its portfolio. Its broad and passive nature also means that additions and deletions happen infrequently, leading to a highly tax efficient 2.2% annual turnover. This, coupled with a low 0.03% expense ratio, makes VTI a top choice for diversified domestic equity exposure.
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
Because it’s an ETF, investors looking to buy and hold VTI need to actively trade it as they would an individual stock. This means entering orders for the price you want and waiting for a fill. If you want to stay more hands-off, this mutual fund equivalent of VTI might be a better choice. Unlike ETFs, mutual funds like VTSAX do not trade like stocks. Instead, all orders are executed at one end-of-day price.
In terms of exposure, though, VTSAX is identical to VTI. This is because the ETF is structured as a share class of the same fund, a unique system previously under patent by Vanguard. This helped VTSAX deliver strong tax efficiency with lower capital gains distributions. However, it does charge a slightly higher 0.04% expense ratio and requires a $3,000 minimum initial investment.
Vanguard S&P 500 ETF (VOO)
If you prefer to follow the benchmark S&P 500 index, Vanguard has funds for that as well. The low-cost ETF to buy and hold here is VOO, which goes for around $480 per share at a 0.03% expense ratio. If you prefer mutual funds, the equivalent is VFIAX, with a minimum required investment of $3,000 and a slightly higher 0.04% expense ratio. Both are diversified and low-cost.
The S&P 500 index is slightly more active than the CRSP U.S. Total Market Index. For instance, it’s restricted to mostly large-cap stocks, has a committee deciding which companies get added or deleted, and implements a positive earnings screener to ensure quality. However, as a buy-and-hold investment, it still results in a low and tax-efficient 2.2% turnover for funds like VFIAX and VOO.
Vanguard Total World Stock ETF (VT)
John Bogle, the late founder and former CEO of Vanguard, once wrote: “Don’t look for the needle in the haystack. Just buy the haystack!” When taken to its extreme for equities, this suggestion implies that buy-and-hold investors should buy stocks from all 11 market sectors, small-, mid- and large-cap stocks, and stocks from every investable country, all weighted by market cap.
This level of diversification is made possible by VT, which tracks over 9,800 U.S., international developed and emerging market equities via the FTSE Global All Cap Index. Despite its large portfolio, the passive and broad nature of VT’s index ensures that turnover still remains fairly low at just 4.3% and the expense ratio is kept to a minimal 0.07%. Over the past 10 years, VT has returned an annualized 8.9%.
[READ: 7 Best International Stock Funds to Buy]
Vanguard Dividend Appreciation ETF (VIG)
A well-structured dividend fund can be invaluable in helping investors stay the course. The growing dividend payments can be reinvested into more shares for compounding, but it can also provide a psychological boost during bear markets. In addition, focusing on blue-chip dividend stocks can reassure investors that they own quality companies that should be held long-term even if volatility strikes.
A great Vanguard ETF to use for this role is VIG, which tracks the S&P U.S. Dividend Growers Index. The holdings in VIG are screened for at least 10 consecutive years of dividend growth, with the top 25% highest yielding stocks and real estate investment trusts (REITs) eliminated to ensure quality. Currently, investors can expect an above-average 1.7% 30-day SEC yield and a fairly low 0.06% expense ratio.
Vanguard Wellington Fund Investor Shares (VWELX)
“Launched in 1929, VWELX has seen it all — the Great Depression, World War II, the intense bear market of the 1970s, the subsequent bull market of the ’80s and ’90s, the global financial crisis, and the COVID-19 pandemic, just to name a few,” says Brian Miller, senior investment specialist on the multi-asset solutions team at Vanguard. Today, this time-tested Vanguard fund is available at a 0.26% expense ratio.
VWELX is an actively managed fund, meaning that it does not track an index. Instead, Vanguard’s portfolio managers construct their own proprietary portfolio of two-thirds stocks and one-third bonds. The stocks are typically out-of-favor large- and mid-cap companies with high dividends and low valuations, while the bonds largely consist of investment-grade corporate issues.
Vanguard Target Retirement 2060 Fund (VTTSX)
“Vanguard’s suite of target retirement funds can be a complete portfolio solution for investors who want a simple, globally diversified portfolio that adjusts its risk profile over time,” Miller says. “Simply pick the target date closest to when you plan to retire, and the fund allocates your assets to a low-cost mix of stocks and bonds that gradually gets more conservative as you approach retirement.”
For example, if you want to retire around 2060, the Vanguard target retirement fund to look at is VTTSX. VTTSX uses a “fund of funds” structure to hold a Vanguard domestic equity fund, an international equity fund, a domestic bond fund and an international bond fund. Currently, VTTSX is optimized for growth with 90% stocks and 10% bonds, but this will become more conservative over time.
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7 Best Vanguard Funds to Buy and Hold originally appeared on usnews.com
Update 08/07/24: This story was previously published at an earlier date and has been updated with new information.
