The Vanguard Group differs greatly from most other asset managers and mutual fund companies. Vanguard is organized as a mutual company, meaning 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.
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Vanguard’s mission statement is: “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 Target Retirement 2050 Fund (ticker: VFIFX) | 0.08% |
| Vanguard LifeStrategy Growth Fund (VASGX) | 0.14% |
| Vanguard Core Bond Fund Investor Shares (VCORX) | 0.20% |
| Vanguard Dividend Appreciation Index Fund (VDADX) | 0.08% |
| Vanguard Tax-Managed Balanced Fund Admiral Shares (VTMFX) | 0.09% |
| Vanguard High-Yield Tax-Exempt Fund (VWAHX) | 0.17% |
| Vanguard International Core Stock Fund Investor Shares (VWICX) | 0.48% |
Vanguard Target Retirement 2050 Fund (VFIFX)
If you’re looking for one fund to rule them all, there isn’t one because every investor has unique needs. However, a target-date fund like VFIFX is about as close as retirement investors can get.
These funds are designed to be one-fund solutions for retirement investing. They adjust their allocation to stocks and bonds over time, growing more conservative as the target retirement date nears. This means you won’t need to do this rebalancing yourself.
“This target-date series has all the features one would expect from Vanguard’s deeply rooted investment culture,” writes Jason Kephart, director of multi-asset ratings at Morningstar. “It features four low-cost, broadly diversified index funds to gain efficient exposure to global stocks and bonds.”
Vanguard offers a dozen target retirement funds with target dates ranging from 2020 to 2070. Simply choose the fund that most closely aligns with your anticipated retirement year. Or, if you’re already in retirement, opt for the Vanguard Target Retirement Income Fund (VTINX), which is designed for people already in retirement.
Vanguard LifeStrategy Growth Fund (VASGX)
Another one-fund solution for retirement investors is Vanguard’s LifeStrategy funds. Unlike the target-date funds listed above, these are designed to maintain a fixed allocation in perpetuity. This means that as your time horizon changes, you may need to switch funds since they won’t adjust their risk for you.
For instance, VASGX is 80% stocks and 20% bonds. This makes it a fairly aggressive fund best used when you have more than five years until you want to withdraw your money.
If that’s too long to wait, consider the Vanguard LifeStrategy Income Fund (VASIX). At 20% stocks and 80% bonds, it’s designed for when you’re three to five years away from withdrawal.
There’s also a 40% stock to 60% bond fund (VSCGX) and a 60% stock to 40% bond fund (VSMGX) for more middle of the road investors.
The LifeStrategy funds’ “straightforward and efficient approach to delivering broad equity and fixed-income exposure should continue to serve investors well,” writes Morningstar Analyst Ben Sater. They are “inexpensive and reliable” options, he says.
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Vanguard Core Bond Fund Investor Shares (VCORX)
Don’t neglect fixed-income funds when constructing your retirement portfolio. The stability these funds offer can be key in preserving your capital. Not to mention, the regular income some offer can help provide a paycheck replacement in retirement. 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. The fund invests predominantly in a diversified portfolio of U.S. government and government agency bonds and mortgage-backed securities 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 0.20% fee is still quite low compared to its peers.
Vanguard Dividend Appreciation Index Fund (VDADX)
Whether you’re saving for retirement or already in retirement, VDADX could be a great addition to your portfolio. Pre-retirees can benefit from the long-term growth potential of an all-equity portfolio enhanced by reinvesting dividends. Meanwhile, retirees can appreciate the income stream of those dividends along with some much-needed capital appreciation to keep up with inflation throughout retirement.
The fund focuses on high-quality companies with growing dividends. It features big names like Apple Inc. (AAPL), Microsoft Corp. (MSFT) and Broadcom Inc. (AVGO). These established names “insulate the portfolio from volatility and should lead to a long-term risk-adjusted advantage,” according to Bryan Armour, director of passive strategies research at Morningstar. He calls VDADX “a steady approach to higher yield.”
The current 1.74% 30-day SEC yield isn’t overly impressive. But when paired with a rock-bottom 0.08% expense ratio, you still come out ahead.
Vanguard Tax-Managed Balanced Fund Admiral Shares (VTMFX)
Taxes are the bane of retirement investors’ portfolios. Finding ways to minimize the bite Uncle Sam takes from your hard-saved cash can go a long way in preserving your wealth. To help with this, consider tax-managed funds like VTMFX.
The balanced fund maintains a roughly 50-50 split between U.S. stocks and federally tax-exempt municipal bonds. Stocks are chosen to minimize taxable dividends. The result is an after-tax return of nearly 7% over the lifetime of the fund, which dates back to 1994. It pays a 30-day SEC yield of 2.38%.
VTMFX also comes with a low 0.09% expense ratio, but you’ll need to invest at least $10,000 to get started.
Vanguard High-Yield Tax-Exempt Fund (VWAHX)
If you want a bit more income than VDADX or VTMFX, but don’t want to have to sell your first grandchild to pay the taxes, VWAHX may be for you.
The fund takes the same tax-exempt approach by investing in municipal bonds, but is willing to go lower down the rating spectrum. Up to 20% of the portfolio may be in below investment-grade bonds. This can give it a boost in yield, as shown by the just over 4% 30-day SEC yield.
However, high yield often comes with high risk. This fund is not for the faint of heart, as lower quality issuers tend to be more volatile and prone to default. That said, Vanguard considers it a good “complement to an already diversified fixed-income portfolio” for investors who can tolerate “moderate risk.”
Vanguard International Core Stock Fund Investor Shares (VWICX)
There’s often a tendency toward home country bias in retirement investing. It can be easier and more comfortable to invest in companies you recognize. But it’s also important to remember that the U.S. isn’t always the best-performing economy out there. There will likely be times throughout your retirement when other nations are doing better. Including international funds like VWICX in your portfolio will ensure you get to benefit from their successes too.
VWICX invests in companies from developed and emerging markets across all sectors. The managers look for a mix of growth and value stocks to keep the overall portfolio balanced. It’s predominantly invested in Europe at over 45% of the portfolio. The remaining half is mostly split between the Pacific and emerging markets, with about 5% in North America.
As an actively managed fund, it comes with a slightly higher expense ratio. However, it’s still well below average for this type of fund. If you’re willing and able to put $50,000 into the fund, you can get a 0.1% discount with the fund’s admiral shares (VZICX).
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The 7 Best Vanguard Funds for Retirement originally appeared on usnews.com
Update 08/02/24: This story was previously published at an earlier date and has been updated with new information.
