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 Funds | Expense Ratio |
| Vanguard Target Retirement 2050 Fund (ticker: VFIFX) | 0.08% |
| Vanguard LifeStrategy Growth Fund (VASGX) | 0.14% |
| Vanguard 500 Index Admiral Shares (VFIAX) | 0.04% |
| Vanguard Intermediate-Term Bond Index Admiral Shares (VBILX) | 0.07% |
| Vanguard Dividend Appreciation Index Fund (VDADX) | 0.08% |
| 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. It’s the epitome of a set-it-and-forget-it investment strategy.
“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 through 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, the LifeStrategy funds 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 about 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.
Vanguard 500 Index Admiral Shares (VFIAX)
The starting place for many retirement investors is a good ol’ S&P 500 fund. As one of the most widely recognized indexes in the U.S., these funds give you low-cost exposure to many of the most coveted U.S. stocks. “Because the 500 Index Fund is broadly diversified within the large-capitalization market, it may be considered a core equity holding in a portfolio,” Vanguard states.
Vanguard’s take on an S&P 500 index fund lives up to the company’s low-cost reputation with a rock-bottom expense ratio of 0.04%. However, you’ll need to invest at least $3,000 to score that price. If that doesn’t work for you, there’s always the ETF version of the fund (VOO), which can be had for as little as $1 and comes with an even lower 0.03% expense ratio.
Morningstar awards VFIAX its highest rating of five out of five stars and a gold badge, indicating analysts have the highest conviction it will outperform its peers or a market index in the near term.
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Vanguard Intermediate-Term Bond Index Admiral Shares (VBILX)
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 VBILX is included among the seven best Vanguard funds to buy for retirement.
The fund splits its assets between corporate bonds and U.S. government bonds with maturities mostly ranging from five to 10 years. This creates a nice, moderate-risk fixed-income option with a 4.22% 30-day SEC yield. And with an expense ratio of only 0.07%, you’re getting a great deal on this exposure.
Morningstar puts VBILX in the lowest fee quintile among its peers and awards it a gold badge. If the $3,000 investment minimum is more than you want to spend, you can get the same portfolio as an ETF for as little as $1 under the ticker BIV.
Vanguard Dividend Appreciation (VDADX)
Fixed income isn’t the only way to generate income from your investments. 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), Broadcom Inc. (AVGO) and Microsoft Corp. (MSFT). These established names “insulate the portfolio from volatility and should lead to a long-term risk-adjusted advantage,” writes Morningstar Director Bryan Armour. He calls VDADX “a steady approach to higher yield.”
The current 1.68% 30-day SEC yield isn’t overly impressive. But when paired with a rock-bottom 0.08% expense ratio, you still come out ahead. Morningstar also awards VDADX a gold badge, so the future is bright here in the analysts’ eyes as well.
Vanguard High-Yield Tax-Exempt Fund (VWAHX)
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 VWAHX.
The fund takes a 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 under 4% 30-day SEC yield as of Sept. 2.
High yield often comes with high risk, however. 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 nearly 46% 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 low for this type of fund, according to Morningstar. The analysts also award it with their highest rating: five out of five stars and a gold badge.
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 09/09/24: This story was previously published at an earlier date and has been updated with new information.
