With the gamification of brokerage apps and zero-commission trading, it’s never been more tempting for new investors to act more like traders than long-term shareholders.
With this mentality, investors are now quickly flipping securities for a profit, rather than holding on to them as tangible claims on a company’s earnings. Even back in 2020, data from the New York Stock Exchange (NYSE) found that the average investor held stocks for just 5.5 months.
[Sign up for stock news with our Invested newsletter.]
Moreover, the proliferation of exotic exchange-traded funds (ETFs) is fueling this trend. Today, investors seeking to capitalize on the volatility of a particular company or sector have access to a variety of specialized ETFs that offer embedded leverage, inverse exposure, zero-day-to-expiry (0DTE) options, or focus on single stocks.
Yet, if your investment horizon is long and your goal is to build a solid, diversified portfolio, these niche ETFs might not serve your best interests. Instead, consider the advantages of broad-market, index-based funds from a provider like Vanguard, known for its investor-first approach.
Vanguard’s unique shareholder-owned structure means that fund investors essentially own the company, incentivizing lower costs and aligning the company’s interests with those of its investors. Coupled with industry-leading low expense ratios and widespread popularity among both advisors and individual investors, Vanguard funds are a cornerstone for any long-term, buy-and-hold strategy.
“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 500 Index Fund Admiral Shares (ticker: VFIAX) | 0.04% |
| Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) | 0.04% |
| Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) | 0.12% |
| Vanguard Total World Stock Index Fund Admiral Shares (VTWAX) | 0.10% |
| Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) | 0.05% |
| Vanguard Wellington Fund Investor Shares (VWELX) | 0.26% |
| Vanguard Target Retirement 2070 Fund (VSVNX) | 0.08% |
Vanguard 500 Index Fund Admiral Shares (VFIAX)
Buy-and-hold investors can easily access the growth potential of U.S. equities via VFIAX, which tracks the S&P 500. This is a benchmark of 500 prominent U.S. companies selected by an objective methodology and the subjective input of a committee. Criteria for inclusion include factors like liquidity, size and earnings quality, among others. It covers all 11 stock market sectors but is currently dominated by technology.
As an index fund, all VFIAX does is passively purchase all the securities represented by the S&P 500 in their correct proportions and leave it alone. Outside of index reconstitutions, the fund rarely has to make buy and sell decisions. This keeps VFIAX’s annual portfolio turnover low at just 2.2%, which enhances tax efficiency. VFIAX charges a 0.04% expense ratio and has a $3,000 investment minimum.
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
When it comes to Vanguard’s passively managed mutual funds, benchmark selection matters. For instance, if you buy VFIAX, you’re only getting exposure to America’s largest companies. The S&P 500 excludes thousands more mid- and small-cap stocks that don’t fit its inclusion criteria. Thus, if your goal is to track the broad investable U.S. equity market, VFIAX might not be sufficient.
For this role, the go-to Vanguard fund is VTSAX. This fund tracks the CRSP US Total Market Index, which holds more than 3,600 small-, mid- and large-cap domestic equities weighted by their size. The top holdings are similar to VFIAX as a result of this, but VTSAX is still far more diversified. However, it shares the same low 2.2% portfolio turnover rate and a minimal 0.04% expense ratio, with a $3,000 investment minimum.
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
The equity strategy team at investment bank Goldman Sachs Group Inc. (GS) recently issued their projections for U.S. equity performance over the next 10-years. Their conclusions left much to be desired, as the analysts ultimately settled on an expected annualized 3% nominal total return. That is, before inflation and with dividends reinvested, Goldman Sachs believes that U.S. stocks on the whole will only compound at 3% for the next decade, a very anemic level of performance.
To hedge against this scenario, buy-and-hold investors may wish to diversify with an international equity fund. The Vanguard fund to use for this role is VTIAX, which tracks FTSE Global All Cap ex U.S. Index. It holds both international developed markets — like the U.K., France, Germany, Japan and Switzerland — and emerging markets like China, India and Brazil. VTIAX charges a 0.12% expense ratio.
[READ: 5 Best Nuclear Energy Stocks and ETFs to Buy Now]
Vanguard Total World Stock Index Fund Admiral Shares (VTWAX)
Looking to keep your buy-and-hold portfolio as simple as possible, yet highly diversified? Instead of manually allocating to VTSAX and VTIAX, consider replacing both with a global equity fund like VTWAX. This fund tracks the FTSE Global All Cap Index, which holds more than 9,000 U.S., international developed and emerging market equities for a 0.1% expense ratio and a $3,000 minimum investment requirement.
Despite its broad portfolio, VTWAX is still very hands-off. The ETF’s benchmark isn’t constantly tweaking its composition to identify which sector or geography is poised to outperform. As the markets of different nations rise or fall, VTWAX’s market-cap-weighted strategy will naturally shift to accommodate that, which helps contribute to its already low 4.3% portfolio turnover ratio.
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)
Another way to hedge against both stagnant returns for U.S. equities and a prolonged bear market is by including an allocation to bonds. While inflated valuations for stocks could cause them to lag until earnings growth catches up, the semi-annual coupons enjoyed by most bond investors will continue to be paid, as long as the bond issuer doesn’t default. This gives you a valuable diversifier.
For low-cost bond exposure, Vanguard offers VBTLX. This fund tracks the Bloomberg U.S. Aggregate Float Adjusted Index, which holds more than 11,300 Treasurys, mortgage-backed securities (MBS), agency bonds and investment-grade corporate bonds of multiple maturities. The fund also pays decent monthly income with a 4.3% 30-day SEC yield, albeit with poor tax efficiency. VBTLX charges a 0.05% 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. From inception to present, VWELX has delivered an 8.3% annualized return.
This actively managed Vanguard fund does not track a benchmark index. Instead, it begins by allocating two-thirds of its portfolio to stocks with balance sheet quality, above-average dividend yields and low valuations. The remaining one-third of VWELX is allocated to bonds, largely consisting of intermediate maturity, investment-grade corporate issuers. VWELX charges a 0.26% expense ratio.
Vanguard Target Retirement 2070 Fund (VSVNX)
“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, a young investor looking to retire around 2070 could select VSNVX as the core of their 401(k) plan or self-directed Roth IRA. Currently, this Vanguard fund is optimized for growth with 90% allocated to global stocks and 10% in bonds. But as time goes on and investors age, VSVNX will adjust to become more conservative with a higher bond allocation to favor capital preservation and income.
More from U.S. News
6 of the Best AI ETFs to Buy Now
Donald Trump Stocks: 8 Stocks Owned by the GOP Nominee
7 Best Defense Stocks to Buy Now
7 Best Vanguard Funds to Buy and Hold originally appeared on usnews.com
Update 11/06/24: This story was previously published at an earlier date and has been updated with new information.
