Indexing isn’t a modern era invention. Back in 1896, financial reporters Charles Dow and Edward Jones developed a rules-based subset of blue-chip stocks that would eventually evolve into the long-standing Dow Jones Industrial Average.
But it wasn’t until 1976 that Vanguard, under the leadership of the late John Bogle, took indexing from an academic concept to a practical tool for fund management.
The catalyst was the launch of the First Index Investment Trust, which tracked the S&P 500 by replicating its components. This was groundbreaking because you can’t invest directly in an index — it’s just a set of rules and math — but with an index fund, you could now capture its performance.
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A decade later, Vanguard pushed the boundaries further by introducing bond indexing, offering fixed-income exposure in a way that was cheaper than active funds and more liquid and transparent than buying individual bonds over the counter.
Vanguard’s early success with index funds paved the way for its remarkable growth. The company offers 208 funds in the U.S. and 215 internationally, many of which passively track an index.
Together, these funds manage an average of $10.1 trillion in assets under management, underscoring the enduring appeal of indexing for investors worldwide.
“Individual retail investors typically achieve better results through Vanguard’s low-expense-ratio, broad stock market index funds compared to higher-cost actively managed funds,” says Henry Yoshida, CEO and co-founder of Rocket Dollar.
Here are seven of the best Vanguard index funds to buy 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 Total International Bond Index Fund Admiral Shares (VTABX) | 0.11% |
| Vanguard Balanced Index Fund Admiral Shares (VBIAX) | 0.07% |
Vanguard 500 Index Fund Admiral Shares (VFIAX)
The spiritual successor to the First Index Investment Trust is VFIAX. This Vanguard index fund also tracks the S&P 500 and is highly popular, with about $577 billion in share class total net assets. It charges a low 0.04% expense ratio and requires a $3,000 minimum investment. With VFIAX, investors get exposure to large-cap U.S. stocks with a blend of both growth and value styles, tilted to the former.
Thanks to the outperformance of the U.S. stock market over the last decade, VFIAX has delivered above-average returns. Over the last 10 years, VFIAX’s total return with distributions reinvested sits at 13.3% annualized. After taxes on both distributions and sale of fund shares, investors would have earned an 11% net return. This fund also has no purchase fees, redemption fees or 12b-1 marketing fees.
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
“Beyond their industry-leading low costs, Vanguard’s index funds benefit investors through reduced portfolio turnover, which minimizes tax implications in taxable accounts,” Yoshida explains. Turnover happens when fund managers frequently buy and sell holdings, often due to changes in strategy or rebalancing, resulting in potentially large or frequent capital gains distributions.
In contrast, a broad index fund like VTSAX tracks 3,600 stocks in the CRSP US Total Market Index, and its market-cap weighting reduces the need for frequent additions or deletions, keeping turnover — and tax drag — remarkably low. Currently, VTSAX has an annual turnover rate of just 2.2%. This, alongside a 0.04% expense ratio, makes VTSAX an efficient and affordable vehicle for U.S. equity exposure.
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
The benefits of passive indexing extend beyond U.S. equities. Nowadays, indexes can seamlessly track international equities and account for complexities like currency and time zone differences. Thus, investors can use Vanguard index funds to invest internationally with ease. A standout option in its lineup is VTIAX, which tracks the FTSE Global All Cap ex US Index.
This fund currently holds about 8,600 market-cap weighted stocks from both developed and emerging markets. Around 38% of the fund is allocated to European region equities, 26% is allocated to Pacific region equities, 8% to North American equities ex-U.S., and 27% to emerging markets. Investors can expect a low 3.9% portfolio turnover rate and a reasonable 0.12% expense ratio.
[See: 7 Best ETFs to Buy Now.]
Vanguard Total World Stock Index Fund Admiral Shares (VTWAX)
Modern indexing is so advanced that benchmarks like the FTSE Global All Cap Index can seamlessly account for about 9,800 stocks spanning U.S., developed and emerging markets. These indexes handle complexities like currency differences, time zones, varying market caps and liquidity with ease. Thanks to Vanguard, you can now invest in this global benchmark through a single fund.
The index fund to use is VTWAX, which tracks the FTSE Global All Cap Index for a low 0.1% expense ratio and requires a $3,000 minimum investment. VTWAX gives you the world’s investable stock market in one convenient package while maintaining a low 4.3% turnover rate, minimizing tax exposure. It’s a simpler, more streamlined alternative to combining VTSAX and VTIAX yourself.
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)
“VBTLX is a well-diversified, low-cost bond fund designed to offer investors a comprehensive representation of the total U.S. investment-grade bond market,” says Perryne Desai, senior manager, investment product strategy at Vanguard. This fund provides exposure to about 11,300 government, corporate and mortgage-backed bonds via the Bloomberg U.S. Aggregate Float Adjusted Index.
“VBTLX can serve as an anchor position in a client’s fixed-income portfolio, ensuring their investment strategy benefits from the ballast against equity risk,” Desai explains. The fund also has above-average income generation potential, with a 4.4% 30-day SEC yield and monthly payouts. It is very affordable, with a 0.05% expense ratio, but requires the usual $3,000 minimum investment requirement.
Vanguard Total International Bond Index Fund Admiral Shares (VTABX)
VBTLX has an international counterpart in VTABX. This fund tracks the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Index, which holds about 6,900 government and corporate bonds of varying maturities from both developed and emerging markets. The fund’s portfolio is also hedged to the U.S. dollar to mitigate volatility from foreign exchange fluctuations.
“Investing in hedged international bonds can provide diversification benefits to an investor’s portfolio, helping to spread risk and potentially improve overall performance,” says Tara Talone, senior fixed-income portfolio manager at Vanguard. VTABX charges a 0.11% expense ratio and also requires a $3,000 minimum investment. The fund currently pays a 2.8% 30-day SEC yield.
Vanguard Balanced Index Fund Admiral Shares (VBIAX)
One of Vanguard’s most diversified index funds is VBIAX. This fund uses a multi-asset allocation strategy consisting of about 60% in stocks and 40% in bonds. The stock allocation tracks the CRSP US Total Market Index, while the bond allocation tracks the Bloomberg U.S. Aggregate Float Adjusted Index. Essentially, combining 60% in VTSAX and 40% VBTLX gets you VBIAX.
VBIAX’s strategy is designed to provide competitive risk-adjusted returns during most market conditions. Aside from years like 2022 when stocks and bonds fell in tandem, the fund has achieved this objective consistently. Over the trailing 10 years, VBIAX has delivered an annualized 8.4% return. The fund charges a low 0.07% expense ratio and requires the usual $3,000 minimum investment.
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7 Best Vanguard Index Funds to Buy originally appeared on usnews.com
Update 12/17/24: This story was previously published at an earlier date and has been updated with new information.
