The U.S. stock market, as represented by the S&P 500 index, returned an impressive 23.3% in 2024, continuing its winning streak from 2023 as mega-cap tech stocks propelled the index higher.
If you’re considering starting a buy-and-hold investment portfolio now, you might feel apprehensive about how to begin during a time of high valuations: Should you invest all at once with a lump sum or ease in gradually with dollar-cost averaging?
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According to prior research from Vanguard, the former tends to be statistically better. Based on MSCI World Index returns from 1976 to 2022, Vanguard’s Enterprise Advice Group found that lump-sum investing outperformed dollar-cost averaging 68% of the time.
That said, dollar-cost averaging still beats sitting in cash and trying to time the market. The key takeaway is that for long-term investing, it’s less about how you start and more about staying the course with a well-diversified portfolio.
With that in mind, here are seven Vanguard funds that are ideal for buy-and-hold investors:
| Vanguard Funds | Expense Ratio |
| Vanguard 500 Index Fund Admiral Shares (ticker: VFIAX) | 0.04% |
| Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) | 0.04% |
| Vanguard FTSE All-World ex-US Index Fund Admiral Shares (VFWAX) | 0.11% |
| Vanguard Total World Stock Index Fund Admiral Shares (VTWAX) | 0.10% |
| Vanguard Wellington Fund Investor Shares (VWELX) | 0.26% |
| Vanguard Dividend Growth Fund (VDIGX) | 0.29% |
| Vanguard Target Retirement 2070 Fund (VSVNX) | 0.08% |
Vanguard 500 Index Fund Admiral Shares (VFIAX)
“The S&P 500 index should be a staple of every investor’s portfolio,” says Henry Yoshida, CEO and co-founder of Rocket Dollar. If you want to track this index, the Vanguard fund to buy is VFIAX. The underlying benchmark tracks around 500 large-cap U.S. stocks, selected for earnings quality, size and liquidity. This fund provides exposure to 85% of the domestic stock market for a 0.04% expense ratio and a $3,000 minimum investment.
VFIAX has historically been a top-performing fund with a 10-year annualized trailing return of 13.1%. It’s also fairly tax-efficient thanks to a low 2.2% turnover rate. Vanguard estimates that net of taxes on distributions and sale of shares, VFIAX’s 10-year annualized return would be around 10.8%. It also trades as an ETF version, the Vanguard S&P 500 ETF (VOO), for around $544 per share.
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
“VTSAX gives you complete exposure to the entire U.S. stock market from the Magnificent Seven down to thousands of publicly traded small- and mid-cap stocks that could become the next Nvidia Corp. (NVDA) of the future,” Yoshida says. “Personally, it represents the majority of my personal investment portfolio since it is so diversified, low-cost and tax efficient — you can buy this fund and hold it forever.”
This mutual fund tracks the CRSP US Total Market Index. Unlike the S&P 500, the CRSP US Total Market Index is not limited to 500 stocks. It is far more diversified, holding more than 3,600 market-cap-weighted equities. If you want exposure to small- and mid-caps beyond what the S&P 500 provides, VTSAX is likely a better pick. The fund charges a 0.04% expense ratio.
[READ: 7 High-Return, Low-Risk Investments for Retirees]
Vanguard FTSE All-World ex-US Index Fund Admiral Shares (VFWAX)
Thanks to their size, U.S. stocks currently account for a large share of the global stock market capitalization. However, investors looking to diversify away from this “home country bias” can use an international Vanguard fund. A great pick is VFWAX, which tracks the FTSE All-World ex-US Index for a 0.11% expense ratio and the usual $3,000 minimum investment required by Vanguard’s Admiral Share class funds.
VFWAX holds a portfolio of 3,800 stocks spanning both international developed and emerging markets. However, investors should be aware of the risks of international investing before buying. Vanguard notes that these include currency risk and country risk. In addition, the inclusion of emerging-market equities makes VFWAX more volatile than U.S. equity funds or developed-market-only funds.
Vanguard Total World Stock Index Fund Admiral Shares (VTWAX)
If you want to passively invest in the global stock market, the Vanguard fund to buy and hold is VTWAX. This fund is one of the most diversified options an equity investor can own. It tracks the FTSE Global All Cap Index, which holds more than 9,800 stocks from all 11 stock market sectors; U.S., international developed and emerging-market countries; and small-, mid- and large-cap sizes.
Turnover for VTWAX is low at 4.3%, making it highly tax efficient. This is because the fund simply buys and holds all investable stocks globally, requiring few changes and adjusting automatically as the world market shifts. VTWAX charges a 0.1% expense ratio and requires a $3,000 minimum investment. For greater savings, investors can opt for the ETF variant at a 0.07% expense ratio and $118 per share.
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. Since inception, VWELX has returned an annualized 8.3%.
Unlike the previous Vanguard funds, VWELX does not passively track an index. Instead, the subadvisor, Wellington Management Company LLP actively selects a portfolio of two-thirds stocks and one-third bonds. The stocks are blue chips selected for quality, above-average dividend yields and low valuations. The bonds tilt towards investment-grade, intermediate maturity. VWELX charges a 0.26% expense ratio.
Vanguard Dividend Growth Fund (VDIGX)
Another standout Vanguard actively managed fund to consider is VDIGX. For a 0.29% expense ratio, investors get a high-conviction portfolio of 42 blue-chip stocks selected for above-average and sustainable dividend growth. On average, companies in VDIGX also exhibit strong quality traits with a 30.7% return on equity and a 10.3% earnings growth rate.
Unlike the S&P 500, VDIGX’s sector composition is far more balanced. Instead of the tech sector dominating, the fund is balanced between health care, industrials, financials and consumer staples. Investors can currently expect an above-average 1.8% 30-day SEC yield. However, the use of active management creates a higher 9.1% turnover rate and more frequent capital gains distributions.
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 Gen Z investor looking for a 401(k)-plan holding can use a Vanguard target retirement fund like VSVNX. This fund is intended for investors looking to retire around 2070. Right now, it is optimized for growth with a 90% equity and 10% fixed-income allocation. But over time, VSVNX will change to become more conservative, prioritizing capital preservation as its investors age.
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7 Best Vanguard Funds to Buy and Hold originally appeared on usnews.com
Update 01/07/25: This story was previously published at an earlier date and has been updated with new information.
