Competition in the passive index fund space is intense. While active managers try to stand out with performance, strategy or brand reputation, index fund providers compete primarily on scale and fees.
That’s why it’s no surprise to see large providers like Vanguard and iShares offering dozens of index funds that track everything from broad market benchmarks to individual sectors.
Thanks to modern portfolio management and technology, most of these funds hug their benchmarks very closely, which keeps tracking error low. They’re also highly tax efficient due to low turnover.
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In this kind of environment, the one lever index fund managers still have to compete is price. All else being equal, if an investor is comparing two passive funds tracking the same index, they’ll likely pick the one with the lower fee — and big players know it.
With billions under management, some of these firms can afford to turn a few funds into loss leaders to maintain scale and stay ahead.
Vanguard did exactly that in February, cutting fees on 168 share classes across 87 funds. The firm estimates the move will save investors $350 million. Many of the reductions targeted index funds — already cheap, and now even more competitive.
“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 Total Stock Market Index Fund Admiral Shares (ticker: VTSAX) | 0.04% |
| Vanguard 500 Index Fund Admiral Shares (VFIAX) | 0.04% |
| Vanguard Developed Markets Index Fund Admiral Shares (VTMGX) | 0.05% |
| Vanguard Emerging Markets Stock Index Fund Admiral Shares (VEMAX) | 0.13% |
| Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) | 0.04% |
| Vanguard Total International Bond Index Fund Admiral Shares (VTABX) | 0.10% |
| Vanguard Balanced Index Fund Admiral Shares (VBIAX) | 0.07% |
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 refers to how frequently a fund buys and sells its holdings — higher turnover can trigger capital gains distributions, even if you don’t sell any shares yourself.
VTSAX keeps turnover low at just 2.1% despite holding more than 3,600 domestic stocks across small-, mid- and large-cap segments. Its tax efficiency was also enhanced for years by a now-expired patent that allowed certain Vanguard funds to use their exchange-traded fund (ETF) share class structure to defer taxable gains. The fund charges a 0.04% expense ratio but requires a $3,000 minimum initial investment.
Vanguard 500 Index Fund Admiral Shares (VFIAX)
Vanguard’s flagship index fund is VFIAX, which tracks the S&P 500 index and currently has more than $1.4 trillion in assets under management (AUM) across all its share classes. Unlike VTSAX, this fund only holds large- and mid-cap stocks, making it less diversified due to the lack of small-cap stocks. However, turnover remains low at just 2.3%, which makes the fund tax efficient. It charges the same 0.04% expense ratio.
Historically, VFIAX has produced returns very similar to VTSAX. Because both funds are market-cap-weighted, their top holdings tend to be more or less identical despite the use of differing index benchmarks. This makes the two funds viable tax-loss harvesting partners. However, VFIAX does require the usual $3,000 minimum investment typical of most Vanguard “Admiral Shares” class funds.
Vanguard Developed Markets Index Fund Admiral Shares (VTMGX)
Index funds can help investors diversify beyond a U.S.-heavy portfolio. This can be advantageous over the long term, as there have been periods like 1999 to 2009 where the U.S. stock market was stagnant. A great Vanguard index fund for this role is VTMGX. This fund tracks the FTSE Developed All Cap ex U.S. Index, which holds over 3,900 market-cap-weighted international equities.
VTMGX focuses on developed markets — countries with stable governments, advanced economies and mature financial systems. Examples include the UK, Canada, Germany, France, Switzerland, Denmark, Spain, Sweden, Japan and Australia. Right now, this fund trades at a lower price-to-earnings and price-to-book ratio than VTSAX and VFIAX. It charges a 0.05% expense ratio.
Vanguard Emerging Markets Stock Index Fund Admiral Shares (VEMAX)
VEMAX tracks the other half of the international stock market: emerging markets, which are countries with developing economies, growing middle classes and less mature financial systems. These markets include countries like China, India, Brazil, South Africa and Mexico. Accessing the equities of these countries without a fund can be difficult, as not all are offered as American depositary receipts.
VEMAX tracks the FTSE Emerging Markets All Cap China A Inclusion Index, a benchmark of more than 5,900 market-cap-weighted stocks. It charges a slightly higher 0.13% expense ratio, which is typical for funds offering emerging market exposure, but still lower than most competitors. Like VTMGX, VEMAX also trades at much lower P/E and price-to-book ratios than VTSAX and VFIAX.
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 for investment product strategy at Vanguard. “It can serve as an anchor position in a client’s fixed-income portfolio, ensuring their investment strategy benefits from the ballast against equity risk.”
This fund tracks the Bloomberg U.S. Aggregate Float Adjusted Index, a broad benchmark of over 11,300 domestic fixed income securities. It holds government-issued Treasurys, mortgage-backed securities and investment-grade corporate bonds ranging from under one year to over 25 years’ maturity. Investors currently get paid a 4.4% 30-day SEC yield with monthly distributions. The fund charges a 0.04% expense ratio.
Vanguard Total International Bond Index Fund Admiral Shares (VTABX)
“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. The Vanguard index fund for this role is VTABX, which tracks the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Index.
VTABX currently holds over 6,800 international bonds, spanning both government and investment-grade corporate issues from developed and emerging market countries. The fund currently pays a 3.1% 30-day SEC yield and charges a 0.1% expense ratio. However, VTABX isn’t very tax efficient, so investors may want to prioritize holding it in a tax-sheltered account like a Roth IRA or 401(k).
Vanguard Balanced Index Fund Admiral Shares (VBIAX)
Some Vanguard index funds offer built-in diversification across asset classes. A great example is VBIAX, which allocates 60% to the CRSP U.S. Total Market Index and 40% to the Bloomberg U.S. Aggregate Float Adjusted Index — creating a classic “60/40” portfolio of broad U.S. stocks and aggregate bonds. The stock component provides capital appreciation, while the bonds produce income and lower volatility.
This moderate strategy may appeal to investors with lower risk tolerance who find a 100% equity allocation too volatile. Despite the rare simultaneous stock-and-bond bear market in 2022, the fund has delivered a strong 8.1% annualized total return over the past 10 years and charges a low 0.07% expense ratio. VBIAX currently pays an above-average 2.5% 30-day SEC yield.
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7 Best Vanguard Index Funds to Buy originally appeared on usnews.com
Update 03/31/25: This story was previously published at an earlier date and has been updated with new information.
