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best vanguard funds

The 8 Best Vanguard Funds That You Should Buy

We’re big fans of Vanguard, but admittedly, it’s a bit more complicated than using a Robo Advisor.  In this article, we break down what we think are the 8 best Vanguard funds, balancing both performance and cost.

Details are below but if you’re looking for a deeper dive on our logic as well as some colorful commentary than check out the podcast episode we did on this:

Before we dive in, it’s important to mention why we are focusing so heavily on fees here. Due to their exponential nature, fees of just 1% can cause you to lose up to 25% of your earnings. That’s pretty horrendous and often what turns investors on to Vanguard in the first place.

If you’re interested in seeing for yourself I highly suggest you run some sample numbers via the free Personal Capital fee analyzer. In addition to running simulations, the analyzer will also pinpoint all of the overly fee-hungry funds across your accounts – retirement or otherwise.

1. Total Stock Market (ETF) – VTI

NYSEARCA:VTIVanguard | MorningStar | Fee: 0.05% | 5yr Avg: 15.87%

This ETF is Vanguard’s flagship fund and in our opinion, their best. It’s a blend of Large, Mid and Small cap companies in the US. It’s the lowest fee we’ve ever seen on a fund, and it’s mostly because the fund tracks a few smaller indexes allowing it to be largely automated.

Often when people mention they’re invested in Vanguard, they are referring to this fund.

2. Target Retirement 2050 Fund (Investor Shares) – VFIFX

MUTF:VFIFX | Vanguard | MorningStar Fee: 0.18% | 5yr Avg: 12.12%

This fund is a lifecycle fund, so it starts out with most stocks and slowly tapers into bonds over time. The point is you take on risk now while you’re young and slowly reduce risk as you reach retirement age, so big market swings don’t wipe out your retirement money.

While this fund isn’t their best regarding the fee, it covers a much-needed gap in most people’s portfolio. As you know, we’re big fans of buy and hold, and this fund fits in there perfectly.

2050 corresponds to your “typical” retirement date – usually when you’re 59 1/2. We often find ourselves picking funds with dates well past typical retirement age, so we get something a bit more growth-focused early on.

3. 500 Index Fund (Admiral Class) – VFIAX

MUTF:VFIAX | Vanguard | MorningStar Fee: 0.05% | 5yr Avg: 15.67%

This fund was the industries first for individual investors. Invest in 500 of the biggest, baddest companies based in the US. By definition, this fund is filled with the best Large Cap companies, and since it focuses on the biggest companies in the US, it’s the closest to tracking the US economy.

4. REIT Index Fund (Admiral Shares) – VGSLX

MUTF:VGSLXVanguard | MorningStar Fee: 0.10% | 5yr Avg: 9.48%

Why own a property and rent it when your money gets stuck in the home, and there is so much work to be done? Instead, invest in a REIT and take rental profit and liquidity. This index fund is not just a REIT but a fund of many REITs, so you’re heavily diversified in the rental game.

Note: You won’t much yield here which is a bit of a drag considering real estate is generally an income play. As a replacement for the income portion of your portfolio, we recommend Fundrise. Currently, their yield is 2.196x that of the Vanguard REIT.

Compared to VGSLX, Fundrise sticks to mid-size deals generally overlooked by huge funds and as a result, provides a markedly higher return. You can also opt to concentrate on income or appreciation focused funds.


5. Growth Index Fund (Admiral Shares) – VIGAX

MUTF:VIGAX | Vanguard | MorningStar Fee: 0.09% | 5yr Avg: 16.62%

With the Growth Index, Vanguard picks high-growth companies that will knock it out of the park for you. It’s a bit riskier, but the returns are solid.

Even though the focus is on high growth companies, the fund follows a buy and hold approach where once they locate a stable company they stay invested in them for awhile.

The air is crisp in Admiral.

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6. Strategic Equity Fund (Investor Shares) – VSEQX

MUTF:VSEQXVanguard | MorningStar Fee: 0.29% | 5yr Avg: 18.65%

Like the Growth Index fund but smaller companies, potentially higher growth and a large portion of the fund’s composition is chosen by a computer. The fee is the highest here because proportionately the most amount of work goes into running this fund. 0.29% isn’t a big fee by a long shot, but I do think it’s important to note.

Also, again, this one’s the riskiest of the bunch. Of your Vanguard investments, we wouldn’t recommend making this one more than 10% of the total amount you invest.

7. Total International Stock Index Fund (Investor Shares) – VGTSX

MUTF:VGTSX | Vanguard | MorningStar Fee: 0.22% | 5yr Avg: 5.88%

Similar in approach to our #1 choice, VTI, only this fund focuses only on companies outside the US. The fund covers both developed and emerging markets.

It’s pretty volatile, so we keep it as a small portion of our portfolio to help offset our heavy US exposure.

8. Total Bond Market (ETF) – BND

NYSEARCA:BND | Vanguard | MorningStar Fee: 0.08% | 5yr Avg: 3.98%
Any well-balanced portfolio has bonds in it. They’re much less sexy than stocks but are also much less risky. When you’re young, 10% of your portfolio should be in something similar to BND, and as you get older, you’ll increase that percentage significantly. Not coincidentally, this approach is very similar to what is already baked into a lifecycle fund (fund #2). This ETF is by far the best bond fund that we have seen for the price.
All the bonds that are in this fund are investment grade, and it’s recommended that you hold this fund in the medium to long term based on its contents.

Build Meaningful Wealth and Optimize your Investments

Manage your cash investments in one place. With Personal Capital you can analyze your 401k to diversify your holdings better and reduce fees. I had no idea I was paying over 1% of my assets in fees every year, but with their help, I was able to get it down below 0.3%.

Once you have all of your accounts linked, you can also leverage their Retirement Planner to plot out exactly what your retirement would look like. Using a Monte Carlo simulation, they determine how likely it is that you’ll reach the level of income in retirement that comfortable with.

I’ve been using Personal Capital since 2013, and I haven’t found a better free online tool for building and managing wealth.

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Show Notes

LMM Ultimate Investor Strategy Blueprint:  Andrew’s article that lays some of the above information out in greater details.

Vanguard:  Get started with Vanguard here.

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14 responses to “The 8 Best Vanguard Funds That You Should Buy”

  1. Andrew says:

    I’m so glad for the show notes, it was hard to track the numbers mentioned without writing it down.

    • Yea, it was weird in that there was so much info to convey. I’m going to have to update the show notes with some links to the resources later. Added it to my Todoist (damn do I love that app now)!

  2. jb1907 says:

    I am 49 and have like 2% Bonds in BND. Short term bonds aren’t worth holding until rates go back up. I won’t go near long term bonds.

  3. jb1907 says:

    The Wall Street Journal barely talks about investing. You only need about six funds to be diversified. Then stop watching the news.

  4. Lane B. says:

    Great resource for a diversified portfolio, thanks for sharing!

  5. Justin Canzano says:

    Hi Andrew-
    Great show, great website, and overall very informative. I am a new investor and please excuse my ignorance if this question is answered somewhere else in the articles:

    Would there be any particular down fall to investing in some of the funds mentioned above by buying the ETFs instead of Investor or Admiral Shares? I like the zero minimum of the ETFs. Seems like I can “get my feet wet” with a few Vanguard Funds if there is no minimum.


    • Thanks Justin!

      I think it would be perfectly find to invest in the ETFs and in fact, I’d highly recommend it. While there are a bunch of small nuanced differences between the two I think the biggest thing is you can’t automatically invest in ETFs like you can with Mutual Funds. We’re very big on consistent monthly investing (even in small amounts) – that’s why we recommend the Mutual Funds.

      Also, if you buy the ETFs available with any brokerage account, you’ll be hit with transaction fees – so open an account directly with Vanguard.

      Hope that helps!

  6. jb1907 says:

    It makes no sense to have a target fund if you are going to have other funds as well. To me, it is all or nothing with those funds.

  7. There is a school of thought that VTI alone is enough. Though it is US focused, most of it’s holding companies have sizable international revenues, anywhere from 20-80%. So, in effect, you are getting the benefit of global investing without the governance risks associated with international companies with opaque rules and less regulated capital markets.

    • True and to an extent I agree. That said, I do think there is value in small cap funds, emerging markets and real estate.

      It’s almost cliche to talk about diversification at this point but when you have a lot to lose you really want to make sure a bubble doesn’t wipe you out.

  8. tinman says:

    the date of your articles should be prominently displayed. I couldn’t find one for this article at all.

  9. Milton Chamberlain says:

    is there an additional fee for VFIFX if the initial investment is below a certain amount? I have seen minimums of both $3,000 (with no explanation of correlating fees) and $10,000 (fee being $20 annual). it showed an out if you work electronically, but I was confused as to whether that meant directly through Vanguard. I use tdameritrade to manage my Roth IRA. I just started saving and am only working with $800 right now, so I was trying to buy $300 worth, but cancelled the order cause I got spooked. :(

    • Milton Chamberlain says:

      My apologies if this is some basic bish ish not worth your time, no worries if you can’t respond

      • Hah, no worries dude. Sometimes my slowness works to my benefit ;)

        I would suggest opening a Vanguard account specifically since there are no transaction fees associated with it. This fund aside, if you’re going to be DIY than most of what you’ll buy will be Vanguard so it makes sense to consider future fees beyond that initial $50.

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