Tag Archive vanguard index funds

ByCurtis Watts

The 10 Best Vanguard Index Funds to Buy

If you don’t have the time, the money or the expertise to buy individual stocks or bonds to build your investment portfolio, then consider the best Vanguard index funds.

Index funds are a good way to start saving and investing for retirement.

One reason is because the chance of making more money investing in index funds is far higher than it is investing in individual stocks, especially if you are a beginner investor.

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As the master of value investing, Warren Buffett, once said “a low-cost index fund is the most sensible equity investment for the great majority of investors.” “By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals.”

But how do you find and choose among the best Vanguard index funds? Don’t worry, GrowthRapidly can help make your choice easier.

On this page:

Index funds vs mutual funds

Index funds are one of the easiest and cheapest ways to invest in the stock market. As opposed to a mutual fund, which is actively managed by a fund manager, index funds are passive.

This means that index funds attempt to track the performance of a particular index, such as the Standard & Poor’s 500 index of 500 large U.S. company stocks or the CRSP US Small Cap Index.

So, when you invest in the Vanguard S&P 500 Index fund (which we’ll discuss in more detail below), you’re essentially buying a piece of the 500 largest publicly traded US companies.

Index funds don’t jump around; they stayed invested in the market. Again, they simply track the performance of the stock index.

Related: What is a mutual fund?

Whereas with a mutual fund, fund managers might make mistake by not being invested when the market goes up or by being too aggressive when the market goes down.

That doesn’t mean mutual funds are not good investments. In fact, they are great investment vehicles. But when it comes to long term investments, index funds are the best. However, these 8 mutual funds are great for long term investing.

Like a mutual fund, you can buy an index fund through a fund company like Vanguard.

The main advantage of a Vanguard index fund is its low-cost, which is usually less than 1% annually. Another benefit of Vanguard index funds is that they are diversified. Like mutual funds, they invest to multiple companies, thus spreading out the risk.

One of the downside with index funds, however, is that they won’t outperform the market they track.

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Why choosing the best Vanguard index funds to invest your money?

There are thousands of fund companies (such as Fidelity, Schwab, JP Morgan) where you can buy index funds. Different companies have different experiences and expertise with different type of funds. So, it can be difficult to know which one is the best. 

Here are four main factors to consider when looking to buy the best index funds for long term investments: 

  • The company: Is it a reputable and well-known company with a great track record?
  • Fees: Another major factor to consider in picking a fund company is its cost. Excessive fees have a negative effect on your investment return. These fees are deducted from your index fund’s balance every year. Other fees can apply as well. So always find a company with a low fee. 
  • Reasonable minimum investment: Will you be able to invest with as little as $1000?
  • Performance: Although past performance does not guarantee future performance, look for a fund company with a strong record of performing well against its competitors over the short and long term as well.

If you are an intelligent investor who has done his or her research, you will conclude that among the various fund companies out there, Vanguard comes out on top.

Jack Bogle, who recently died and who founded the firm Vanguard Group, invented the index fund in 1976.

Today, Vanguard is one of the World’s biggest and the best investment funds with approximately $5.6 trillion in assets.

Moreover, Vanguard has the best index funds because of their ability to keep their operating fees so low. Vanguard has all types of stock and bond index funds and their fees are the lowest.

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The advantages and disadvantages of Vanguard Index funds. 

Pros of the best vanguard index funds

By now, you know that an index fund is well diversified. But you might know these two other pros that make Vanguard index funds the best:

  • Good return: Vanguard index funds generally delivers a good return because their expenses are relatively low. The average Vanguard Index fund has an expense ratio of 0.2% per year (compare that to the average index fund operating expenses of 1.4% per year.) A 1.2% difference can be a significant difference on your return. Operating expenses are also lower because ongoing research is not needed to identify companies to invest in.
  • Tax-friendly: not only Vanguard index funds have lower operating expenses, which help increase your returns, they are also tax-friendlier when you invest outside of retirement accounts. Because a mutual fund is actively managed, they tend to jump around by selling and buying stocks more frequently. By doing that, it increases a fund’s taxable capital gains distribution. Whereas an index fund stays invested and not trying to jump around.

Cons of the best Vanguard index funds

Despite their low costs and tax-friendliness, their minimum investment while seem reasonable, might not be for the beginner investor with little money to invest.

Most Vanguard index funds requires a $3,000 minimum initial investment. Retirement account investors who plan on starting with less might be at a disadvantage.

Moreover, Vanguard has an overwhelming number of index funds to choose from. That can make it tedious for an investor to decide which ones are the best. But that’s why we have compiled the top Vanguard index funds for you.

The 10 Best Vanguard Index Funds to Buy in August 2020: 

Now that you know what an index fund is and why investing Vanguard index funds makes good sense, in no particular order, below are 10 of the best Vanguard index funds to add to your investment portfolio.

Vanguard S&P 500 Index Admiral (VFIAX)

Of all the Vanguard index funds in this list, the Vanguard S&P index fund, which tracks the Standard & Poor’s 500, is perhaps the best Vanguard index fund. One reason is that the fund invest in 500 of largest U.S. companies with a few a midsize stocks.

Some of the big name stocks in this index fund includes Apple (AAPL), Microsoft (MSFT), and Google/Alphabet (GOOGL). Another reason to select this fund is that the cost is pretty low, (0.04%) if not the lowest of all the index funds.

Index fund cost is an important factor in choosing an index fund to invest in, because fees are deducted from your balance and thus reduced your rate of returns. The last reason to invest in the VFIAX is because the initial minimum investment is also low ($3,000).

So if you’re looking for an index fund that maintains low operating expenses while enjoying a good rate of return, the Vanguard S&P 500 Index Admiral is for you.

Vanguard Developed Market Stock Index Admiral

For diversification, you should consider in your investment portfolio some index funds that invests in foreign countries. International funds are diversified because they invest in countries around the world. If so, the Vanguard Developed Market Stock Index Admiral fund (VTMGX) is a fine choice.

This Vanguard index fund tracks the performance of the FTSE Developed All Cap ex US Index. It invests in large cap stocks in 24 developed countries. Some of its several blue-chip multinational companies include the Toyota Motor Corp (7203), Royal Dutch Shell (RDS.A.), Nestle SA (NESN), making it one of the best Vanguard index funds.

This index fund has a minimum investment of $3,000 and an expense ratio of 0.07%.

Vanguard Emerging Markets Stock Index Admiral 

While Vanguard index funds invested in U.S. stocks tend to perform better than Vanguard index funds invested in emerging markets, emerging markets in Latin America, Asia, and Eastern Europe should not be overlooked.

If you don’t mind investing in emerging economies, consider checking out the Vanguard Emerging Markets Stock Index Admiral (VEMAX), which is currently one of the best Vanguard index funds to buy now.

In fact, some of the big name foreign companies included in this index fund are Alibaba Group Holding Ltd ADR (BABA), Tencent Holdings Ltd (TCEHY), Taiwan Semiconductor Manufacturing Co Ltd (2330.TW), and China Construction Bank Corp Class H (00939).

This investment attempts to track the performance of the FTSE Emerging Markets All Cap China Inclusion Index.

One of the downside of this index fund is that it has an expense ratio of 0.14%, but it still has a low minimum initial investment of $3,000.

Vanguard Total Stock Market Index (VTSAX)

The Vanguard Total Stock Market Index (VTSAX) is one of the best Vanguard index funds. It captures the total market.

That means it gives investors broad exposure to the entire U.S. equity market including large cap, mid cap and small cap growth and value stocks.

Some of the big name companies included in this Vanguard fund are: Facebook, Alphabet, JPMorgan Chase, Apple, and Microsoft.

This Vanguard index fund has an expense ratio of 0.04% and a minimum initial investment of $3,000.

So, if you’re looking for a well diversified Vanguard fund and don’t mind a little volatility, this index fund is for you.

Note that you can purchase this index fund as an ETF as well. It start at the price of one share.

Vanguard Mid-Cap Index Admiral

The Vanguard Mid-Cap Index Admiral fund (VIMAX), which tracks the CRSP U.S. Midcap Index, may be appropriate for you if you have a long term perspective.

That is because the index fund, which consists of midsize and smaller stocks, performs better in the long term rather than the short term, making it one of the best Vanguard index funds to include in your investment portfolio.

The fund targets midsize companies. The minimum investment is $3,000 with an operating expense of 0.05%.

So if you’re looking for a Vanguard index fund to use for retirement investing and you don’t expect to tap into your investment money for 10 years or more, the Vanguard Mid-Cap Index Admiral fund is for you.

Vanguard Small-Cap Index Admiral

The Vanguard Small-Cap Index Admiral (VSMAX), as the name suggests invests in stocks of smaller companies.

This index fund tracks the CRSP U.S. Small Cap Index. Some of its holdings include DocuSign, Inc (DOCU), Leidos Holdings Inc (LDOS), Tyler Technologies, Inc (TDY), Equity Lifestyle Properties, Inc (ELS), etc…

This index fund, just like the Vanguard Mid-Cap Index Admiral fund, tends to perform better in the long term. Therefore, invest in this Vanguard fund if you don’t plan to use your money within the next five years.

So if you’re looking for a broadly diversified index of stocks of small U.S. companies, the Vanguard Small-Cap Index Admiral is a good choice. This index fund has a minimum initial investment of $3,000 and an expense ratio of 0.05%. 

Vanguard Short-Term Corporate Index Admiral

If you want to invest in short term bonds to use your money in the next five years to buy a house, or if you plan to withdraw the money from your retirement account, then the Vanguard Short-Term Corporate Index Admiral fund (VSCSX) is for you.

This bond index fund tracks the performance of the Bloomberg Barclays U.S. 1-5 Year Corporate Bond Index.

While you shouldn’t expect a return of no more than 2 to 3% annually on this bond index fund, corporate bonds in general are safe, and this fund is pretty stable.

Because of this stability, this short-term bond index fund makes it an appropriate investment. The Vanguard Short-Term Corporate Index Admiral has an expense ratio of 0.07% expense and a minimum initial investment of $3000, making it one of the best Vanguard index funds around.

Vanguard High Dividend Yield ETF

The Vanguard High Dividend Yield ETF (VYM), as the name suggests, is a “dividend” fund. It attempts to track the performance of the FTSE High Dividend Yield Index.

This index ETF allows investors to earn dividend through growth companies. Some of the big companies with a strong record of paying dividends are AT&T, Intel, and Exxon Mobil.

As of 2/27/2020, this ETF has an expense ratio of 0.06%, making it one of the best Vanguard index funds for income. It starts at the price of one share.

So, if you’re looking for an index fund with the best long term investments growth potential, and you don’t mind the stock market volatility, this income-focused fund is appropriate for you.

Note that the Vanguard High Dividend Yield is also available as an Admiral share with a minimum investment of $3,000.

Vanguard Information Technology

Vanguard Information Technology Index Fund Admiral Shares (VITAX) is a sector fund. This investment attempts to track the performance of the MSCI US Investable Market/Information Technology 25/50.

Sector funds invest in stocks and/or bonds in specific industries. And the Vanguard Information Technology Index Fund, as the name suggests, focuses only on technology.

Generally, you should avoid sector funds mainly because they lack diversification. However, there is an exception with this Vanguard index fund. It focuses on technology, which makes it one of the best Vanguard funds.

In addition, this index is made up of stocks of large, mid-size, and small U.S. companies within the technology sector.

Nowadays, technology has shaped our daily lives. From computers, TVs, tablets, etc, everything is connected to the internet. Therefore, this means that there is and there will be continued growth in the years ahead.

The top companies included in this Vanguard fund are Apple, Microsoft, Visa, Adobe, PayPal, etc.

This index fund has an expense ratio of 0.10 %, but a minimum investment of $100,000. This can be high for the beginner investor.

However, this Vanguard index fund is available as an ETF, starting at the price of one share. 

Vanguard Real Estate

The Vanguard Real Estate Index Fund Admiral Shares (VGSLX) is another sector fund. It focuses on real estate investment trusts (REITs), which are companies that buy office buildings, hotels and other real estate properties.

This Vanguard fund seeks to track the performance of the MSCI US Investable Market Real Estate 25/50 index.

Just as any other sector funds, this Vanguard real estate index fund may lack diversification. So, it makes sense to have this index fund in conjunction with another a more broadly diversified Vanguard fund.

Despite the lack of diversification, however, this fund distributes higher dividend income than other funds, allowing it to be among the best Vanguard index funds for income.

This Vanguard fund has an expense ratio of 0.12%. It has a minimum initial investment of $3,000.

Note that this Vanguard fund is also available as an ETF, starting at the price of one share.

Final tips for buying the best Vanguard index funds

In general, index funds are a good investment vehicle to use. So whether you’re looking to invest money for retirement, or you’re looking to add diversification to your investment portfolio, these Vanguard index funds are a great choice for you. They are great quality funds. They produce superior returns comparing to other similar funds.

Indeed, the best Vanguard Index funds will not only save you money in fees throughout the years. But also, these low-cost index mutual funds and exchange-traded funds (ETFs) will give you a wide exposure to different asset classes.

Speak with the Right Financial Advisor

  • If you have questions beyond knowing which of the best Vanguard index funds to invest, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
  • Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
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ByCurtis Watts

What Are Mutual Funds? Understanding The Basics

If you’re one of those investors with very little time to research and invest in individual stocks, it might be a good idea to look into investing in mutual funds.

Whether your goal is to save money for retirement, or for a down payment to buy a house, mutual funds are low-cost and effective way to invest your money.

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What is a mutual fund?

A mutual fund is an investment vehicle in which investors, like you ad me, pool their money together. They use the money to invest in securities such as stocks and bonds. A professional manages the funds.

In addition, mutual funds are cost efficient. They offer diversification to your portfolio. They have low minimum investment requirements.

These factors make mutual funds among the best investment vehicles to use. If you’re a beginner investor, you should consider investing in mutual funds or index funds.

Investing in the stock market in general, can be intimidating. If you are just starting out and don’t feel confident in your investing knowledge, you may value the advice of a financial advisor.

Types of mutual funds

There are different types of mutual funds. They are stock funds, bond funds, and money market funds.

Which funds you choose depends on your risk tolerance. While mutual funds in general are less risky than investing in individual stocks, some funds are riskier than others.

However, you can choose a combination of these three types of funds to diversify your portfolio.

  • Stock funds: a stock fund is a fund that invests heavily in stocks. However, that does not mean stock funds do not have other securities, i.e., bonds. It’s just that the majority of the money invested is in stocks.
  • Bond funds: if you don’t want your portfolio to fluctuate in value as stocks do, then you should consider bond funds.
  • Money market funds: money market funds are funds that you invest in if you tend to tap into your investment in the short term.
  • Sector funds. As the name suggests, sector funds are funds that invests in one particular sector or industry. For example, a fund that invests only in the health care industry is a sector fund. These mutual funds lack diversification. Therefore, you should avoid them or use them in conjunction to another mutual fund.

Additional funds

  • Index funds. Index funds seek to track the performance of a particular index, such as the Standard & Poor’s 500 index of 500 large U.S. company stocks or the CRSP US Small Cap Index. When you invest in the Vanguard S&P 500 Index fund, you’re essentially buying a piece of the 500 largest publicly traded US companies. Index funds don’t jump around. They stay invested in the market. 
  • Income funds: These funds focus invest primarily in corporate bonds. They also invest in some high-dividend stocks.
  • Balance funds: The portfolio of these funds have a mixed of stocks and bonds. Those funds enjoy capital growth and income dividend.

Related Article: 3 Ways to Protect Your Portfolio from the Volatile Stock Market

The advantages of mutual funds

Diversification. You’ve probably heard the popular saying “don’t put all of your eggs in one basket.” Well, it applies to mutual funds. Mutual funds invest in stocks or bonds from dozens of companies in several industries.

Thus, your risk is spread. If a stock of a company is not doing well, a stock from another company can balance it out. While most funds are diversified, some are not.

For example, sector funds which invest in a specific industry such as real estate can be risky if that industry is not doing well.

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Here’s how it works:

1. Answer these few easy questions about your current financial situation

2. In just under one minute, the tool will match you with up to three financial advisors based on your need.

3. Review the financial advisors profiles, interview them either by phone or in person, and choose the one that suits your’ needs.

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Professional Management.

Mutual funds are professionally managed. These fund managers are well educated and experienced. Their job is to analyze data, research companies and find the best investments for the fund.

Thus, investing in mutual funds can be a huge time saver for those who have very little time and those who lack expertise in the matter.

Cost Efficiency. The operating expenses and the cost that you pay to sell or buy a fund are cheaper than trading in individual securities on your own. For example, the best Vanguard mutual funds have operating expenses as low as 0.04%. So by keeping expenses low, these funds can help boost your returns.

Low or Reasonable Minimum Investment. The majority of mutual funds, Vanguard mutual funds, for example, have a reasonable minimum requirement. Some funds even have a minimum of $1,000 and provide a monthly investment plan where you can start with as little as $50 a month.

Related Article: 7 Secrets Smart Professionals Use to Choose Financial Advisors

The disadvantage of mutual funds.

While there are several benefits to investing in mutual funds, there are some disadvantages as well. 

Active Fund Management. Mutual funds are actively managed. That means fund mangers are always on the look out for the best securities to purchase. That also means they can easily make mistakes.

Cost/expenses. While cost and expenses of investing in individual stocks are significantly higher than mutual funds, cost of a mutual fund can nonetheless be significant.

High cost can have a negative effect on your investment return. These fees are deducted from your mutual fund’s balance every year. Other fees can apply as well. So always find a company with a low cost. 

How you make money with mutual funds.

You make money with mutual funds the same way you would with individual stocks: dividend, capital gain and appreciation.

Dividend: Dividends are cash distributions from a company to its shareholders. Some companies offer dividends; others do not. And those who do pay out dividends are not obligated to do so. And the amount of dividends can vary from year to year.

As a mutual fund investor, you may receive dividend income on a regular basis.

Mutual funds offer dividend reinvestment plans. This means that instead of receiving a cash payment, you can reinvest your dividend income into buying more shares in the fund.

Capital gain distribution: in addition to receiving dividend income from the fund, you make money with mutual funds when you make a profit by selling a stock. This is called “capital gain.”

Capital gain occurs when the fund manager sells stocks for more he bought them for. The resulting profits can be paid out to the fund’s shareholders. Just as dividend income, you have the choice to reinvest your gains in the fund.

Appreciation: If stocks in your fund have appreciated in value, the price per share of the fund will increase as well. So whether you hold your shares for a short term or long term, you stand to make a profit when the shares rise. 

Best mutual funds.

Now that you know mutual funds make excellent investments, finding the best mutual funds can be overwhelming. 

Vanguard mutual funds.

Vanguard mutual funds are the best out there, because they are relatively cheaper; they are of high quality; a professional manage them; and their operating expenses are relative low. 

Here is a list of the best Vanguard mutual funds that you should invest in:

  • Vanguard Total Stock Market Index Funds
  • Vanguard 500 Index (VFIAX)
  • Total International Stock index Fund
  • Vanguard Health Care Investor

Vanguard Total Stock Market Fund 

If you’re looking for a diversified mutual fund, this Vanguard mutual fund is for you. The Vanguard’s VTSAX provides exposure to the entire U.S. stock market which includes stocks from large, medium and small U.S companies.

The top companies include Microsoft, Apple, Amazon. In addition, the expenses are relatively (0.04%). It has a minimum initial investment of $3,000, making it one of the best vanguard stock funds out there.

Vanguard S&P 500 (VFIAX)

The Vanguard 500 Index fund may be appropriate for you if you prefer a mutual fund that focuses on U.S. equities. This fund tracks the performance of the S&P 500, which means it holds about 500 of the largest U.S. stocks.

The largest U.S. companies included in this fund are Facebook, Alphabet/Google, Apple, and Amazon. This index fund has an expense ration of 0.04% and a reasonable minimum initial investment of $3,000.

Vanguard Total International Stock Market

You should consider the Vanguard International Stock Market fund of you prefer a mutual fund that invests in foreign stocks.

This international stock fund exposes its shareholders to over 6,000 non-U.S. stocks from several countries in both developed markets and emerging markets. The minimum investment is also $3,000 with an expense ratio of 0.11%.

Vanguard Health Care Investor

Sector funds are not usually a good idea, because the lack diversification. Sector funds are funds that invest in a specific industry like real estate or health care. However, if you want a fund to complement your portfolio, the Vanguard Health Care Investor is a good choice.

This Vanguard mutual fund offers investors exposure to U.S. and foreign equities focusing in the health care industry. The expense ration is a little bit higher, 0.34%. However, the minimum initial investment is $3,000, making it one of the cheapest Vanguard mutual funds.

Bottom Line

Mutual funds are great options for beginner investors or investors who have little time to research and invest in individual stocks. When you buy into these low cost investments, you’re essentially buying shares from companies.

Your money are pooled together with those of other investors. If you intend to invest in low cost investment funds, you must know which ones are the best. When it comes to saving money on fees and getting a good return on your investment, Vanguard mutual funds are among the best funds out there.

They provide professional management, diversity, low cost, income and price appreciation.

What’s Next: 5 Mistakes People Make When Hiring A Financial Advisor

Speak with the Right Financial Advisor

  • If you have questions beyond knowing which of the best Vanguard mutual funds to invest, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
  • Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
*TOP CIT BANK PROMOTIONS*
PROMOTIONAL LINK OFFER REVIEW
CIT Bank Money Market 1.00% APY Review
CIT Bank Savings Builder 0.95% APY Review
CIT Bank CDs 0.75% APY 1 Year CD Term Review
CIT Bank No Penalty CD 0.75% APY Review

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