Best Vanguard Funds

Vanishingly few brands (Apple and Taylor Swift come to mind) manage to be the biggest players in their industry, while also maintaining a fan base of cult followers. In the investing world, that brand is Vanguard.

From its modest beginnings under legendary founder Jack Bogle, the money manager now oversees a whopping $8 trillion in investor assets. It is the nation’s largest provider of mutual funds, and the second-largest provider of exchange-traded funds, also known as ETFs.

Reasons for its popularity include its corporate structure =—designed to enrich its shareholders, rather than top executives—and its famously low costs.

• Best Vanguard stock fund
• Best Vanguard dividend fund
• Best Vanguard international fund
• Best Vanguard bond fund
• Best Vanguard balanced fund
• How we picked

“They have a long and hallowed history of strong returns across a variety of strategies,” says Dan Culloton, a researcher for Chicago-based fund analysts Morningstar. “They focus on low-cost, diversified strategies, and have managers with sound processes and a lot of experience. We believe they will continue to serve investors’ interests well over the long term.”

While Vanguard is primarily associated with passive strategies, the money manager was among the first to offer index funds, it also has a growing menu of actively managed funds.

In a previous article, we looked at the best Vanguard ETFs. But some investors prefer the option of traditional mutual funds—people making regular, automated contributions, for example.

In combing through Vanguard’s offerings for best funds, we talked to investment research experts and crunched data on performance and fees to highlight some of the best options for individual investors in a few basic categories. Here is what we found.

Best Vanguard stock fund

Vanguard Total Stock Market

• Ticker: VTSMX
• Fund size: $322 billion
• Yield: 1.4%
• Annual fee: 0.14%
• Top holdings: Apple, Microsoft, Amazon

The cornerstone of any portfolio is exposure to U.S. stocks, and this fund gets you a sliver of every publicly traded company in the nation at an extremely low cost. This fund offers exactly what investors need from a core holding: A product that allows you to benefit from the fact that the stock market reliably rises over time, while charging minimal fees to let you keep as much of your gains as possible.

“You can’t go wrong with Total Stock Market Index,” says Jeff DeMaso, editor of the popular newsletter The Independent Vanguard Adviser. “It is super low-cost, has exposure across the whole market, and is very tax-efficient. It checks all the boxes.”

Those well-rounded features account for its “silver” rating from Morningstar—as an index-tracker, by design it’s not a big outperformer that might qualify for a “gold” rating—as well as high marks in three different areas of fund evaluation (process, people and parent).

While its holdings tilt toward “large-cap” companies, such as Apple, Microsoft and Amazon, its portfolio also extends all the way through the most modest small-caps, with a total of 3,854 stocks represented. It is a more accurate reflection of the total market than other typical core holdings such as, say, an S&P 500 index fund that owns only the 500 largest U.S. stocks.

For long-term-minded investors, just witness these figures: Five-year average annual returns of 11%, 10-year of 12%, and 15-year of 11%. That is the kind of portfolio building block that can get your retirement savings where they need to be.

Best Vanguard dividend fund

Vanguard Dividend Growth

• Ticker: VDIGX
• Fund size: $53 billion
• Yield: 1.7%
• Annual fee: 0.3%
• Top holdings: TJX Companies, Stryker, UnitedHealth Group

Some investors turn up their noses at income-oriented stocks, preferring to target high-growth companies. For those investors dividends are often an afterthought or even nonexistent.

As a counterpoint, consider these figures: 13% a year over three years, 12% annually over five years and 11% over 10 years.

Those are the returns of Vanguard’s Dividend Growth offering, which has been a longtime standout under manager Don Kilbride, with a coveted “gold” rating from Morningstar.

“It is a simple strategy: They invest in stocks that have the wherewithal and commitment to grow their dividends steadily over time,” says Culloton. “They don’t necessarily have high yield, but those income streams are growing. Holdings tend to be stable, profitable companies that offer protection in market downdrafts.”

The modest absolute yield—not much higher than broader market averages, such as 1.5% for S&P 500 stocks—might not be a huge draw, but the ‘growth’ focus means a virtually guaranteed annual raise for its shareholders.

To be sure, 2022 was one big headwind for dividend stocks, as investors focused more on technology names that don’t pay a lot of attention to payouts. The dividend category was actually down almost 17% for the year—although this fund only slipped 4.9%, perhaps aided by its fairly selective portfolio of only 42 equity holdings.

Going forward, the time-tested strategy of focusing on high-quality companies that pay growing dividends should continue to reward investors. One interesting note: Manager Kilbride is actually stepping away from the fund next year. But co-manager Peter Fisher is slated to take the reins, another steward whom fund observers hold in high regard.

Best Vanguard international fund

Vanguard International Growth

• Ticker: VWIGX
• Fund size: $45 billion
• Yield: 1.2%
• Annual fee: 0.45%
• Top holdings: MercadoLibre, ASML Holding, Adyen

While indexes are straightforward and reliable, sometimes investors want the chance for a little more juice from their returns with an actively managed fund that offers the potential to beat the market.

They can find that added promise—and added risk—with Vanguard International Growth. In contrast to the firm’s Total International Index and its massive portfolio of 7,887 equity holdings, international growth is a narrowly focused menu of 121 stocks from around the world.

“It is a growth fund, and it is reasonably concentrated, so it is going to be riskier,” says DeMaso. “But managers there have far surpassed the index over the past five, seven, 10 and 15 years. It is a good way to add a bit of diversification, and get some exposure to global stocks.”

To get a sense of the market swells you could be experiencing: The fund was up an eye-popping 60% in 2020, down 30% in 2022 and year-to-date up almost 20%. So only investors with strong stomachs need apply. Because of its higher-risk nature, you should “moderate how much you put into it,” advises DeMaso.

Over the long term, though, those returns smooth out into very attractive averages. Five-year annual gains of 7.1% and 10-year of 8.8%, are almost double those of Vanguard’s own total international index, for instance. And it gains you exposure to familiar foreign-based names such as Tencent, Moderna and Taiwan Semiconductor, which you wouldn’t own with a solely domestic portfolio.

In the international realm, it can be an advantage to have an actively managed product, in this case with the workload split between two experienced subadvisors (those are outside managers assigned by Vanguard to steer the portfolio). That way managers can move away from sluggish regions or sectors, load up on fast-growing ones—and deliver outsize returns to shareholders as a result.

Best Vanguard bond fund

Vanguard Intermediate Term Investment Grade

• Ticker: VFICX
• Fund suze: $31 billion
• Yield: 3.5%
• Annual fee: 0.2%

Fixed income has the reputation of being the sleepy portion of investor portfolios, but in recent years that can hardly be said to be the case.

An environment of rising rates has powered generous yields in the space, especially on bonds with shorter durations, while upping the risk associated with longer-term holdings.

An easy way to split the baby: Vanguard’s Intermediate Term Investment Grade fund. It offers a yield that will appeal to income investors, currently at 3.5%, while avoiding some of the dangers of locked-in longer durations.

“It is a solid core bond fund: Cheap and diversified,” says Morningstar’s Culloton. “They don’t make big interest-rate bets, and tend to play it close to the vest. They worry about controlling risk, and deliver on what they promise.”

That portfolio includes almost 90% corporate bonds, from familiar names like Anheuser Busch InBev, T-Mobile USA, WarnerMedia and Boeing (as well as a smattering of U.S. Treasurys). About two-thirds of its bonds are rated BBB or above, so shareholders face little risk of default.

To be sure, there are other strong options as well within the Vanguard fund family: Notably Vanguard High-Yield Corporate (VWEHX), a gold-rated fund with a whopping 5.5% yield. But the majority of its holdings are rated BB or B.

Intermediate term investment grade is probably a safer space to be for most investors. Vanguard’s long-term bond ETF, as an example, was down almost 30% in 2022. In comparison, while VFICX slipped less than half of that.

And over a long-term time horizon, its 3.9% average annual returns over 15 years are precisely what investors need and expect from the bond portion of their portfolios—as an income generator, a hedge against risk and a useful counterbalance to equities.

Best Vanguard balanced fund

Vanguard Wellington

• Ticker: VWELX
• Fund size: $105 billion
• Yield: 2.1%
• Annual fee: 0.25%
• Top holdings: Microsoft, Alphabet, Apple

For decades, the notion of a ‘balanced’ portfolio was almost the Platonic ideal of the industry: Roughly 60% in equities, enough to benefit from a rising market, along with 40% in fixed income to provide yield and ballast during market swoons.

In recent years this balanced approach has been seen as somewhat old-fashioned, and 2022’s bond troubles certainly didn’t help. “But I don’t think 60-40 is dead,” says DeMaso. “One year doesn’t throw out decades of investor experience and market behavior.”

Indeed, before you shy away from the strategy altogether, consider Vanguard’s storied Wellington fund. Its inception date was back in the 1920s, long predating any index funds, and at one point had Vanguard founder Jack Bogle at the controls. As such it is essentially the “granddaddy” of balanced funds, and a “great long-term performer,” says DeMaso.

It actually strays somewhat from the typical 60-40 allocation of balanced funds, tilting more towards stocks with a 65-35 split. But there is a reason for its five-star, gold rating from Morningstar, and you can see why in its remarkably consistent returns: 7.3% annually over three years, 7.5% over five, 8.1% over 10 and 8.3% over 15. That kind of steadiness over time is exactly what investors seek from a balanced fund.

As such it outpaces other strong offerings in the space like Vanguard’s own passively managed Balanced Index (VBINX). Its expense ratio also compared very favorably to other actively managed funds, charging only 0.25%, compared with the category average of 0.81%.

Fund observers were keeping a close watch when oversight duties shifted to current lead manager Daniel Pozen, following the retirement of predecessor Edward Bousa in 2020. “The next generation has had to step up and fill those shoes,” says DeMaso. “So far—so good.”

How we picked

Vanguard Group offers a total of 191 mutual funds (303 if you include different share classes). We started by looking for funds that had a consistent track record, quality management, above-average relative returns and below-average fees.

Beyond that, we looked for funds that had broad-based portfolios that produced for investors over time. We also consulted with fund experts at Morningstar, Refinitiv Lipper and the Independent Vanguard Adviser to come up with highly-ranked options.

Data such as fund returns, yields, expense ratios and assets under management are as of July 28, 2023.