Last updated on January 11, 2023 byteam pf
With a background dating back to 1929, it's safe to sayvanguard fundshas documented achievements in the field of fund management.
As the second largest mutual fund company with $5.6 trillion in global assets under management, you can expect many great options from Vanguard. Here is a breakdown of the 15 Vanguard funds with the highest annual returns since inception.
In this article :
Why Choose Vanguard Funds
Among the largest investment fund companies, some have become widely known. However, Vanguard stands out from the crowd, becoming almost synonymous with investment funds in the minds of investors.
While familiarity gives you confidence, there are more details to consider when choosing where to invest your money.
Who is Jon C. Bogle?
The Vanguard story begins with John C. Bogle, founder of The Vanguard Group and best-selling author.
If you are new to investing or looking for new insights to help you in your game, consider buying a copy of John Bogle's The Little Book of Common Sense Investing.
The Little Book makes it easy to understand investment ideas and encourages the reader to invest according to common sense principles that anyone can apply.
Vanguard's first index fund
Most of us are familiar with index funds, at least by name, although we may not know where they came from. John Bogle founded the first index fund for individual investors in 1975, paving the way for hundreds of similar funds and derivatives.
Both index funds and index ETFs are now part of millions of portfolios. First Index Investment Trust, founded in 1975, was initially not well received.
Many in the industry referred to the fund as "Bogle's Folly" because the fund's strategy was to outperform experienced advisers simply by following the index.
The fund was later renamed the Vanguard 500 Index Fund, which tracks the S&P 500 index and still exists today, surviving its founder.
Your investment philosophy
Even after his death in early 2019, John Bogle's investment philosophy remains relevant and continues to influence Vanguard funds and the industry as a whole.
Wherever you find cheap funds or index funds, you can thank John Bogle and his insightful views on keeping trading costs low and simplifying investment management.
Vanguard ETFs vs Vanguard Mutual Funds
Our list includes both ETFs and mutual funds, so it's important to discuss some of the features and limitations of each.
- administration fee: ETFs tend to have lower fees. Fees for ETFs on our list range from 0.03% to 0.32%. In comparison, fees for mutual funds on the list range from 0.04% to 0.94%.
- Minimum initial investment: If you areinvestingfor Vanguard ETFs, the entry price is equal to the price per share plus any transaction fees. However, to invest in the best mutual fund on our list, you'll need between $1,000 and $3,000 to start.
- Automatic investments and withdrawals: To take full advantage of dollar cost averaging, Vanguard mutual funds are often a better option as they support investments and automatic payouts. ETFs generally require a more hands-on approach, although some brokers offer tools to help automate buying and selling.
Why fees are so important when choosing a fund
mediaexpense ratiofor investment funds it may reach 2.5%. None of the funds or ETFs featured on our list come close to this level.
However, the difference in cost from the lowest rates on our list (0.03%) to the highest rates (0.94%) can make a measurable difference in long-term returns.
For example, consider the performance of funds with an average return before spend of 9%:
with a rate of 0.03%
with a rate of 0.94%
with a bigger one
|10.000 $||23.602,71 $||21.540,12 $||-2.062,59$|
|50.000 $||118.013,56 $||107.700,62 $||-10.312,94 $|
|100 000 $||236.027,12 $||215.401,25 $||-20.625,87$|
For a higher cost fund, more than 20% of your initial investment is lost in fees.
The best vanguard ETFs
Exchange-traded funds generally have lower cost ratios and may perform better in a taxable investment account. In addition, the entry price is only the cost of one share. Here are 7 options to consider.
1. Vanguard S&P 500 (VOO)
The Vanguard S&P 500 ETF invests in the 500 largest US companies. This gives you a share of the investment and many brands you know and use every day.
Since its inception in 1926 as The Composite Index, S&P has provided investors with impressive annual growth and a healthy dividend stream.
The Vanguard S&P 500 ETF offers exposure to powerful companies at a low cost ratio of 0.03%. Similar funds have an average spending ratio close to 1%, and many are even higher.
Because the fund invests in 500 companies, your investment is instantly diversified across several leading sectors in the US and around the world. You can buy VOO through a Vanguard brokerage account or other major brokerages.
2. Mid Vanguard Cap (VO)
Some investors may prefer the growth potential of mid-cap and small-cap companies. For example, Intel, the world's largest chip maker, is part of the large-cap S&P 500 index.
However, Advanced Micro Devices Inc. (AMD) manufactures the processors that power many of today's computers and devices. AMD is one of the largest shareholders in Vanguard's VO mid-cap ETF.
Financial, industrial and technology companies account for the largest shares of the fund in terms of percentage.
Vanguard's mid-cap VO ETF spend is below average at just 0.04%. For comparison, competing funds have an average spending ratio of over 1%.
VO tracks the CRSP US Mid Cap Index, which includes over 300 US companies. You can buy Vanguard VO ETF directly through Vanguard using a brokerage account.
3. Small Cap Vanguard (VBK) Growth
With total assets in excess of $24 billion, Vanguard's VBK Small-Cap Growth ETF comprises 621 stocks across 10 sectors. Health & Finance leads the fund's largest investment sectors, followed by tech stocks.
Major holding companies include companies such as Zebra Technologies Corp., Burlington Stores Inc., both operating in retail. Zebra manufactures equipment used in retail point of sale and inventory management.
An investment of $10,000 in VBK in 2009 would be worth nearly $38,000 in 2019. Of course, Vanguard's low management fees deserve some credit.
VBK has a low cost ratio of 0.07%, while competitors have an average cost ratio of 1.23%. Vanguard estimates that over a 10-year investment period with an average annual return of 9%, you can save up to $2,600 in fees by choosing VBK.
4. Vanguard FTSE All-World ex-US Small Cap (VSS)
In today's global economy, a full portfolio often includes international stocks. Following the growth trends seen in US Vanguard small cap funds, VSS aims to grow dynamically through international small cap companies.
Vanguard rates small-cap funds as riskier than average, but also expects higher average returns. Over 21% of the fund's investments are in emerging markets.
European companies account for more than a third of investments. North American companies such as OpenText of Canada and Algonquin Power & Utilities Corp. account for nearly 15% of the fund's assets.
VSS fees are low with a fund cost ratio of just 0.11%. In comparison, competing international small cap funds have an average spending ratio 10 times higher at 1.44%.
5. Extended Duration Vanguard Vault (EDV)
Bonds offer a great way to diversify, and Vanguard's EDV Extended Duration Treasury ETF focuses on the long game of long US Treasuries.
In total, the fund holds approximately $3 billion, with 100% investment in US government bonds. The fund tracks a comparative index and returns have proven to be strong, with a return of 160% over the past 10 years and an annualized return of just over 10%.
Low rates increase profits, with an EDV spend ratio of just 0.07%. Competing long-term funds are more expensive to hold, with an average spending ratio of 0.58%.
Over a decade, your savings could be as high as several hundred dollars at lower rates, leaving you with more money to invest.
6. Vanguard Total World Bond (BNDW)
With Vanguard's Total World Bond ETF, you don't just invest in US government bonds. Instead, the fund holds bonds from different regions, although purchases are made indirectly through the purchase of other ETFs.
The Vanguard Total World Bond ETF is split almost equally between the Vanguard Total International Bond ETF and the Vanguard Total Bond Market ETF. In total, the fund has assets representing more than 15,000 securities in which almost USD 205 million has been invested.
The majority of the fund's market allocation is dedicated to US bonds. Japanese bonds account for over 10%, while French and German bonds each account for over 5% of the fund's allocation.
As with many other Vanguard funds, the BNDW spend ratio is low at just 0.06%. Comparable funds from other providers average almost 1% of fees.
7. Vanguard Information Technology (VGT)
Owning stocks in the tech sector can be as exciting as a rollercoaster ride, but VGT's 10-year performance looks more like an uptrend than a downtrend.
Like any investment, expect ups and downs. However, VGT's high-tech holdings would increase the investment by $10,000 to over $50,000 in the last 10 years.
If you look around the average American home, you'll see brands owned by VGT, including Apple and Microsoft. However, the fund also owns stocks and Visa and Mastercard, which likely played a role in purchasing the tech equipment we all use.
By purchasing VGT, you will also own shares in Intel, IBM and Adobe. Oversized returns can grow even faster with Vanguard's low fees.
VGT is 0.10%, which is less than 1/10 of the average spend ratio for competing funds, which is 1.3%. Over 10 years, Vanguard estimates savings of over $2,500 through lower fees.
The best avant-garde investment funds
Long before the advent of ETFs, mutual funds offered the easiest way to diversify. In many ways, and for some investors, mutual funds may still be a better option than ETFs. Consider these 8 low-cost mutual funds from Vanguard, and if you're nearing retirement, you might want to read about themvanguard target pension funds.
1. Vanguard FTSE Social Index (VFTAX)
When investing long-term, earnings may not be the only thing you're interested in. Vanguard's Admiral Shares FTSE Social Index aims for long-term returns while keeping environmental and social criteria in mind.
Let's face it, not all companies put people and the planet first. VFTAX selects companies that meet certain social and environmental goals, enabling you to invest while supporting companies that share some of your values.
VFTAX's largest holdings include tech stocks, which account for nearly 30% of holdings, as well as financial and medical stocks. You will spend only 0.14% on fees, which compares well with the average spending fee of over 1% for competing funds.
Minimum investment: $3,000
2. Vanguard Midcap Stock Index (VMVAX)
If you're a fan of mid-market investing, you'll feel right at home with VMVAX, Vanguard's Admiral Shares fund. $10,000 invested in this fund, which launched in late 2010, would be worth almost $28,000 today.
The fund tracks an index and invests in companies that may be undervalued. As a value investor, you know this means a long-term earning goal. However, some volatility can be expected along the way.
This is common with mid-cap stocks, especially those that are trending towards their true long-term value.
The fees are low and the spend rate is 0.07%. With an investment of $10,000, fees alone can save you nearly $2,300 over 10 years compared to similar funds.
Minimum investment: $3,000
3. Índice Vanguard Small Cap Growth (VSGAX)
Small-cap stocks can offer dynamic growth, and even in VSGAX's short history, the opportunity is clear. Like its sister fund, VSGAX was launched in late 2010. $10,000 invested in the fund since inception would be worth nearly $28,000 in 2019.
This fund is also available as an ETF (VBK) as we highlighted earlier. The fund holds a total of 621 shares with an average market capitalization of $5.1 billion.
Fees won't hinder your development with VSGAX. You will only pay 0.07%, while competing funds charge an average of 1.23% per year. This is a huge savings, which over time can amount to thousands of dollars.
Minimum investment: $3,000
4. Vanguard Target 2055 (VFFVX) Recall
What if there was a fund that could automatically adjust asset allocations as you approach retirement? VFFVX may be exactly what you've been looking for if your planned retirement date is between 2053 and 2057.
The fund invests in 4 proprietary Vanguard index funds, offering a well-diversified portfolio. However, approximately 10% of the fund's assets are held in bonds, which provides additional security.
Over time, expect your portfolio to shift from stocks to bonds, preserving the gains you've made over the years.
Vanguard's Target Retirement 2055 is a long-term game, so fees matter. Fortunately, you'll only pay 0.15% as a spend rate, while similar funds have an average spend rate that's more than three times that of Vanguard.
Minimum investment: $1,000
5. Vanguard Total World Stock Index (VTWAX)
It's a big world, and while the US is home to some of the world's most successful companies, international stocks can help build a well-diversified portfolio.
The Vanguard Total World Stock Index Fund provides investors with access to stock markets in the United States and abroad. Over 40% of the fund's assets are invested outside North America.
Founded in early 2019, VVTWAX is a newcomer to the Vanguard family of funds. However, the first results are promising. For example, $10,000 invested at the beginning of the fund would be worth over $11,000 less than a year later.
The low cost ratio of 0.10% provides a buffer against short-term volatility and helps you achieve long-term profits.
Minimum investment: $3,000
6. Federal Money Market Vanguard Cash Reserves (VMMXX)
update: This fund is closed to new investors.
Stock market rally seems to make headlines, but diversified investors realize the importance of current income combined with capital preservation.
Vanguard's Prime Money Market Fund aims to maintain a net asset value of $1 while paying solid dividends.
This fund has been a staple fund for income investors since 1975, achieving an average annual return of nearly 5% since its inception. Combined with a stable amount, this means you pay for the safety of your investments.
Expect to invest at least $3,000 to get started. This can make VMMXX a great place to store money between investments or before retirement.
Minimum investment: $3,000
7. Vanguard Long Term Bond Index (VBLAX)
Investing in bonds is a tough business, but Vanguard's Long-Term Bond Index Fund takes the guesswork out of investing in bonds while providing good diversification.
You will earn on US investment grade bonds with an asset mix of around 60% corporate bonds. The remaining 40% is invested in US government bonds.
As another newcomer to the Vanguard fund family, VBLAX is already performing well. Despite the fact that the fund has been operating for less than a year, it has already generated almost 12%.
Low management fees should help you achieve long-term results. At 0.07%, VBLAX has an expense ratio of about 1/10 of the average found with similar funds.
Minimum investment: $3,000
8. Vanguard Property Index (VGSLX)
real estate investmentmutual funds (REITs) march to the beat of their own drummer. You will usually find high dividends along with long term growth. However, price movements generally do not parallel movements in the broader stock market.
Vanguard's Admiral Equity Fund Real Estate Index offers a great way to diversify your portfolio and gain access to booming real estate markets while earning a fair reward while you wait for stocks to rise in value.
An investment of $10,000 in 2009 would be worth more than $35,000 today in 2019. These results reflect dividends and continued growth in the fund's net asset value.
Any homeowner will tell you that real estate investing is all about building cash flow. With a low cost ratio of 0.12%, VGSLX makes more money flow to you. You can reinvest or receive dividends as income as needed.
Minimum investment: $3,000
How We Made the Vanguard Funds List
Vanguard funds are known for their low cost, but we wanted to create a list that offered more than just performance. Business owners and investors know that you cannot save to make a profit. You will also need the growth and security of diversification.
We ran our inventory tracker looking for specific criteria.
- Annual return greater than 9%: We wanted a list of funds with a decent average return.
- Lower administration fees: Fees are important, so we set a limit of 0.16%. The lowest rate on our list is a paltry 0.03%. Savings translate into profitsefficiency.
- Diversification: The old saying about eggs and baskets never goes out of date. We are looking for diversified funds, although some are asset class specific. Expect to find funds focused on bonds, US and international investments.
Final Thoughts on Vanguard Funds
Of the many fund providers available to individual investors, Vanguard is perhaps the best known. Low fees are just one reason why The Vanguard Group has become a trusted name in the industry.
You'll find an ETF or mutual fund for virtually every investment interest, allowing investors to invest according to their comfort level and even their social priorities.
Brokers or advisers that consistently beat the market may be rarer than you might think - especially after fees. With a fund provider like Vanguard, you can take your investment into your own hands.
By choosing the right combination of mutual funds and ETFs, you also add an element of security that is difficult to replicate when investing in single stocks and bonds.
You may like:
- Top 7 index funds with spend rates below 0.05%
- 10 Vanguard Target Sustainable Pension Funds
- How to invest 100k