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7 Best Vanguard Funds to Save for Retirement

Investors have several options when it comes to making money in the stock market. Although individual stocks are a popular investment vehicle, many investors prefer funds including exchange traded funds (ETFs), index funds, and mutual funds.

The preference toward funds is reasonable too.

As you learn how to invest, you will be told that diversification is the key to success. Diversification ultimately protects your investment portfolio from volatility risks should a single investment decline.

Although there is the opportunity to practice diversification by choosing your own list of stocks and securities to buy, many believe that index funds, ETFs, and mutual funds are the way to go. In fact, even Warren Buffet has been an outspoken fan of low-cost index funds. He has even suggested that a low-cost index fund is the most sensible investment for the great majority of investors, and that even a novice can outperform most investment professionals by periodically investing in an index fund.

With experts like Warren Buffett suggesting that index funds and other low-cost funds are the way to go for most investors, it’s no surprise that there has been incredible interest in these types of products, especially among retail investors with a goal of building a strong retirement portfolio.

Pro tip: If you’re saving for retirement using an IRA, 401(k), or another retirement plan, make sure you sign up for a free portfolio analysis from Blooom. Once you connect your accounts, they will check to make sure you’re properly diversified and have the correct asset allocation. They’re also going to make sure you’re not paying more than you should in fees. Sign up for Blooom.

Best Vanguard Funds to Plan for Retirement

When choosing where to open your retirement account, there are a few things you’ll want to look for. One of the first is stable investments and trust. Ultimately, you want to make sure that the company or fund you invest in has the financial stability needed to create a strong foundation along with the management team that has the best interest of investors in mind at all times.

Vanguard is one of the most trusted investment advisors on Wall Street. The company currently has well over $6 trillion in assets under management, and it operates some of the most popular index funds, ETFs, bond funds, and mutual funds on the stock market today. There are plenty of Vanguard funds to choose from, each created to meet the needs of a specific group of investors.

While Vanguard does have great retirement-focused investment funds, it’s a good idea to mix up your funds in order to practice further diversification in your investment profile. So, although Vanguard retirement funds are great to consider, you’ll want to look at all of your options to ensure that your goals are met.

There’s only one problem. With so many Vanguard funds to choose from, where exactly should a newcomer looking to start a retirement investment portfolio built of ETFs, mutual funds, and index funds start?

The Vanguard funds listed below are some of the best to consider as you begin to build out your retirement investment portfolio.

Important note: In addition to normal Investor Shares, Vanguard also offers Admiral Shares of its funds, which are a class of shares that come with lower expense ratios, ultimately reducing your cost of investing. Admiral Shares of Vanguard funds are charged 41% less in fees than standard Investor Shares and a whopping 82% less than the industry average. To qualify for Admiral Shares, you’ll need to have a minimum investment of $3,000 for most index funds, $10,000 for sector-specific index funds, and $50,000 for mutual funds.

1. Vanguard Target Retirement 2055 Fund (VFFVX)

The Vanguard Target Retirement 2055 Fund is one of the company’s many target-date retirement funds. These funds are designed to provide a strong investment for those with a long time horizon.

As a retirement fund, VFFVX is focused on heavy diversification and adjusting the portfolio to reduce risk over time. Instead of making single-stock investments, VFFVX is an investment in a collection of multiple Vanguard funds. In particular, an investment in the VFFVX is an investment in:

  • Vanguard Total Stock Market Fund. Although the allocation will change over time, the vast majority of assets under management in the Vanguard Target Retirement 2055 Fund are invested in the Investor Shares of the Vanguard Total Stock Market Fund. This fund is a portfolio based on heavy diversification that is designed to give investors exposure to the entire U.S. stock market through a mix of small-cap, mid-cap, and large-cap stocks.
  • Vanguard Total International Stock Index Fund. Another major portion of the asset allocation in the VFFVX at the moment is invested in Investor Shares of the Vanguard Total International Stock Index Fund. This is yet another highly diversified portfolio of stocks. However, this index fund is designed to give investors exposure to the overall global market.
  • Vanguard Total Bond Market II Index Fund. A relatively small portion of the asset allocation in the VFFVX is invested in the Vanguard Total Bond Market II Index Fund. This index fund is designed to give diversified exposure to the entire U.S. bond market.
  • Vanguard Total International Bond Index Fund. Finally, the smallest allocation is given to the Vanguard Total International Bond Index Fund. This fund was designed to provide exposure to the global bond market through a portfolio built around safety and diversification.

As time passes, this fund’s allocation will slowly shift away from stocks and into bonds, reducing risk as the time to retirement narrows.

VFFVX Key Stats

When considering an investment in a fund, there are several key stats in terms of expenses and returns that you should dive into before making your investment. Here’s what you need to know in the case of the Vanguard Target Retirement 2055 Fund.

  • Expense Ratio: 0.15%
  • One-Year Return: 14.70%
  • Three-Year Return: 9.08%
  • Five-Year Return: 10.69%
  • 10-Year Return: 10.28%
  • Morningstar Return Rating: 4 out of 5
  • Years Up Since Inception: 6
  • Years Down Since Inception: 4
  • Best Three-Year Total Return: 24.98%
  • Worst Three-Year Total Return: 4.68%

Pro Tip: Have you considered hiring a financial advisor but don’t want to pay the high fees? Enter Vanguard Personal Advisor Services. When you sign up you’ll work closely with an advisor to create a custom investment plan that can help you meet your financial goals. Learn More about Vanguard Personal Advisor Services.


2. Vanguard Inflation-Protected Securities (VIPSX)

Although this fund isn’t one that will realize significant gains, it’s great in terms of safe-haven asset allocation for a well balanced investment portfolio. The fund isn’t interested in purchasing Apple stock or the S&P 500 index funds. Instead, it’s focused on securities designed to provide a real return that protects against inflation.

For the most part, these securities are all inflation-protected bonds that are backed by the full faith and credit of the U.S. government, it represents one of the lowest risk investments you can make.

There are some drawbacks to consider, however. Because 100% of asset allocation is aimed at inflation-protected bonds, this fund has slow growth and experiences interest rate risks. Because the bonds invested in by the VIPSX pay a fixed interest rate, when interest rates are low overall, it is a highly attractive investment vehicle. Conversely, when interest rates are high, demand for the VIPSX tends to decline.

Nonetheless, every investing portfolio should include a good mix of bonds. That’s especially the case if the goal of your portfolio is to prepare for retirement. Considering that, this is a great option in terms of bond allocation within your portfolio.

VIPSX Key Stats

The expense ratio and key return stats surrounding the VIPSX are as follows:

  • Expense Ratio: 0.20%
  • One-Year Return: 9.04%
  • Three-Year Return: 5.21%
  • Five-Year Return: 4.16%
  • 10-Year Return: 3.02%
  • Morningstar Return Rating: 4 out of 5
  • Years Up Since Inception: 15
  • Years Down Since Inception: 4
  • Best Three-Year Total Return: 13.24%
  • Worst Three-Year Total Return: -2.45%

3. Vanguard Total Bond Market ETF (BND)

The Vanguard Total Bond Market ETF was designed to be both a safe haven and an income generator. In the entire 12 years the ETF has been around, it has only been down for two years.

BND is a perfect fit for retirement investment portfolios for two reasons:

  1. Bonds Rather Than Stocks. Bonds are generally one of the safer asset classes when compared to stocks, and retirement portfolios should have a relatively safe asset allocation, especially as retirement draws near. BND was designed to give investors exposure to the entire taxable U.S. bond market with the exception of inflation-protected bonds. So, 100% of the assets in this ETF are invested in investment grade bonds.
  2. Income. BND was designed to be a strong income investment, and it has proven to be over the years. With a dividend yield of 2.91%, it is one of the strongest income generators in the entire Vanguard list of investing portfolios.

BND Key Stats

The key stats for the Vanguard Total Bond Market ETF are as follows:

  • Expense Ratio: 0.09%
  • One-Year Return: 7.47%
  • Three-Year Return: 5.54%
  • Five-Year Return: 4.38%
  • 10-Year Return: 3.68%
  • Morningstar Return Rating: N/A
  • Years Up Since Inception: 10
  • Years Down Since Inception: 2
  • Best Three-Year Total Return: 20.25%
  • Worst Three-Year Total Return: 6.58%

4. Vanguard Total Stock Market Index Fund (VTSMX)

The Vanguard Total Stock Market Index Fund was designed to give investors exposure to the entire U.S. equities market. The index fund is a heavily diversified portfolio including small-cap, mid-cap, and large-cap stocks.

Some of the largest holdings in the VTSMX portfolio include Apple, Microsoft, Amazon.com, Alphabet, and Berkshire Hathaway.

The fund was designed to not only add a decent level of diversification to any investment portfolio, but to specifically provide exposure to value and growth stocks, making this portfolio one that experiences momentous growth from time to time.

Although high levels of potential growth also come with high levels of risk, growth and value are both important styles of investing that should be included in a well-diversified retirement portfolio.

VTSMX Key Stats

As you can see from the stats below, in terms of significant returns — both short-term and long-term — VTSMX is one of the highest earners on this list.

  • Expense Ratio: 0.14%
  • One-Year Return: 19.02%
  • Three-Year Return: 13.10%
  • Five-Year Return: 13.84%
  • 10-Year Return: 13.91%
  • Morningstar Return Rating: 4 out of 5
  • Years Up (Past 27 Years): 21
  • Years Down (Past 27 Years): 6
  • Best Three-Year Total Return: 33.35%
  • Worst Three-Year Total Return: 8.45%

5. Vanguard Wellington Fund (VWELX)

The Vanguard Wellington is the firm’s oldest mutual fund. It also holds the title as the oldest balanced fund in the United States.

VWELX is a mutual fund that has built-in diversification. About two-thirds of the assets in the fund are stocks, with the other one-third of the assets in the fund being bonds.

Adding to the diversification of the fund, VWELX invests in stocks and bonds across all economic sectors, from emerging markets to the pharmaceutical sector and everything in between. Although the fund is exposed to stock market volatility, it has a strong history of long-term growth, making it a great fit for just about any retirement investment portfolio.

VWELX Key Stats

As Vanguard’s oldest mutual fund, VWELX has a history of strong performance as can be seen by the stats below.

  • Expense Ratio: 0.25%
  • One-Year Return: 10.41%
  • Three-Year Return: 9.04%
  • Five-Year Return: 9.97%
  • 10-Year Return: 10.12%
  • Morningstar Return Rating: 5 out of 5
  • Years Up Since Inception: 71
  • Years Down Since Inception: 19
  • Best Three-Year Total Return: 22.51%
  • Worst Three-Year Total Return: -1.08%

6. Vanguard Windsor Mutual Fund (VWNDX)

The Vanguard Windsor Mutual Fund is a great fund for those who are just starting to build their retirement investing portfolios. The fund is made up of large-cap stocks. In particular, the fund managers at VWNDX are working to buy stocks that the market has undervalued in hopes of an outsize long-term return.

Due to the value investing nature of the VWNDX, it is not fit for those nearing retirement, as the mutual fund exposes investors to short-term volatility risks. Nonetheless, high-quality value stocks have made plenty of millionaires, and with the VWNDX, those just starting out in terms of retirement investing have the time horizon necessary to take advantage of this type of potential.

As yet another of Vanguard’s older, more seasoned mutual funds, the VWNDX is a strong pick for the right retirement portfolio.

VWNDX Key Stats

Although the VWNDX has a higher expense ratio than most Vanguard funds on this list, it has a strong history of stellar performance, as can be seen below:

  • Expense Ratio: 0.30%
  • One-Year Return: 6.29%
  • Three-Year Return: 5.72%
  • Five-Year Return: 8.69%
  • 10-Year Return: 11.20%
  • Morningstar Return Rating: 4 out of 5
  • Years Up Since Inception: 48
  • Years Down Since Inception: 13
  • Best Three-Year Total Return: 36.08%
  • Worst Three-Year Total Return: -12.07%

7. Vanguard Total World Stock Index Fund (VTWSX)

A well balanced portfolio includes equities not only from the United States but also from around the world. Ultimately, international investment opportunities give you the ability to take advantage of growth in other regions. That’s what the Vanguard Total World Stock Index Fund does for investors.

The fund is made up of several stock market indexes from around the world, including the United States. Much of the fund’s assets are held in equities in emerging markets as well as developed foreign markets.

Although you’re probably best served investing the lion’s share of your retirement portfolio in U.S. assets, you don’t want to miss out on compelling international growth. So it’s a good idea to allocate some of your retirement funds to international opportunities, and VTWSX is a great way to do that.

VTWSX Key Stats

As with most Vanguard funds, the VTWSX comes with a low expense ratio and a history of strong returns for investors.

  • Expense Ratio: 0.17%
  • One-Year Return: 12.48%
  • Three-Year Return: 11.30%
  • Five-Year Return: 7.15%
  • 10-Year Return: 8.95%
  • Morningstar Return Rating: 3 out of 5
  • Years Up Since Inception: 7
  • Years Down Since Inception: 3
  • Best Three-Year Total Return: 33.30%
  • Worst Three-Year Total Return: 3.43%

Consider Vanguard Personal Advisor Services

If you’re working on putting together your retirement investment portfolio, you’ve likely come across plenty of articles telling you where you should put your money. But you worked hard for that money, and you don’t want to lose your hard-earned dollars.

If you’re still unsure, relatively new to the market, or simply have questions about your portfolio that you’d like an expert’s answers to, Vanguard Personal Advisor Services are worth consideration.

The service fee for assets Vanguard Personal Advisors manage for you is 0.30%, which is right in line with some low-cost index funds and lower than many actively managed mutual funds. In exchange, you’ll have expert support that will help you expand your wealth while limiting your tax burden.


Final Word

Regardless of which Vanguard funds you choose to invest in, you’re likely making a strong choice. Vanguard mutual funds, ETFs, and index funds are known for some of the lowest expense ratios in the industry, giving you the ability to hold onto more of your gains.

Furthermore, Vanguard is one of the longest-lived registered investment advisors on Wall Street, having survived the Great Depression and several economic recessions, all while providing investors with strong returns, even in some of the worst market conditions.

The secret to Vanguard funds is the diversification of their portfolios and pedigree of their experts. All in all, it’s hard to find funds that provide returns at a better rate than Vanguard funds. So, it’s a perfect place to find quality investments to start or add to your retirement investment portfolio.

Joshua Rodriguez
Joshua Rodriguez has worked in the finance and investing industry for more than a decade. In 2012, he decided he was ready to break free from the 9 to 5 rat race. By 2013, he became his own boss and hasn’t looked back since. Today, Joshua enjoys sharing his experience and expertise with up and comers to help enrich the financial lives of the masses rather than fuel the ongoing economic divide. When he’s not writing, helping up and comers in the freelance industry, and making his own investments and wise financial decisions, Joshua enjoys spending time with his wife, son, daughter, and eight large breed dogs. See what Joshua is up to by following his Twitter or contact him through his website, Alpha Stock News.

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