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3 Best-Performing Vanguard Mutual Funds From Q3

Nitish Marwah

Founded by John C. Bogle in 1975, Vanguard is one of the world's largest investment management companies. The company offers about 190 domestic funds and 220 funds for foreign markets. It also offers asset management and financial planning services to clients throughout the globe.

Vanguard stands out from the other mutual fund companies because it is owned by the funds themselves. The company believes that this structure helps management to focus more on shareholder interests. Among the notable advantages Vanguard claims to offer are low-cost and no-load funds.

Which Vanguard Fund Turned Out to be the Best?

By the end of the third quarter, Vanguard had around $4.4 trillion of assets under management. The initial investment of the majority of mutual funds from the family ranges from $0 to $3,000. As of Sep 30, 2019, none of the Vanguard mutual funds carried any load.

Further, Vanguard Massachusetts Tax-Exempt Fund Investor Shares VMATX turned up as one of the best-performing mutual funds from the Vanguard family. The fund posted solid gains in the period between July and September. VMATX, which invests a bulk of its assets in municipal bonds issued by Massachusetts state and local governments, returned 2% in the third quarter and has added 8.1% so far this year.

Factors Supporting Growth

Vanguard invests in a variety of sectors that are sensitive, cyclical and defensive. From the sensitive sectors, most investments were made in the technology sector. Among the cyclical sectors, the fund family invested the maximum in the financial services sector, while among the defensive sectors it invested heavily in healthcare.

Technology Select Sector SPDR (XLK) has gained 29.8% year to date, implying that technology has been the best performer among the 11 S&P 500 sectors so far. The financial and healthcare sectors have also registered year to date returns of 14.7% and 3.1%, respectively.

3 Best Funds to Buy Now

Given such bullish circumstances, we have highlighted three Vanguard mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) and poised to gain from such factors. Moreover, these funds have encouraging third-quarter and year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Vanguard LifeStrategy Growth Fund VASGX invests in other Vanguard mutual funds with asset allocation of nearly 80% in equity securities and about 20% in debt securities and bonds. VASGX seeks appreciation of income and capital for the long run.

This fund has a history of positive total returns for over 10 years. Specifically, the fund's returns over the third quarter and YTD benchmarks are 0.6% and 15%, respectively. VASGX has an annual expense ratio of 0.14%, which is below the category average of 0.76%.

Vanguard Short-Term Investment-Grade Fund Investor Shares VFSTX seeks income while maintaining a limited price volatility. VFSTX invests in a variety of high-quality and, to a lesser extent, medium-quality fixed income securities. The fund also invests to a limited extent in non-investment-grade and fixed income securities, mainly short-term and intermediate-term corporate bonds.

This fund has a history of positive total returns for over 10 years. Specifically, the fund's returns over the third quarter and YTD benchmarks are 1% and 5.1%, respectively. VFSTX has an annual expense ratio of 0.20%, which is below the category average of 0.74%.

Vanguard Short-Term Treasury Fund Investor Shares VFISX seeks current income with minimum price volatility. VFISX invests a large share of its assets in U.S. Treasury instruments such as bills, bonds and notes. VFISX seeks to maintain a dollar-weighted average maturity between 1 and 4 years.

This fund has a history of positive total returns for over 10 years. Specifically, the fund's returns over the third quarter and YTD benchmarks are 0.6% and 3.2%, respectively. VFISX has an annual expense ratio of 0.20%, which is below the category average of 0.70%

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