Investment guru and founder of Vanguard Group of low-cost mutual funds, John C. Bogle, passed away last week at the age of 89. These low-cost funds track a market index rather than trying to outdo it. When Bogle launched his first fund that tracked the S&P 500 index in 1976, it was called “the Vanguard experiment,” which initially accumulated $11 million. It is now famously known as the Vanguard 500 Index Investor VFINX fund and has almost $441 billion in assets, noted Vanguard.
Vanguard was formed in 1974 and began functioning the next year. Investors have put in nearly $5.3 trillion into Vanguard funds, according to the company. Most of the Vanguard funds are managed outside. Unlike other fund families, Vanguard doesn’t hire employees to manage funds. Instead, the world’s biggest fund family hires managers from outside. This makes it easier to replace the funds in case the manager fails to deliver. This in turn helps to control overall cost of actively-managed Vanguard funds.
Vanguard funds, in fact, have a high degree of diversification that has helped them earn A+ rating. Its expense ratios is also below industry averages — most are less than 0.5% and few are even below 0.1%. Vanguard, thus, becomes a natural choice for investors.
Let us, now, take a look at Vanguard funds from various investment categories that are worth a buy –
Investors looking to focus on small-cap stocks should consider Vanguard Tax-Managed Small Cap Admiral VTMSX. This fund also keeps tax consequences to a minimum. Vanguard recommends those in the higher income tax bracket with a long-term goal to invest in this fund. This Zacks Rank #2 (Buy) fund over the previous 10 years has given an average return of 13.5%. Much of that return has come in the last three years, as the fund has returned 9.1%.
This Small Cap Blend fund, as of the last filing, allocates fund in three major groups, including Small Value, Foreign Bond and Small Growth. Further, as of the last filing, Vanguard REIT ETF, Ligand Pharmaceuticals and Trex Co. were the top holdings of VTMSX.
The Vanguard Tax-Managed Small Cap Admiral fund, managed by Vanguard Group, carries an expense ratio of 0.09% versus the category average of 1.16%.
As the name indicates, Vanguard Strategic Equity Investor VSEQX invests in mid-capitalization domestic equity securities. The advisor selects securities that it believes offer an appropriate balance between strong prospects and reasonable valuations relative to their industry peers. Since its beginning, this Zacks Rank #1 (Strong Buy) fund has yielded a yearly average return in double-digits.
VSEQX has a history of strong positive total returns for over 10 years. Specifically, the fund has returned 5.7% over three years and 5.8% in five years. Over the 10-year period, the fund has given an even better return of 13.7%.
This Mid Cap Blend fund, as of the last filing, allocates their fund in three major groups, including Small Growth, Large Growth and Foreign Bond. Further, as of the last filing, Square Inc., Advanced Micro Devices Inc. and Best Buy Company were the top holdings of VSEQX.
The Vanguard Strategic Equity Investor fund, managed by Vanguard Group, carries an expense ratio of 0.17%, less than the category average of 1.06%.
Investors who prefer a diversified collection of large-cap stocks often turn to Vanguard US Growth Investor VWUSX. This mutual fund seeks to provide long-term capital appreciation, while a large portion of its assets will be invested in securities issued by U.S. companies. Since its inception, this Zacks Rank #1 fund has yielded a one-year average return of about 0.6%.
VWUSX has a history of strong positive total returns for over 10 years. Specifically, the fund has returned 9.5% over three years and 10% in five years.
This Large Cap Growth fund, as of the last filing, allocates fund only in Large Growth. Further, as of the last filing, Microsoft Corp, Alphabet Inc. and Amazon.com were the top holdings of VWUSX.
The Vanguard US Growth Investor fund, managed by Vanguard Group, carries an expense ratio of 0.42%, below the category average of 1.07%.
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