|Expense Ratio (net)||0.05%|
|Last Cap Gain||0.00|
|Morningstar Risk Rating||Below Average|
|Beta (3Y Monthly)||1.06|
|5y Average Return||N/A|
|Average for Category||N/A|
|Inception Date||Nov 12, 2001|
[Editor's note: This story was last updated in June 2019. It has since been updated and republished.]Vanguard should probably be thanking Warren Buffett.In Berkshire Hathaway's (NYSE:BRK.B) 2014 shareholders letter, Buffett mentioned Vanguard funds in a big way. Specifically, he recommended that the cash left to his wife be invested 10% in short-term government bonds and 90% in a very low-cost S&P 500 index fund. Not just any index fund mind you, but a Vanguard fund in particular.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Stocks to Buy In a Flat Market Whether it be exchange-traded funds (ETFs) or mutual funds, the Oracle of Omaha believes Vanguard funds are the way to go. With that in mind, I've put together a portfolio of two ETFs, two mutual funds and a fifth wildcard. The resulting portfolio should be appropriate for Buffett's wife -- or anyone else, for that matter. 1\. Vanguard 500 Index Fund Admiral Shares (VFIAX)Source: Shutterstock Allocation: 50% of Portfolio 10-year performance: 13.41%The goal here is to keep costs to a minimum while generally sticking to Buffett's hypothesis when it comes to his wife's investments.In that case, it makes more sense for the S&P 500 investment to be a mutual fund rather than an ETF (although Vanguard Funds do offer commission-free ETFs) to avoid paying commissions on the largest segment of the portfolio. The Vanguard 500 Index Fund Admiral Shares (VFIAX) charge an annual expense ratio of just 0.04%.Your annual fees would amount to a mere $20 on a $50,000 portfolio. That's hard to beat, and Buffett knows it. The largest holdings in this fund include Apple (NASDAQ:AAPL), Exxon Mobil (NYSE:XOM) and Google (NASDAQ:GOOGL, NASDAQ:GOOG). The minimum investment is $10,000. 2\. Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX)Allocation: 20% of Portfolio 10-year performance: 13.50% The VFIAX covers the large-cap portion of the portfolio quite nicely. While Buffett might not be fond of mid-cap stocks being added to the mix, but evidence suggests mid-caps outperformed large-cap stocks over a four-year period between 2009 and 2013.In fact, John Hancock published a report in 2012 that cautions investors about underweighting mid-caps because of an assumption that a large-cap fund combined with a small-cap fund will do the job. That's simply not the case.Mid-cap stocks tend to provide an attractive combination of risk and reward. For this reason, I recommend the Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX), which tracks the CRSP Mid Cap Index, an index composed of stocks that fall between the top 70%-85% of investable market capitalization. * 7 Best Tech Stocks to Buy Right Now They're big enough to survive an economic hit but small enough to still be growing. With an expense ratio of 0.05%, this entry on our list of Vanguard funds is giving you safety and performance in one. Top holdings include Moody's (NYSE:MCO) and Roper Technologies (NYSE: ROP). 3\. Vanguard FTSE All-World ex-US Small-Cap ETF (VSS)Source: Shutterstock Allocation: 10% of Portfolio 3-year performance: 3.98% Although I just said mid-caps are a key part of any portfolio and tend to outperform small caps while utilizing less risk, there is always a place for small caps in your portfolio.That's especially true when the two previous picks from Vanguard Funds are almost 100% invested in the U.S. with virtually no international exposure. For this reason, a little bit of love outside America makes total sense.My recommendation is to go with the Vanguard FTSE All-World ex-US Small-Cap ETF (VSS), a fund that tracks the performance of the FTSE Global Small Cap ex US Index, which consists of approximately 3,050 stocks in dozens of countries. Investing in both developed and emerging markets, the fund gives you good exposure to some of the world's future stars at an annual expense ratio of just 0.12%.With such low fees, it's no wonder Vanguard Funds has $6.6 billion invested in this ETF. 4\. Vanguard Short-Term Government Bond ETF (VGSH)Source: Shutterstock Allocation: 10% of Portfolio 5-year performance: 1.28% Buffett recommends that 10% of his wife's portfolio go to short-term government bonds. Vanguard Funds has an ETF that does exactly that.The Vanguard Short-Term Government Bond ETF (VGSH) invests in investment-grade U.S. government bonds with average maturities between one and three years. The risk, on a scale of one to five, is one -- meaning this Vanguard ETF is for conservative investors looking for stable share prices. * The 8 Worst Stocks to Buy Before the Trade Turmoil Cools Off And with an expense ratio of 0.07%, this ETF should give you peace of mind for your short-term needs. 5\. Vanguard Consumer Staples ETF (VDC)Source: Shutterstock Allocation: 10% of Portfolio 10-year performance: 12.43% On this final piece of the puzzle, I'm going defensive. The mutual fund version of the S&P 500 has less than 10% invested in consumer staples' stocks. I mean to remedy that by putting the final 10% in the Vanguard Consumer Staples ETF (VDC), a collection of 109 household names including Procter & Gamble (NYSE:PG) and Coca-Cola (NYSE:KO).Since its inception in 2004, VDC has had but one year of negative annual total returns, and that was in 2008 when it experienced a 17% decline -- 20 percentage points better than the S&P 500. When the you-know-what hits the fan, you'll be glad you own this particular low-cost ETF (with a 0.10% expense ratio) from Vanguard Funds.It seems the "keep it simple" rule holds true, and Warren Buffett is the No. 1 follower.As of this writing, Will Ashworth did not own a position in any of the aforementioned securities. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 S&P 500 Dividend Stocks to Buy at Least Yielding 3% * 7 Stocks to Buy That Don't Care About Tariffs * 5 Healthcare Stocks to Pick Up From the Wreckage The post Take Buffett's Advice: 5 Vanguard Funds to Buy appeared first on InvestorPlace.
Actively managed mutual funds typically carry higher fees and expenses than index funds and exchange-traded funds (ETFs), explaining why passive products have long been stealing market share from active funds.Another cost irritant associated with some active mutual funds is the load. A mutual fund load is real nuisance because it is a charge that goes to compensate a middleman, someone in between the investor and the fund issuer. Like any other fee, mutual fund loads can be drags on investor outcomes, which is never a positive thing.Given the peskiness and, arguably, lack of necessity associated with loads, it is easy to understand why investors who like mutual funds really like no-load funds. While many no-load mutual funds still carry higher costs than passively managed ETFs and index funds, the good news is that saving on loads enhances investors' returns.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 5 Dividend Stocks Perfect for Retirees Here are some no-load mutual funds to consider. American Century High-Yield Municipal Fund Investor Class (ABHYX)Expense Ratio: 0.6% per year, or $60 on a $10,000 investment.The American Century High-Yield Municipal Fund Investor Class (MUTF:ABHYX) requires a minimum investment of $5,000, but at least this is a no-load mutual fund and its expenses are below those found in the category average.This fund focuses on high-yield municipal debt and is "designed to provide shareholders with a high level federal tax-free income while maintaining low exposure to the Alternative Minimum Tax (AMT)," according to the issuer.ABHYX has a portfolio turnover of 49%, a 30-day SEC yield of 3.27% and a trailing-12-month yield of 3.8%. The fund's average duration is 5.5 years and about half its holdings are rated A, BBB or BB. Fidelity Balanced Fund (FBALX)Expense Ratio: 0.53%Fidelity has long been a giant in the world of actively managed mutual funds, but the firm has recently been asserting its dominance in the passive spaces, even offering several no-fee index funds and some of the cheapest ETFs on the market. Part of Fidelity's low-cost push has been to eliminate minimum investments, so not only is the Fidelity Balanced Fund (MUTF:FBALX) a no-load mutual fund, it does not have minimum investment, either.This no-load mutual fund has been around for nearly 34 years and has low expenses compared to the category average, a better return profile and a five-star Morninstar rating.As a balanced fund, FBALX holds both stocks and bonds. Its equity lineup is considered large-cap blend, but has often leaned toward large-cap growth. The technology and healthcare sectors combine for about 33% of FBALX's equity lineup. * 10 S&P 500 Stocks to Weather the Earnings Storm FBALX's bond roster spans more than 10 fixed-income categories, including Treasuries, investment-grade corporate debt and junk bonds. Vanguard Equity Income Investor Shares (VEIPX)Expense Ratio: 0.27%Just by the name, you should expect the Vanguard Equity Income Investor Shares (MUTF:VEIPX) to be a no-load mutual fund because Vanguard is a low-cost leader. Vanguard funds are among the industry's least expensive, and loads are not in the issuer's language.Because VEIPX "typically invests in companies that are dedicated to consistently paying dividends, it may have a higher yield than other Vanguard stock mutual funds," according to Vanguard. "The fund's emphasis on slower-growing, higher-yielding companies can also mean that its total return may not be as strong in a significant bull market."This fund holds 191 stocks with a median market value of $119.6 billion. Nearly a third of the fund's weight is allocated to financial services and healthcare names. VEIPX does require a $3,000 minimum investment. Oakmark Intenrnational (OAKIX)Source: USAFAExpense Ratio: 0.96%The Oakmark Intenrnational Fund (MUTF:OAKIX) is a no-load mutual fund for investors seeking international equity exposure. The investor class of this fund, which is highlighted here, has a minimum investment of just $1,000."Oakmark International invests in a diversified portfolio of common stocks of non-U.S. companies. The fund generally focuses on mid- and large-cap companies, though small-cap companies are also eligible for investment," according to Oakmark. * 7 Stocks to Buy for Spring Season Growth This mutual fund can be used as an alternative to passive EAFE (Europe, Asia and Far East) funds because OAKIX has similar geographic exposures, though the fund is significantly underweight Japan relative to the MSCI EAFE Index. The U.K. and Germany combine for 36% of the fund's geographic exposure. This is a targeted fund, a trait not often seen among passive EAFE strategies, as OAKIX holds just 61 stocks. Metropolitan West Total Return Bond Fund (MWTRX)Source: Shutterstock Expense Ratio: 0.67%The Metropolitan West Total Return Bond Fund (MUTF:MWTRX) is an actively managed alternative to passive aggregate bond funds. MWTRX usually has a duration of two to eight years and an average maturity of two to 15 years.The fund can invest in "corporate bonds, notes, collateralized bond obligations, collateralized debt obligations, mortgage-related and asset-backed securities, bank loans, money-market securities, swaps, futures, municipal sercurities, options, credit default swaps, private placements and restricted securities," according to the issuer.At the end of last year, the bulk of MWTRX's holdings were Treasuries, U.S. government agency debt and mortgage-backed securities (MBS), ensuring the fund's credit quality was high. Vanguard Mid-Cap Index Fund -- Admiral Shares (VIMAX)Expense Ratio: 0.05%For investors looking for a cost-efficient, no-load mutual fund focusing on mid-cap stocks, the Vanguard Mid-Cap Index Fund -- Admiral Shares (MUTF:VIMAX) is one of the better options to consider. VIMAX is cheaper than 95% of competing funds, according to Vanguard data. It requires a minimum investment of $3,000.This no-load mutual fund is a mid-cap blend fund, meaning its 368 holdings include both growth and value stocks. The median market value of VIMAX's holdings is $14.7 billion, meaning this fund actually resides in the lower end of large-cap territory.Financial services, industrial and technology stocks combine for over 55% of the fund's weight. This no-load mutual fund carries a five-star Morningstar rating. * 7 Stocks That Can Outperform for Years "Vanguard Mid-Cap Index is one of the best funds available for U.S. mid-cap stock exposure," according to the research firm. Fidelity New Markets Income Fund (FNMIX)Expense Ratio: 0.84%.For investors willing to take on more risk with their fixed-income investments, the Fidelity New Markets Income Fund (MUTF:FNMIX) is a compelling option. This Fidelity fund, which does not have a minimum investment, targets emerging markets bonds. Due to the risks associated with emerging-markets debt relative to U.S. government bonds, emerging markets bond funds usually carry higher yields. FNMIX fits that bill with a 30-day SEC yield of 5.6% and trailing-12-month yield of 4.8%.The fund's average maturity is just over 11 years. Credit quality is usually the primary consideration with emerging-markets bond funds and FNMIX is no different. This no-load mutual fund allocates about 64% of its weight to bonds rated BBB, BB or B, indicating a fair amount of the fund's holdings carry non-investment-grade ratings.Mexico, Turkey and Brazil are FNMIX's largest geographic exposures. The fund, which has a four-star Morningstar rating, has a duration of 6.48 years.As of this writing, Todd Shriber did not own any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 5 Dividend Stocks Perfect for Retirees * 7 Reasons the Stock Market Rally Isn't Over Yet * 10 S&P 500 Stocks to Weather the Earnings Storm Compare Brokers The post 7 No-Load Mutual Funds to Buy appeared first on InvestorPlace.
Exchange-traded funds (ETFs) and index funds have long been grabbing market share from actively managed mutual funds for several reasons. First, various studies continue confirming that across various market capitalization segments and fixed income arenas, active managers often do not beat their benchmarks.Second, and arguably more prevalent than the first point, is low costs. While there are plenty of ETFs and index funds out there are that are not particularly cheap, many of these products are really cheap and are getting cheaper. For long-term investors, fees really do matter and there is no denying that."Imagine you have $100,000 invested. If the account earned 6% a year for the next 25 years and had no costs or fees, you'd end up with about $430,000," according to Vanguard, one of the dominant issuers of index funds. "If, on the other hand, you paid 2% a year in costs, after 25 years you'd only have about $260,000."InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 High-Risk Stocks With Big Potential Rewards For cost-conscious, buy-and-hold investors, here are some of the best index funds to consider. Best Index Funds: Fidelity ZERO Total Market Index Fund (FZROX)Expense Ratio: 0%Last year, Fidelity shook the index fund space by introducing the first no-cost index funds. The Fidelity ZERO Total Market Index Fund (MUTF:FZROX) is one of the first two zero-fee index funds introduced by Fidelity.There may have been some naysayers who thought no-fee funds were a marketing gimmick. They should think again because FZROX is more proof that investors love cheap -- or in this case, free -- index funds. FZROX debuted early last August and today has $2.74 billion in assets under management. Fidelity clients can also transact in this index fund free of commissions.FZROX is a standard, domestic total market equity fund that is considered a large-cap blend index fund. Investors should expect returns that are comparable to those of the S&P 500 or Russell 1000 Index. Fidelity ZERO International Index Fund (FZILX)Expense Ratio: 0%The Fidelity ZERO International Index Fund (MUTF:FZILX) is the other no-fee index fund introduced by Fidelity last August. As is the case with FZROZ, FZILX is gaining a following by virtue of its zero expense ratio. The internationally focused FZILX now has slightly more than $888 million in assets under management.This Fidelity index fund holds both developed and emerging markets equities, but that split is 70.45% to 22.23% in favor of developed markets fare. Only stocks with market values of greater than $10 billion are included in this index fund. * 10 Medical Marijuana Stocks to Cure Your Portfolio At the geographic level, Europe is FZILX's largest regional weight at over 38% while Japan is the index fund's largest individual country weight at almost 17%. Vanguard Value Index Fund -- Admiral Shares (VVIAX)Expense Ratio: 0.05%The Vanguard Value Index Fund -- Admiral Shares (MUTF:VVIAX) requires a minimum investment of $3,000, but when it comes to its fee, this index fund is one of the cheapest value funds."This low-cost index fund follows a buy-and-hold approach, and invests in substantially all of the stocks contained within its broad benchmark," according to Vanguard.The financial services and healthcare sectors combine for over 39% of VVIAX's weight. Large exposure to financials is a common trait among traditional value funds, so investors should not be troubled by VVIAX's weight to that sector. The fund's top 10 holdings, eight of which are members of the Dow Jones Industrial Average, combine for 25.2% of its weight. JPMorgan BetaBuilders U.S. Equity ETF (BBUS)Source: Shutterstock Expense Ratio: 0.02%Until the zero-fee ETFs come to market or barring other fee reductions, the newly minted JPMorgan BetaBuilders U.S. Equity ETF (CBOE:BBUS) is the least expensive ETF in the U.S. This index fund, which debuted in March, offers investors efficient exposure to 85% of the U.S. equity market and holds more than 600 stocks.Like some of the other index funds mentioned here, BBUS is a total market U.S. equity solution, so investors should expect returns comparable to those of broader domestic equity benchmarks because the fund's sector exposures are similar to those found in widely indexes. * 7 Biometric Stocks to Watch as AI Rises BBUS is not yet a month old and already has $28.40 million in assets under management, proving that investors like their ETFs and index funds with low fees. Vanguard Mid-Cap Index Fund -- Admiral Shares (VIMAX)Expense Ratio: 0.05%Index funds with exposure to smaller stocks often feature higher fees than their large-cap counterparts, but there are plenty of cheap mid- and small-cap funds. That includes mid-caps and the Vanguard Mid-Cap Index Fund -- Admiral Shares (MUTF:VIMAX), which is cheaper than 95% of competing funds, according to Vanguard data.One of the primary reasons buy-and-hold investors should consider a mid-cap index fund like VIMAX is that mid caps historically outperform large caps by wide margins. Mid caps can also top small caps and do so with less volatility.VIMAX holds 363 stocks and if there is a knock on this Vanguard index funds, it is mid-cap purity. The median market value of $14.8 billion on the fund's holdings indicates VIMAX drifts into large-cap territory. Fidelity ZERO Extended Market Index Fund (FZIPX)Expense Ratio: 0%As noted earlier, Fidelity started with two no-fee index funds and quickly grew that group to four. The Fidelity ZERO Extended Market Index Fund (MUTF:FZIPX) is one of the second pair in that quartet.This index fund is one to consider for investors who have large positions in total market or large-cap funds, including some of the index funds mentioned here because FZIPX fills in the some of the mid- and small-cap gaps left by traditional large-cap products. To that point, FZIPX is considered a mid-cap blend fund. * The Elite 8 Stocks to Buy for Massive Outperformance FZIPX is diverse, as its top 10 holdings combine for just 3.15% of the fund's weight and the index fund has double-digit allocations to five sectors -- financials, industrials, technology, consumer discretionary and healthcare. This index fund debuted last September and has nearly $300 million in assets under management. Fidelity ZERO Large Cap Index Fund (FNILX)Expense Ratio: 0%The Fidelity ZERO Large Cap Index Fund (MUTF:FNILX) is the final member of Fidelity's no-fee index fund quartet to be highlighted here. This is a traditional large-cap index fund featuring exposure to big domestic companies with market values of more than $10 billion. FNILX is considered a large-cap blend index fund because it includes both growth and value stocks.Being a domestic large-cap index fund, FNILX's sector weights are comparable to those of the S&P 500. As such, investors should expect returns and volatility that are in line with those of the benchmark U.S. equity gauge.Like the other Fidelity index funds mentioned here, FNILX is available to the firm's clients on a commission-free basis. And like the other Fidelity index funds highlighted here, FNILX has been an immediate success. The fund debuted last September and already has $526.38 million in assets under management. Schwab Small Cap Index Fund (SWSSX)Expense Ratio: 0.04%The Schwab Small Cap Index Fund (MUTF:SWSSX) is one of the more venerable names among low-cost small-cap index funds. SWSSX holds over 2,000 stocks."Small-blend funds favor firms at the smaller end of the market-capitalization range, and are flexible in the types of small caps they buy. Some aim to own an array of value and growth stocks while others employ a discipline that leads to holdings with valuations and growth rates close to the small-cap averages," according to Schwab. * 10 Tech Stocks That Transformed Their Business The $4.1 billion SWSSX allocates over a third of its weight to financial services and healthcare stocks. Throw in a 15.30% weight to tech stocks and SWSSX has the feel of a growth index fund, but it has portfolio turnover of 17%, so it can drift back to being a value or blend fund. SWSSX earns four-star Morningstar ratings. Schwab International Index Fund (SWISX)Expense Ratio: 0.06%The Schwab International Index Fund (MUTF:SWISX) is another low-cost index fund for investors seeking to add some diversification to U.S.-heavy portfolios."Foreign large-blend funds invest in a variety of big international stocks. Most of these funds divide their assets among a dozen or more developed markets, including Japan, Britain, France and Germany. They tend to invest the rest in emerging markets such as Hong Kong, Brazil, Mexico and Thailand," according to Schwab.While some foreign blend funds feature emerging markets exposure, all of SWISX's top 10 geographic weights are developed markets and those 10 countries combine for 88.6% of the index fund's geographic exposure. European stocks represent 61.40% of SWISX's weight, twice the weight the index fund assigns to Asian economies. Vanguard Short-Term Corporate Bond Index Fund -- Admiral Shares (VSCSX)Expense Ratio: 0.07%Investors looking for income without the burden of significant interest rate risk can turn short-term corporate bond index funds, of which the Vanguard Short-Term Corporate Bond Index Fund -- Admiral Shares (MUTF:VSCSX) is one of the best options for cost-conscious, buy-and-hold investors.VCSH's 2,223 holdings have maturities ranging from one to five years, giving this index fund an average maturity of 2.9 years and an effective duration of 2.5 years. Over 85% of VSCSX's holdings are rated A or Baa. * 7 High-Risk Stocks With Big Potential Rewards VCSH yields 2.66%, which is better than the yield on Treasuries of comparable maturity and the dividend yield on the S&P 500, making it one of the best funds to buy.As of this writing, Todd Shriber did not own any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 5 Data Center Buys That Deliver Sizable Income * 7 High-Risk Stocks With Big Potential Rewards * 3 Marijuana Stocks to Watch as New York, New Jersey Delay Legalization Compare Brokers The post Top 10 Index Funds to Build a Retirement On appeared first on InvestorPlace.
Investing icon Warren Buffett advises investors to stash 90% of their money in a Standard & Poor's 500-stock index fund and keep the rest in short-term government bonds. That's a good start for investors who want to keep things simple, but it limits your investments to large U.S. companies. So today, we'll show you how the best Vanguard index funds can add more portfolio diversification while still keeping your strategy simple. Rather than help to pay the huge salaries of high-powered fund managers, investors can buy index funds, which simply aim to mirror the returns of their benchmark indexes. Why? Because roughly two-thirds of actively managed funds fail to match or beat their indexes. It's not that fund managers are stupid or incompetent. It's because picking mispriced stocks is incredibly difficult. It's not surprising that the average fund lags its benchmark index by just about what it charges investors in annual expenses (a little more than 1%). Vanguard - whose founder, John Bogle, just passed away - invented the index fund and still does the best job operating them. Vanguard index fund fees are always, if not the lowest, within a few basis points (a basis point is one one-hundredth of a percent) of the lowest. What's more, its managers are skilled at running index funds, so they don't stray far from the performance of the index they track - a job that actually sounds a lot easier than it is. Here are six of the best Vanguard index funds you can use to build a solid portfolio. This includes a general suggestion for a percentage of your assets to allocate to each one. And if you prefer exchange-traded funds to mutual funds, that's OK too - I'll offer up the ETF version of each fund. ### SEE ALSO: The 27 Best Mutual Funds in 401(k) Retirement Plans