The Vanguard Group differs greatly from most other asset managers and mutual fund companies. Vanguard is organized as a mutual company, meaning the firm is ultimately owned by the shareholders who invest in its funds. When you invest in Vanguard funds, you become a partner as well as a customer.
Vanguard's mission statement is: "To take a stand for all investors, to treat them fairly and to give them the best chance for investment success." The company's commitment to shareholders and its well-earned reputation for low fees and reasonable expenses make it especially well suited for long-term investing.
Here are six of the best Vanguard funds to invest in for retirement:
| Vanguard Fund | Expense Ratio |
| Vanguard Core Bond Fund Investor Shares (ticker: VCORX) | 0.20% |
| Vanguard Growth and Income Fund Investor Shares (VQNPX) | 0.32% |
| Vanguard Explorer Fund Investor Shares (VEXPX) | 0.45% |
| Vanguard Tax-Managed Balanced Admiral Shares (VTMFX) | 0.09% |
| Vanguard High-Yield Tax-Exempt Fund (VWAHX) | 0.17% |
| Vanguard International Core Stock Fund Investor Shares (VWICX) | 0.48% |
Vanguard Core Bond Fund Investor Shares (VCORX)
Don't neglect fixed-income funds when constructing your retirement portfolio. The stability these funds offer can be key in preserving your capital, not to mention the regular income some offer, which can help provide a paycheck replacement in retirement. That's why VCORX is included among the six best Vanguard funds to buy for retirement.
VCORX should be looked at as a core bond-fund holding. The fund invests predominately in a diversified portfolio of U.S. government and government agency bonds and mortgage-backed securities ranging in maturity from short to long term.
Vanguard is a leader in index investing, but indexing is not all it does. VCORX is an example of an actively managed Vanguard fund. Being actively managed, it carries an expense ratio that's somewhat higher than some other funds on this list, but the 0.2% fee is still quite low compared to its peers.
Vanguard Growth and Income Fund Investor Shares (VQNPX)
Stability is important in retirement portfolios, but so is growth. With retirement lasting upward of 30 years today, you still need some capital appreciation to keep up with inflation – especially when it runs rampant. To this end, a growth and income fund like VQNPX can be a retirement investor's best friend.
This is an ambitious fund that seeks to outperform the S&P 500 without taking on extra risk. It's achieved this goal over the previous five-, three- and one-year periods.
While it looks for total return, which encompasses both capital appreciation and income, the 30-day SEC yield is a modest 0.57% as of April 30. You can expect two distributions each year: a dividend distribution in June and both a dividend and capital gain distribution in December.
The fund's 0.32% expense ratio is below average, but if you really want to save money, the admiral share class (VGIAX) costs only 0.22% for a $50,000 investment minimum. Meanwhile, the investment minimum on the investor shares is only $3,000.
Vanguard Tax-Managed Balanced Admiral Shares (VTMFX)
Taxes are the bane of retirement investors' portfolios. Finding ways to minimize the bite Uncle Sam takes from your hard-saved cash can go a long way in preserving your wealth. To help with this, consider tax-managed funds like VTMFX.
The balanced fund maintains a roughly 50-50 split between U.S. stocks and federally tax-exempt municipal bonds. Stocks are chosen to minimize taxable dividends. The result is an after-tax return of nearly 7% over the lifetime of the fund, which dates back to 1994.
It does pay a quarterly dividend, but this is exclusively income with no capital gains distributions. It leads to a 30-day SEC yield of 2.4%.
VTMFX also comes with a low 0.09% expense ratio, but you'll need to invest at least $10,000 to get started.
Vanguard High-Yield Tax-Exempt Fund (VWAHX)
If you want a bit more income than VTMFX, but don't want to have to sell your first grandchild to pay the taxes, VWAHX may be for you.
The fund takes the same tax-exempt approach by investing in municipal bonds, but is willing to go lower down the rating spectrum. Up to 20% of the portfolio may be in below investment-grade bonds. This can give it a boost in yield, as shown by the 4.1% 30-day SEC yield as of May 15.
High yield often comes with high risk, however. This fund is not for the faint of heart, as lower quality issuers tend to be more volatile and prone to default. That said, Vanguard considers it a good "complement to an already diversified fixed-income portfolio" for investors who can tolerate "moderate risk."
Vanguard Explorer Fund Investor Shares (VEXPX)
Another way to amp up the growth portion of your retirement portfolio is with a small-cap fund like VEXPX. Small-cap investing comes with a unique set of risks. Smaller stocks tend to be more volatile and less predictable than their larger counterparts. But with greater risk comes the possibility of greater rewards over time.
VEXPX is an actively managed fund run by portfolio managers who search out and invest in small- and mid-cap publicly traded companies that they believe have exceptional growth potential. While they will venture into the mid-cap space, the fund remains largely small cap. The median market cap of companies in the portfolio is $6.7 billion.
What sets VEXPX apart from other funds is that it has a multiple advisor approach. In practice, that means that Vanguard relies on several different managers and advisors when making investment decisions. Each advisor to the fund brings their own unique perspective and is allowed to use their own proprietary strategies.
At any given time, investors can expect there to be more than 500 stocks in the portfolio. The hope is that this high level of diversification will help to reduce overall risk, although investors will still weather the volatility that comes with small-cap growth investing.
Vanguard International Core Stock Fund Investor Shares (VWICX)
There's often a tendency toward home country bias in retirement investing. It can be easier and more comfortable to invest in companies you recognize. But it's also important to remember that the U.S. isn't always the best-performing economy out there. There will likely be times throughout your retirement when other nations are doing better. Including international funds like VWICX in your portfolio will ensure you get to benefit from their successes too.
VWICX invests in companies from developed and emerging markets across all sectors. The managers look for a mix of growth and value stocks to keep the overall portfolio balanced. It's predominantly invested in Europe at about half of the portfolio. The remaining half is mostly split between the Pacific and emerging markets, with about 5% in Canada.
As an actively managed fund, it comes with a slightly higher expense ratio. However, it's still well below average for this type of fund. If you're willing and able to put $50,000 into the fund, you can get a 0.1% discount with the fund's admiral shares (VZICX).
