Vanguard's lineup currently includes a total of 266 mutual funds and 86 exchange-traded funds (ETFs), most of which boast low costs and minimum required investments.
"Vanguard funds as well as other low-cost investment options are an efficient way for investors to gain exposure to both the overall market as well as specific market sectors," says Robert F. Draper Jr., founder and chief investment officer of Draper Asset Management. "The usage of Vanguard funds removes the burden of specific security analysis."
However, that doesn't mean a buy-and-hold investor can blindly select a handful of funds to create a portfolio. Picking the right ones for a buy-and-hold strategy largely depends on assessing three key objectives: the time horizon, investment goals and risk tolerance.
For example, a short-term bond fund that emphasizes liquidity and safety of principal may not be appropriate for an investor looking to grow a portfolio over the next decade. The lack of risk here translates into lower expected returns.
Similarly, an investor who is not drawing on their portfolio for retirement income may not need corporate bond ETFs or high-yield dividend stocks. Instead, growth-focused investments with capital appreciation potential may be more desirable.
Finally, while Vanguard has a variety of sector-specific funds, a buy-and-hold investor may not be comfortable holding these long term, as there is no guarantee that an individual sector will outperform in perpetuity. Consider the steep losses suffered by the tech and communication sectors during the dot-com bubble.
Here are seven of the best Vanguard funds to buy and hold in 2024, with input from investment experts:
| Vanguard Fund | Expense Ratio |
| Vanguard Total Stock Market ETF (ticker: VTI) | 0.03% |
| Vanguard S&P 500 ETF (VOO) | 0.03% |
| Vanguard Total International Stock ETF (VXUS) | 0.08% |
| Vanguard Total World Stock Index Fund Admiral Shares (VTWAX) | 0.10% |
| Vanguard Wellington Fund Investor Shares (VWELX) | 0.26% |
| Vanguard Target Retirement 2065 Fund (VLXVX) | 0.08% |
| Vanguard Dividend Appreciation ETF (VIG) | 0.06% |
Vanguard Total Stock Market ETF (VTI)
"I still believe that a quality ETF for a long-term growth portfolio from Vanguard is VTI, especially for investors who are not really near retirement and have the ability to invest monthly in up or down markets," says Jim Penna, senior manager of retirement services at VectorVest Inc. This ETF provides exposure to over 3,700 domestic equities via the CRSP US Total Market Index.
As a broad market ETF, VTI holds both value and growth stocks; small-, mid- and large-cap stocks; and stocks from all 11 market sectors. Thanks to its diversified methodology, the ETF also keeps turnover low, at just 2.2%, which is beneficial for tax efficiency. It is extremely cheap as well, with a 0.03% expense ratio. It is also available as the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX).
Vanguard S&P 500 ETF (VOO)
It is exceedingly hard to beat the S&P 500 consistently over long periods. For example, the latest update to the S&P Indices Versus Active (SPIVA) study found that over the last 15 years up to Dec. 31, 2023, approximately 88% of all U.S. large-cap funds underperformed this benchmark. Therefore, for a buy-and-hold investor with a high risk tolerance, an S&P 500 index ETF like VOO could be ideal.
This ETF is remarkably cost-effective and tax-efficient, with a 0.03% expense ratio and a 2.2% turnover rate. However, keep in mind that because it is a 100% equity fund, short-term volatility is to be expected. If you prefer it in mutual fund form, Vanguard also offers the Vanguard 500 Index Fund Admiral Shares (VFIAX), but it charges a higher 0.04% expense ratio and requires a $3,000 minimum investment.
Vanguard Total International Stock ETF (VXUS)
Even if you believe strongly in continued U.S. stock market dominance, it may be a good idea to hedge your bets via an allocation to international stocks. Historically, there have been periods, such as the "lost decade" of 1999 to 2009, in which the S&P 500 remained flat even with dividends reinvested, and negative if you factored in the eroding effects of inflation during that time.
Long-term investors who want to mitigate this can use an international stock ETF like VXUS. This ETF tracks the FTSE Global All Cap ex US Index, which holds over 8,600 stocks from both developed and emerging-market countries for a 0.08% expense ratio. As with most Vanguard ETFs, it is also available in mutual fund form as the Vanguard Total International Stock Index Fund Admiral Shares (VTIAX).
Vanguard Total World Stock Index Fund Admiral Shares (VTWAX)
If you don't want to guess as to whether U.S. or international markets will outperform, then a total world equity fund like VTWAX could be a great "set it and forget it" pick. This fund tracks the FTSE Global All Cap Index, which holds over 9,800 stocks from U.S., developed and emerging markets weighted by market cap. It is also available in ETF form as the Vanguard Total World Stock ETF (VT).
The beauty of VTWAX is that it takes the guesswork out of investing. Because its index is weighted by market cap, the composition will automatically adjust over time to reflect the relative size of each country's market. This makes VTWAX a simple bet on the overall upward growth of the global economy. All this can be attained for a low 0.1% expense ratio, or 0.07% if you pick VT instead.
Vanguard Wellington Fund Investor Shares (VWELX)
"Launched in 1929, the Vanguard Wellington fund has seen it all – the Great Depression, World War II, the intense bear market of the 1970s, the subsequent bull market of the '80s and '90s, the global financial crisis and the COVID-19 pandemic, just to name a few," says Brian Miller, senior investment specialist on the multi-asset solutions team at Vanguard.
With its longevity, VWELX is ideal for a buy-and-hold investor with a moderate risk tolerance. It currently holds a portfolio of two-thirds in blue-chip quality dividend stocks trading at favorable valuations, while reserving the other third for investment-grade bonds. However, keep in mind that as an actively managed fund, it is more expensive, with a 0.26% expense ratio. It also requires a $3,000 minimum.
Vanguard Target Retirement 2065 Fund (VLXVX)
"Vanguard's suite of target retirement funds can be a complete portfolio solution for investors who want a simple, globally diversified portfolio that adjusts its risk profile over time," Miller says. "Simply pick the target date closest to when you plan to retire, and the fund allocates your assets to a low-cost mix of stocks and bonds that gradually gets more conservative as you approach retirement."
For example, a buy-and-hold investor looking to retire around 2065 can buy VLXVX as a one-fund solution. This fund currently holds around 90% in global stocks and 10% in global bonds, suitable for higher-risk-tolerance investors with a long time horizon. But as time passes, VLXVX will adjust its composition to become more conservative. The fund charges a 0.08% expense ratio.
Vanguard Dividend Appreciation ETF (VIG)
Focusing on high dividend yields may not be a good idea for long-term investors not requiring income, but a dividend growth approach could make sense. This strategy targets companies with a history of steadily increasing dividends, which can provide exposure to quality stocks. As the dividend payments grow, investors can reinvest them to accumulate more shares, starting a snowball effect.
The Vanguard ETF to watch here is VIG, which tracks the S&P U.S. Dividend Growers Index. This ETF requires holdings to have at least 10 consecutive years of dividend growth, while eliminating the top 25% yielding stocks to ensure quality. Top holdings include names like Microsoft Corp. (MSFT), Apple Inc. (AAPL), Broadcom Inc. (AVGO), and JPMorgan Chase & Co. (JPM). VIG charges a 0.06% expense ratio.
