Best Vanguard Funds Overview
Vanguard is well-known in the investment world for its mutual funds—and for good reason. Low expense ratios and good ratings are two reasons we really like these funds in particular:
Vanguard Developed Markets Index Fund (VTMGX)
For international investors, Vanguard created VTMGX in 1999. With more than two decades under its belt, it has racked up over 171% total return during its lifetime. Vanguard’s profile for the developed-markets fund shows an expense ratio of just 0.07%. With such a low management fee, it should come as no surprise that this fund is passively managed. It tracks the FTSE Developed All Cap ex US Index, which is a market-capitalization-weighted index composed of thousands of stocks outside the United States. Vanguard’s profile for VTMGX shows these holdings in the top 10:
- Nestle SA
- Samsung Electronics Co. Ltd.
- LVMH Moet Hennessy Louis Vuitton SE
- Roche Holding AG
- AstraZeneca plc
- Shell plc
- Toyota Motor Corp.
As can be seen, most of the companies are in Europe or Asia. There are a few in Canada. Amazingly, VTMGX holds over 4,000 stocks.
Ratings for Vanguard’s international fund are quite good. Although Vanguard’s fund profiles unfortunately do not provide any grades, it is fairly easy to find them elsewhere on the Web. During our research, we found these ratings from Lipper for VTMGX:
Overall: 5 out of 5
3 Year: 4 out of 5
5 Year: 5 out of 5
10 Year: 5 out of 5
The grades are developed by comparing the fund against other funds in its category, which is international multi-cap core in this case.
The initial purchase amount for VTMGX at Vanguard is $3,000. The fund has no load, and there is no transaction fee when traded at Vanguard in most account types (a few, such as a solo 401k, could have fees for trading this or any other Vanguard fund in some situations).
VTMX is available through a variety of other brokerage firms and may have a transaction fee on some platforms with a minimum purchase amount less than or greater than $3,000.
Vanguard 500 Index Fund (VFIAX)
For a very domestic investment approach, there is VFIAX. This is the Vanguard 500 Index Fund. As the title suggests, it seeks to track the Standard & Poor‘s 500 Index, which means the vast majority of the holdings in this mutual fund are U.S. stocks.
Vanguard’s S&P 500 fund has over $900 billion in assets, which means it’s very popular. No wonder, given its expense ratio, which is just 4 basis points annually. The fund is able to do this because it is passively managed and has only a 2% annual turnover.
Morningstar has a good opinion of the fund. The famous analyst grades it a 5 out of 5 for its 10-year performance. Overall, the fund has 4 stars. As far as return and risk, Morningstar judges the fund to have high return potential but only average risk on a 10-year basis.
Another analyst, New Constructs, seems to like the fund as well. It grades VFIAX a 2-Attractive, which is the second highest rating. New Constructs cites the fund’s low management fee for the high rating.
Like the first fund we looked at, VFIAX is an admiral-shares fund. It has a minimum initial purchase amount of $3,000 when purchased through Vanguard. There is no load or transaction fee. Additional charges, like 12b-1 fees, won’t be found on this fund, either.
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Vanguard High-Yield Tax-Exempt Fund (VWAHX)
For all the bond investors out there, we found a fixed-income fund from Vanguard that invests in municipal securities. Despite the emphasis on high yield, at least 80% of the assets in the fund must be investment grade. Examples of specific holdings we found during our investigation include:
- North Texas Tollway Authority
- Metropolitan Pier and Exposition Authority (MPEA)
- Jefferson County (AL) Sewer Revenue
- Chicago, IL Board of Education
- Commonwealth of Puerto Rico
- Montgomery County Higher Education and Health Authority (MCHEHA)
Most of the bonds are rated A or higher. There are some BBB and BB securities. About 1% is rated below B. A significant number (roughly 16%) are not rated at all. The fund’s effective duration is 7.75, making this a long-term bond fund.
As a bond fund, VWAHX has a focus on income. Its most recent 30-day SEC yield is 4.33%. It pays dividends monthly. Vanguard and most other brokerage firms will permit these dividends to be automatically reinvested as additional shares of the fund.
Placing an initial trade for VWAHX is quite easy to do on Vanguard’s website. On the fund’s profile, there is a big red button to make an initial purchase. Clicking on this button brings up the order ticket. The first task is to specify the fund to be purchased. The order ticket doesn’t automatically populate with the ticker symbol from the profile, so it will need to be entered here. Alternatively, there is a link on the ticket to find a Vanguard fund to purchase. Clicking on this link brings up a pop-up window with a list of Vanguard funds. Simply click on the fund desired, and the order ticket will be populated.
The next task is to select where the money will come from. This can be an external bank account, another Vanguard fund already held, or the core position of the brokerage account.
Fund profiles on Vanguard’s mobile app have a buy link that will create a similar order process.
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Vanguard Energy Fund Investor Shares (VGENX)
And finally, for all the energy investors out there, there is VGENX. This is Vanguard’s energy fund. It is one of the few Vanguard mutual funds that is actively managed. This means the fund’s managers will not try to simply track an index but will instead attempt to beat the market by purchasing undervalued securities and selling overvalued ones.
Speaking of the portfolio’s assets, there are stocks from around the world in VGENX. These companies are either energy or utilities companies. Over 36% of the fund’s securities are classified as utility companies by Morningstar. Examples of energy and utility holdings include:
- ConocoPhillips
- Shell PLC
- BP PLC
- Engie SA
- TotalEnergies SE
- Shell PLC ADR
- Iberdrola SA
These holdings exist in another version of VGENX. This sister fund trades with ticker symbol VGELX. It is a different share class, which has a higher initial minimum purchase amount ($50,000) but delivers a lower expense ratio (0.38% instead of 0.46%).
Both VGENX and VGELX have the same ratings from Morningstar. Although the portfolio, which is the same in both cases, hasn’t performed well over the short term (just 2 stars for 3-year performance), the fund has 5 stars for 10-year performance.
Finding either fund or another Vanguard mutual fund is quite easy on Vanguard’s website. Simply click on the Products & services tab in the top menu and select the link for mutual funds in the drop-down window. The next page will have information on mutual funds and a link to a list of all the mutual funds that Vanguard offers. The mobile app has the same list (look for it on the Research page). Results on either platform can be sorted by a variety of criteria, including investment minimum and risk rating.
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