No matter how established, large or reputable a blue-chip stock may appear, it's essential to remember that it is still vulnerable to company-specific risks and can face a downfall unexpectedly or due to prolonged decline and mismanagement.
Consider the sudden collapse of giants like Washington Mutual, Enron and Lehman Brothers, or the gradual demise of once-dominant players like Kodak, Sears and Blockbuster.
These examples underscore the reality that idiosyncratic risk – risk unique to a particular company – is hardly ever worth taking, especially when investors concentrate their portfolios on a limited number of stocks. This is where the adage that "diversification is the only free lunch in investing" comes into play.
For long-term, buy-and-hold investors, opting for a diversified mutual fund or exchange-traded fund (ETF) presents a far wiser strategy than picking individual stocks. These funds can spread risk across various sectors, countries and asset classes, helping to reduce volatility.
This broader diversification not only minimizes the impact of potential significant losses but also offers investors peace of mind, knowing that their portfolio is built to endure and progress steadily over time.
Here are seven of the best Vanguard funds to buy and hold in 2024:
| Vanguard Fund | Expense Ratio |
| Vanguard Total Stock Market ETF (ticker: VTI) | 0.03% |
| Vanguard S&P 500 ETF (VOO) | 0.03% |
| Vanguard High Dividend Yield ETF (VYM) | 0.06% |
| Vanguard Dividend Appreciation ETF (VIG) | 0.06% |
| Vanguard Consumer Staples ETF (VDC) | 0.10% |
| Vanguard Wellington Fund Investor Shares (VWELX) | 0.26% |
| Vanguard Target Retirement 2065 Fund (VLXVX) | 0.08% |
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 passively tracks the CRSP U.S. Total Market Index for a low 0.03% expense ratio.
By doing so, VTI delivers exposure to more than 3,700 small-, mid- and large-cap stocks from all 11 market sectors, weighting holdings by market capitalization. Given its breadth and index benchmark, investors can expect a very low portfolio turnover rate of just 2.2%, which results in excellent tax efficiency. VTI also has a mutual fund counterpart, the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX).
Vanguard S&P 500 ETF (VOO)
A popular tax-loss harvesting partner for VTI is VOO. Both ETFs currently share an 86% overlap in their holdings thanks to their market-cap-weighted index methodologies. In addition, their historical performance has been similar, with VTI returning an annualized 12.3% over the last 10 years compared to 12.9% for VOO. Finally, both ETFs charge the same low 0.03% expense ratio.
However, the index benchmarks for both ETFs are different, with VTI tracking the CRSP U.S. Total Market Index and VOO tracking the S&P 500. Thus, an investor could sell VTI to lock in a capital loss, while immediately reinvesting the proceeds into VOO without running afoul of the IRS' wash-sale rule. VOO is also available in mutual fund form as the Vanguard 500 Index Fund Admiral Shares (VFIAX).
Vanguard High Dividend Yield ETF (VYM)
VYM has long been a mainstay for dividend investors thanks to a low 0.06% expense ratio, a diversified portfolio of 450 stocks, and a decent 2.8% 30-day SEC yield. However, the ETF can also be an ideal core holding for a buy-and-hold investor thanks to its strong tilt toward value stocks. In practice, the FTSE High Dividend Yield Index tracked by VYM actually delivers strong exposure to value.
Currently, VYM's portfolio shares a 63% overlap with the Vanguard Value ETF (VTV). Notable blue-chip, dividend-paying value stocks in VYM currently include JPMorgan Chase & Co. (JPM), Exxon Mobil Corp. (XOM), Johnson & Johnson (JNJ) and Procter & Gamble Co. (PG). Thus, contrarian investors looking to avoid potentially overvalued growth stocks may find VYM to be an appealing buy-and-hold option.
Vanguard Dividend Appreciation ETF (VIG)
Another Vanguard ETF suitable for buy-and-hold investors looking to harness the snowballing effect of reinvested dividends is VIG. Instead of focusing on high-yielding dividend stocks, this ETF focuses on ETFs that have historically grown their dividends consistently. It offers the same low fees as VYM does with a 0.06% expense ratio and pays a 1.7% 30-day SEC yield.
Currently, VIG tracks the S&P U.S. Dividend Growers Index. This benchmark requires holdings to possess a minimum 10-year history of sustained dividend growth, while excluding the top 25% highest-yielding stocks. Notable value holdings overlapping VYM include JPMorgan Chase, Exxon Mobil and Johnson & Johnson, but the ETF also holds some growth stocks like Microsoft Corp. (MSFT) and Visa Inc. (V).
Vanguard Consumer Staples ETF (VDC)
Long-term investors looking for defensive buy-and-holds outside of bonds can consider a sector-focused ETF like VDC. This ETF tracks the MSCI U.S. Investable Market Consumer Staples 25/50 Index, which holds around 100 stocks like Procter & Gamble, Costco Wholesale Corp. (COST), Walmart Inc. (WMT) and Coca-Cola Co. (KO). It charges a low 0.1% expense ratio and pays a decent 2.3% 30-day SEC yield.
The consumer staples sector is known for its resilience under a wide range of economic environments, thanks to durable, inelastic demand for its products and services. Case in point: By the end of 2008, VDC fell by 16.6%, compared to the 36.8% loss suffered by the SPDR S&P 500 ETF (SPY). In 2022, VDC lost just 1.8% by year end, compared to SPY, which fell 18.2%.
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.
Despite these trials and tribulations, VWELX's actively managed portfolio of two-thirds in quality and value dividend stocks and one-third in investment-grade bonds has delivered a strong 8.3% annualized return since inception. Currently, investors can buy and hold this longstanding mutual fund for a 0.26% expense ratio and $3,000 minimum investment requirement.
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, Gen Z investors looking to retire around 2065 can opt for VLXVX. This fund currently holds 90% of its portfolio in global stocks and 10% in bonds and charges a low 0.08% expense ratio with a lower $1,000 minimum investment requirement. "Vanguard's target retirement funds are the ultimate set-it-and-forget-it approach to managing your retirement assets," Miller says.
