The Vanguard Group has grown into one of the largest global asset management firms, boasting a vast clientele of over 30 million investors from around the world. Its prominence is attributed to its commitment to offering numerous mutual funds within the U.S., all of which come with low expense fees. This emphasis on low costs reflects their dedication to putting the interests of their investors first.
In order to determine the best Vanguard mutual funds, a rigorous evaluation process was conducted. The selection criteria included factors such as diversification, expense ratio, assets under management (AUM), transaction fees, and management style. By scrutinizing these aspects, the aim was to pinpoint the most attractive and widely preferred funds that align with a passive indexing strategy, appealing to investors seeking broad exposure to the market.
Compare the best Vanguard mutual funds
| FUND | EXPENSE RATIO | AUM |
|---|---|---|
| Vanguard 500 Index Fund Admiral Shares (VFIAX) | 0.04% | $325.9 billion |
| Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) | 0.04% | $310.5 billion |
| Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) | 0.05% | $94.3 billion |
| Vanguard Balanced Index Fund Admiral Shares (VBIAX) | 0.07% | $48.0 billion |
| Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) | 0.11% | $57.1 billion |
| Vanguard Total International Bond Index Fund Admiral Shares (VTABX) | 0.11% | $50 billion |
| Vanguard Total World Stock Index Fund Admiral (VTWAX) | 0.10% | $28.5 billion |
Why other funds didn’t make the cut
The criteria for our ranking excluded certain Vanguard funds that are either actively managed or focused on niche holdings, such as growth stocks, small-cap stocks, sector stocks, dividend stocks, or specific maturity bonds. While these funds can serve particular investment objectives, they might not be the best fit for investors seeking a versatile one-size-fits-all Vanguard fund.
Daniel Dusina, director of investments at Blue Chip Partners, explains that actively managed funds at Vanguard usually have higher expense ratios due to the need for extensive research and expertise.
This exclusion decision was influenced by the 2022 SPIVA Scorecard from S&P Dow Jones Indices, which showed that a significant majority (93.4%) of large-cap U.S. equity funds underperformed the S&P 500 index over a 15-year period ending Dec. 31, 2022. Similar results were observed for other equity styles and market caps.
In our rankings, we also left out equity funds with narrow focuses on specific sectors, styles, or market caps. For instance, funds that solely track equities from the financial sector or only target small-cap or mid-cap equities were not considered.
Vanguard’s dividend, growth, and value-focused funds were also omitted from our selection process, as well as bond funds that exclusively hold specific issuers like government or corporate bonds, or those that track only specific maturities like short-duration bonds.
It’s essential to note that the funds not included in our ranking are not necessarily inferior or undeserving of investment. More niche funds can be valuable to investors with different objectives, such as seeking tax efficiency, aggressive growth, steady income, or capital preservation. They can also serve as tools to express specific investment theses or to hedge against macroeconomic changes.
Our ranking intentionally focuses on broad-based Vanguard funds suitable for a wide range of investors over the long term. These selected funds provide excellent diversification across sectors, geographies, market caps, issuers, and maturities, making them strong core building blocks for most investment portfolios.
Paul Peeler, a financial advisor at Integrated Financial Group, agrees that four Vanguard funds – VTSAX, VTIAX, VBTLX, and VTABX – can serve as a solid core for a portfolio, offering maximum diversification for most investors.
Methodology
Our curated rankings of the top Vanguard mutual funds are based on several essential metrics that indicate strong performance and reliability.
One critical factor we consider is the Assets Under Management (AUM) for each fund. We only include funds that have amassed at least $1 billion in AUM for their share class. A high AUM reflects investor confidence, economies of scale, and overall popularity, making it a positive indicator for potential investors.
Another vital aspect we look at is the Expense Ratio of the funds. All Vanguard funds in our list have a net expense ratio of 0.15% or lower. Keeping costs low is crucial because the expense ratio directly affects an investor’s overall returns.
In terms of diversification, our equity funds on the list have exposure across multiple market cap sizes and most of the 11 market cap sectors. We also ensure a blended equity style, incorporating both growth and value. For fixed-income funds, we consider those that encompass both government and corporate issuers and hold investment-grade (BBB or higher) bonds of all credit qualities, as well as index bonds of all maturities.
To provide our users with greater value, we exclude certain fees from our selection criteria. No Vanguard mutual fund on our list charges any purchase, redemption, or 12b-1, sales load, or commission fees.
All the Vanguard mutual funds included in our list are passively managed. They track the returns of an underlying benchmark index and do not involve active management based on the fund manager’s personal strategy or a quantitative methodology.
While an experienced fund analyst has selected these funds, it’s essential to remember that they might not be suitable for everyone. Before making any investment decisions, conduct thorough research to ensure they align with your specific financial goals and risk tolerance.
Final verdict
Vanguard mutual funds offer a do-it-yourself investment approach with low fees and broad holdings. By opting for Vanguard funds, investors can retain more of their earnings while achieving average market returns over the long term. Combining our carefully selected seven picks in different proportions allows investors to create a globally diversified portfolio of stocks and bonds across various geographies, market sectors, market cap sizes, bond issuers, and bond maturities.
Among the Vanguard mutual funds, our top choice is VTWAX. With this fund, investors gain exposure to over 9,500 large-, mid-, and small-cap stocks from U.S., international developed, and emerging markets.
What sets VTWAX apart is its low expense ratio of 0.1%, providing investors with an opportunity to mirror the average return of the world’s stock market with a single investment. It’s an excellent option for those seeking high diversification, low costs, and transparency in their equity allocation.
