Vanguard Funds Mutual Fund #2 — Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX)
Allocation: 20% of Portfolio
YTD Performance: 3.4%
The VFIAX covers off the large-cap portion of the portfolio quite nicely. While Buffett might not be fond of mid-cap stocks being added to the mix, evidence suggests mid caps outperformed large-cap stocks over a four-year period between 2009 and 2013.
In fact, John Hancock published a report in 2012 that cautions investors about underweighting mid caps because of an assumption that a large-cap fund combined with a small-cap fund will do the job. That’s simply not the case.
Mid-cap stocks tend to provide an attractive combination of risk and reward. For this reason, I recommend the Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX), which tracks the CRSP Mid Cap Index, an index composed of stocks that fall between the top 70%-85% of investable market capitalization. The average company in the index has a market cap of $8.2 billion.
They’re big enough to survive an economic hit but small enough to still be growing. With an expense ratio of 0.1%, this entry on our list of Vanguard funds is giving you safety and performance in one. Top holdings include Forest Laboratories (FRX) and Illumina (ILMN).