You could throw darts, blindfolded, at a wall of Vanguard mutual funds and you’d still end up with a crop of some of the best funds you can buy today. But if you’re looking for the best among Vanguard’s best, hitting the bull’s-eye is a bit more challenging.
It takes a lot more than a good idea for a mutual fund to receive the highest grades from mutual fund ranking services. They generally need to have above-average returns, below-average risk and low expenses compared to funds in their respective categories.
It also helps for the returns to remain consistently ahead of category peers across all time periods measured, especially for three years and longer. Tax-efficiency is another plus when it comes to high ratings.
So to come up with a truly useful list of the highest rated Vanguard funds, I started with those that received the best marks in the top mutual fund rating services (Morningstar and Lipper), then eliminated funds that had required minimums higher than $3,000.
To further qualify my selection process, each fund had to earn at least four out of five stars at Morningstar and receive a 5 (out of 5) in at least three of the five Lipper Leader scores. For those not familiar with these ratings, it takes a truly exceptional fund to get such high marks from both services.
With that as a backdrop, and in no particular order, here are the seven highest-rated Vanguard mutual funds.