In the mutual fund industry, Vanguard founder Jack Bogle is a legend. After college, he got a job at Wellington Management Company and quickly rose up the ranks, becoming the company’s chairman. However, he was eventually fired because of a bad merger. But this turned out to be fortuitous since he started the mutual fund giant Vanguard in 1974.
His laser-like focus at Vanguard was on the interests on investors. To this end, he developed low-cost mutual funds that focused on indexing. Hey, why should investors spend high amounts on fees when many portfolio managers underperform the market?
Now, thanks to this legacy, Vanguard is a mutual fund investing powerhouse. There are $1.4 trillion in assets, with 160 U.S. funds and 50 international funds. And while many are strong, there are some that are standouts above the rest. Let’s take a look:
Vanguard International Growth (VWIGX)
Started in the early 1980s, the Vanguard International Growth Fund (MUTF: VWIGX) now has $18.8 billion in assets. The portfolio is diversified across the world, with 11.58% in the Americas, 53.81% in Europe and 34.61% in Asia. There is also 21.11% in emerging markets.
The Vanguard fund is composed of a variety of best-of-breed international money managers, from firms like Schroder Investment Management, Baillie Gifford and M&G Investment Management. The general approach is to focus on high quality companies with strong growth prospects.
Vanguard Small Cap Growth Index (VSGIX)
The MSCI U.S. Small Cap 1750 Index tracks the performance of a diverse set of small capitalization stocks in the US. It is widely followed and a good barometer of the category.
If you want to invest based on this index, then a good mutual fund choice is the Vanguard Small Cap Growth Index Fund (MUTF: VSGIX), which has $8.8 billion in assets. True, there has been volatility — which is to be expected. Although, the index has a good amount of mid-cap stocks, which helps with the swings.
Vanguard Health Care (VGHCX)
The U.S. spends about 16% of the gross domestic product on healthcare. In fact, it is projected to grow to 19.5% by 2017.
Yes, the result is that there will likely be continued growth in the healthcare sector. And a beneficiary should be the
Vanguard Health Care (MUTF: VGHCX) mutual fund. It invests in a broad array of healthcare operators — like pharma firms, medical supply operators and research companies. There is also investments in other countries. The top holdings include Merck (NYSE: MRK), Forest Laboratories (NYSE: FRX), Pfizer (NYSE: PFE), UnitedHealth Group (NYSE: UNH) and McKesson (NYSE: MCK).
With $20.4 billion in assets, the Vanguard fund has an expense ratio of 0.36% and a turnover of a mere 6%.
Vanguard Wellington (VWELX)
It’s amazing that the Vanguard Wellington (MUTF: VWELX) is still around. The fund got its start just before the 1929 crash and the onset of the Great Depression. But sometimes tough times can be a good thing — creating a firm that is built to last.
Well, this is certainly the case with the Vanguard Wellington fund. It now has about $56.8 billion under management. Actually, over the past ten years, the fund has posted an average annual return of 6.38%.
The Vanguard Wellington takes an old-school, conservative approach to investments. Just look at the top holdings: AT&T (T), ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), IBM (NYSE: IBM) and even the U.S. Treasury Bill.
Keep in mind that during the 2008 financial crisis, the Vanguard Wellington fund lost about 22.3%. Compared to many other funds, it was certainly a good performance and shows that the fund knows how to handle the downside.
As of this writing, Tom Taulli did not own a position in any of the stocks named here.