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5 Best Vanguard Funds to Buy for Target Date 2025

If retirement isn't too far away, take a look at these offerings

By Will Ashworth, InvestorPlace Contributor

http://invstplc.com/1ifEcNv

You’re 55 and 10 years from retirement. You’ve saved very little but recently have come into a $100,000 windfall from a distant relative. Unsure where to turn, you remember Warren Buffett’s recommendation to buy a low-cost S&P 500 index fund, preferably one from Vanguard Funds.

Vanguard mutual fundsYou’re looking at a so-called “target date” of 2025, so … which are the best Vanguard funds for the job?

Well, your first order of business is to preserve capital. A windfall’s no good to you if you lose it by purchasing speculative investments. But $100,000’s not a great deal of money, so it makes sense to include one or two Vanguard funds that focus on capital appreciation.

With that in mind, here are the best Vanguard funds for target date 2025:

Best Vanguard Funds for Target Date 2025 – Vanguard Total Stock Market Index Fund (VTSMX)

vanguard funds vtsmxVanguard Total Stock Market Index Fund (VTSMX) is the biggest holding of Vanguard Retirement 2025 Fund (VTTVX), representing almost half the portfolio.

When it comes to U.S. stocks, VTSMX is the whole enchilada. You’re getting 100% of the stocks trading on the NYSE and Nasdaq. You can’t cover more ground with another fund.

Unsurprisingly, top holdings are the biggies of the major indices — Apple (AAPL), Exxon Mobil (XOM), Google (GOOG) and the rest of the gang.

Interestingly, the VTTVX has a $1,000 investing minimum while the VTSMX is set at $3,000. It’s not a problem for the person investing $100,000, but it could be for beginners lacking the funds. Expenses run at 0.17%.

Learn more about VTSMX here.

Best Vanguard Funds for Target Date 2025 – Vanguard Total Bond Market Index Fund (VBMFX)

vanguard funds target date 2025 vbmfxThe Total Bond Market II Index Fund (VTBIX) is one of the holdings for the VTTVX. Unfortunately, it can only be held within a fund-of-funds such as Vanguard’s target date 2025 fund — ergo, you’re not buying this on your own.

Thus, Vanguard Total Bond Market Index Fund (VBMFX) qualifies instead as one of the best Vanguard funds for target date 2025.

The fund, which tracks the Barclays U.S. Aggregate Float Adjusted Index, invests about 30% of its $116 billion in total net assets in corporate bonds with the remainder invested in U.S. government bonds with all types of maturities.

VBMFX charges 0.2% in expenses, and while it’s not restricted to short-term bonds like Mr. Buffett recommends, it definitely will get the job done.

Learn more about VBMFX here.

Best Vanguard Funds for Target Date 2025 – Vanguard Total International Stock Index Fund (VGTSX)

vanguard funds vgtsx target date 2025A properly diversified portfolio of stocks should reach beyond U.S. borders. You can do this either by investing in a basket of large-cap U.S. companies doing business globally like Coca-Cola (KO), or you can go for the basket of international stocks that also does business globally.

The VTTVX allocates 20.6% of its portfolio to Vanguard Total International Stock Index Fund (VGTSX). VGTSX has 5,658 holdings with a median market cap of $28 billion. It tracks the FTSE Global All Cap ex US Index, and invests in a total of 46 countries excluding the U.S.

When it comes to the best Vanguard funds for target date 2025, VGTSX is perfect for your global investments.

Learn more about VGTSX here.

Best Vanguard Funds for Target Date 2025 – Vanguard Total International Bond Index Fund (VTIBX)

vanguard funds vtibx target date 2025What’s an international stock fund without a bond fund to boot? That’s especially true if you’ve only got a 10-year investment window.

Vanguard Total International Bond Index Fund (VTIBX) is a $23 billion fund with almost 2,100 bonds invested primarily in European and Asian debt. The average maturity of its holdings is 7.8 years, providing an intermediate-term investment. Approximately 70% of VTIBX’s holdings are rated Aa or higher, making it anything but speculative.

VTIBX tracks the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged),and that hedge against the dollar is what puts it among some of the best Vanguard funds for this target date.

Learn more about VGTSX here.

Best Vanguard Funds for Target Date 2025 – Vanguard Small-Cap Index Fund (NAESX)

vanguard funds naesx target date 2025To give the portfolio a little pop, I’ve added a fifth fund that tracks the CRSP Small Cap Index, a group of U.S. companies that cover the bottom 2%-15% of the investable market. Its universe of stocks include those trading on NYSE, NYSE MKT, Nasdaq or NYSE Arca.

The Vanguard Small-Cap Index Fund (NAESX) is reconstituted four times a year in March, June, September and December, and its holdings have a median market cap of $1.5 billion.

With the top 10 holdings representing just 3% of its $47 billion in total net assets, investors get real diversification, which is important when investing in smaller companies.

While NAESX might not be included in VTTVX, it should be considered one of the best Vanguard funds for target date 2025.

Learn more about NAESX here.

As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/06/best-vanguard-funds-target-date-2025/.

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