Vanguard funds are ideal investment choices for retirees because they arguably have the best lineup of low-cost funds that provide an unmatched combination of low relative risk and high relative return.
Whether you’re trying to squeeze out every ounce of return, get every possible boost in yield, or to make your retirement portfolio tax-efficient, Vanguard funds have something for you.
In different words, almost every retired investor needs to maintain a moderate to conservative investment style but they also need to minimize all possible costs to make their nest egg last throughout retirement and beyond.
In terms of selection, Vanguard funds have something for every retiree. Whether you want to build your own portfolio or you want to use a fund specially designed for retirement income, Vanguard has it.
Let’s look at three Vanguard funds that have a combination of qualities ideal for conservative retirees.
3 Best Vanguard Funds for Conservative Retirees: Vanguard LifeStrategy Conservative Growth (VSCGX)
If you are looking for current income and low to moderate capital appreciation, Vanguard LifeStrategy Conservative Growth (MUTF:VSCGX) may be the best fund for you.
Each of the four Vanguard LifeStrategy Funds are low-cost, diversified funds with a fixed allocation approach that provide a complete portfolio in a single fund. VSCGX is the conservative LifeStrategy option for investors.
The portfolio consists of roughly 40% stocks, a portion of which is allocated to foreign stocks, and 60% bonds, which has a small international flavor as well. This allows for slow but steady growth over the long term, which is crucial for almost every retiree, not just the conservative ones.
For example, the 15-year annualized return of 5% is comfortably ahead of inflation and even beats the S&P 500, which has a 4.4% return for that period.
VSCGX has a rock-bottom expense ratio of 0.15% and the minimum initial investment is $3,000.
3 Best Vanguard Funds for Conservative Retirees: Vanguard Wellesley Income (VWINX)
Vanguard Wellesley Income (MUTF:VWINX) is one of the best conservative funds on the planet.
The portfolio is solidly conservative with an approximate allocation of 37% stocks, 60% bonds and 3% cash. The stock holdings consist primarily of giant-cap stocks such as Wells Fargo & Co (NYSE:WFC), Microsoft Corporation (NASDAQ:MSFT), and Johnson & Johnson (NYSE:JNJ).
All of the bond holdings have a credit quality of investment grade or higher.
As for performance, Wellesley beats at least 95% of other conservative allocation funds for 3-, 5- and 10-year returns.
For one of the best-managed conservative funds you can buy, it’s hard to beat the cheap expense ratio of 0.25%.
The minimum initial investment for VWINX is $3,000.
3 Best Vanguard Funds for Conservative Retirees: Vanguard Managed Payout (VPGDX)
If you are looking for a fund that is specifically designed to provide regular monthly payouts while keeping up with inflation over time, Vanguard Managed Payout (MUTF:VPGDX) can be a good choice.
The asset allocation for VPGDX is not “conservative” as a standalone investment but it can be a valuable tool as a part of diversified portfolio and income plan for conservative retirees.
Payouts from the fund are set in January and should remain consistent each month. The amount is determined by the fund, but Vanguard said it targets an annual rate of 4%.
Recent holdings for VPGDX included a diversified mix of Vanguard funds, such as Vanguard Total Stock Market Index (MUTF:VTSMX), Vanguard Global Minimum Volatility (MUTF:VMVFX), Vanguard Market Neutral (MUTF:VMNFX), and even a non-Vanguard fund, PowerShares DB Commodity Tracking (NYSEARCA:DBC).
The expense ratio is low at 0.34% and the minimum initial investment of $25,000 is high but suitable and appropriate for retirement portfolios.
As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. Under no circumstances does this information represent a recommendation to buy or sell securities.