7 Best Vanguard Funds to Buy in Retirement

These Vanguard funds can take some of the guesswork out of the portfolio for retired investors

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Vanguard Investments offers outstanding mutual funds for retirement plans, such as IRAs and 401ks. But which are the best Vanguard funds to buy in retirement, when it’s time to put your savings to work?

7 Best Vanguard Funds to Buy In Retirement
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Building and growing the retirement portfolio is simpler than converting it into and using it as an income source for retirement. You’re no longer investing for growth; you’re investing for some combination of growth and income. Therefore the asset allocation and the mutual funds you use in retirement are likely to be significantly different than in your saving years.

Vanguard funds make smart choices for retirees because there are plenty of high-quality, low-cost options to choose from within a diverse selection of styles needed in retirement: There are index and actively managed funds, and there’s a solid combination of growth funds and income funds.

So with that backdrop, and in no particular order, here are the best Vanguard funds to buy in retirement.

Best Vanguard Funds to Buy In Retirement: Vanguard Wellesley Income (VWINX)

Best Vanguard Funds to Buy In Retirement: Vanguard Wellesley Income (VWINX)Expenses: 0.23%, or $23 annually per $10,000 invested
Minimum Investment: $3,000

One of the best Vanguard funds to use as a core holding or as a standalone fund in retirement is Vanguard Wellesley Income (VWINX).

Two of the biggest enemies of investors, especially those in retirement, are market risk and inflation. VWINX vanquishes both enemies with a conservative allocation and smart active management that combine for relatively low-risk portfolio that averages returns higher than inflation.

The allocation starts with roughly one-third dividend stocks, such as Microsoft Corporation (MSFT), Wells Fargo & Co (WFC) and Johnson & Johnson (JNJ) and the other two-thirds is allocated primarily to bonds.

For evidence of inflation-busting, long-term returns, look no further than the 10-year annualized return of 7.5%.

For those seeking income, the SEC Yield for VWINX is 2.6%.

Best Vanguard Funds to Buy In Retirement: Vanguard High-Yield Corporate Fund (VWEHX)

Best Vanguard Funds to Buy In Retirement: Vanguard High-Yield Corporate Fund (VWEHX)Expenses: 0.23%
Minimum Investment: $3,000

Investors wanting to add a high-yield fund to their portfolio for income in retirement will want to check out Vanguard High-Yield Corporate (VWEHX).

VWEHX invests in a blend of investment-grade and lower-quality corporate bond funds. Therefore you’ll get exposure to “junk bonds,” which are riskier than a plain vanilla bond index fund but you’ll get higher yields and higher potential long-term returns in exchange for your risk.

For example, the 5.5% yield is very attractive and the 6.5% 10-year annualized return beats most bond funds and some stock funds, but high-yield bond funds like VWEHX can see double-digit declines during periods of economic weakness and uncertainty. Therefore long-term perspective should be taken with this fund.

Best Vanguard Funds to Buy In Retirement: Vanguard LifeStrategy Conservative Growth Fund (VSCGX)

Best Vanguard Funds to Buy In Retirement: Vanguard LifeStrategy Conservative Growth Fund (VSCGX)Expenses: 0.13%
Minimum Investment: $3,000

If you like the “fund of funds” approach to investing, Vanguard LifeStrategy Conservative Growth (VSCGX) is a solid choice for conservative retirees.

The asset allocation consists of roughly 40% stocks, a portion of which is allocated to foreign stocks, and nearly 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.

The portfolio holdings are four Vanguard index funds: Vanguard Total Bond Market II Index (VTBIX), Vanguard Total Stock Market Index (VTSMX), Vanguard Total International Bond Index (VTIBX) and Vanguard Total International Stock Index (VGTSX).

Best Vanguard Funds to Buy In Retirement: Vanguard Managed Payout Fund (VPGDX)

Best Vanguard Funds to Buy In Retirement: Vanguard Managed Payout Fund (VPGDX)Expenses: 0.38%
Minimum Investment: $25,000

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 Fund (VPGDX) can be a good choice.

The asset allocation and investment selections for VPGDX is managed in such a way that it provides reliable income while preserving capital. 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 index funds plus some of their lesser-known funds, such as Vanguard Alternative Strategies (VASFX), Vanguard Global Minimum Volatility (VMVFX) and Vanguard Market Neutral (VMNFX).

Best Vanguard Funds to Buy In Retirement: Vanguard High Dividend Yield Index Fund (VHDYX)

Best Vanguard Funds to Buy In Retirement: Vanguard High Dividend Yield Index Fund (VHDYX)Expenses: 0.16%
Minimum Investment: $3,000

If you’re looking for a low-cost index fund that invests in stocks with high dividend yields, you may not find better than Vanguard High Dividend Yield Index Fund (VHDYX).

VHDYX tracks the FTSE High Dividend Yield Index, which includes common stocks of U.S. companies, such as Exxon Mobil Corporation (XOM), AT&T Inc. (T) and JPMorgan Chase & Co. (JPM), that have paid above-average dividends for the previous 12 months.

The index excludes REITs.

The recent dividend yield for VHDYX was 3.2%.

Since VHDYX is a stock mutual fund, retirees should consider reducing market risk by adding bond funds to their portfolio.

Best Vanguard Funds to Buy In Retirement: Vanguard Dividend Growth Fund (VDIGX)

Best Vanguard Funds to Buy In Retirement: Vanguard Dividend Growth Fund (VDIGX)Expenses: 0.33%
Minimum Investment: $3,000

Investors looking to hold a portfolio of stocks that have trended to increase dividends are wise to consider Vanguard Dividend Growth Fund (VDIGX).

VDIGX tracks the NASDAQ US Dividend Achievers Select Index, which covers stocks of companies, such as Nike Inc (NKE), Costco Wholesale Corporation (COST) and Chubb Ltd (CB) that have demonstrated the ability and the tendency to grow their dividends over time.

This quality and style in a mutual fund can be a good tool for retired investors because it frees them from the task of searching for dividend stocks on their own, which leaves more time for enjoying retirement!

The recent yield for VDIGX was 1.9%.

Best Vanguard Funds to Buy In Retirement: Vanguard International High Dividend Yield Index Fund (VIHIX)

Best Vanguard Funds to Buy In Retirement: Vanguard International High Dividend Yield Index Fund (VIHIX)Expenses: 0.40%
Minimum Investment: $3,000

International stock funds can be smart diversification tools, and ones that also pay dividends, like Vanguard International High Dividend Yield Index Fund (VIHIX) are even better for retired investors.

VIHIX tracks the FTSE AW ex US High Div Yield Index, which covers stocks of companies in developed and emerging economies outside of the U.S.

This means VIHIX shareholders will get exposure to foreign stocks of slower-growing higher-yield companies like Nestle (NSRGF), Royal Dutch Shell plc (ADR) (RDS.A, RDS.B) and Roche Holding (RHHBF).

As with all of the outstanding Vanguard funds in this list, VIHIX is best used in combination with other funds for the purpose of building a complete, diversified portfolio that is appropriate for the investor’s risk tolerance and investment goals.

As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities, although he holds VWINX in some client accounts. His No. 1 holding is his privately held investment advisory firm in Hilton Head Island, South Carolina. Under no circumstances does this information represent a recommendation to buy or sell securities.


Article printed from InvestorPlace Media, https://investorplace.com/2016/06/best-vanguard-funds-buy-retirement/.

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