The 10 Best Vanguard Funds for Retirement

These Vanguard funds can help you have financially healthy golden years

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If there were any real challenge in finding the best Vanguard funds for retirement, it would be sorting through Vanguard’s vast selection of low-cost mutual funds and exchange-traded funds, or ETFs, to arrive at a final set of funds.

Fortunately, we’ve done the homework and have narrowed the complete list of Vanguard funds to an outstanding group of ten funds that retirees should consider as holdings in their retirement portfolio.

Although Vanguard is best known, and rightfully so, for their index mutual funds, any list of best Vanguard funds for retirement would not be complete without including a few actively managed funds and a handful of ETFs.

So in our final group of 10 best Vanguard funds for retirement, the mix will include five Vanguard mutual funds, three of which are index funds and two of which are actively managed, and five Vanguard ETFs.

Without further ado, here are the ten best Vanguard funds for retirement, from which investors can build their own portfolio:

10 Best Vanguard Funds for Retirement: Vanguard 500 Index (VFINX)

10 Best Vanguard Funds for Retirement: Vanguard 500 Index (VFINX)

Expenses: 0.14%, or $14 for every $10,000 invested
Minimum Initial Investment: $3,000

Investors wanting to build a portfolio around a passively managed stock mutual fund need look no further than Vanguard 500 Index Fund (MUTF:VFINX).

Yes, there is a lower-cost ETF version, Vanguard 500 Index Fund (NYSEARCA:VOO), but in the mutual fund universe, VFINX is the quintessential core holding for almost any portfolio, including one for retirement.

VFINX holds the largest U.S. stocks by market cap, which means you’ll get names like Apple Inc. (NASDAQ:AAPL), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Microsoft Corporation (NASDAQ:MSFT), plus about 500 other stocks within one low-cost mutual fund.

10 Best Vanguard Funds for Retirement: Vanguard Total Bond Index (VBMFX)

10 Best Vanguard Funds for Retirement: Vanguard Total Bond Index (VBMFX)

Expenses: 0.15%
Minimum Initial Investment: $3,000

Before adding the high-yield bond funds, it’s wise to start the fixed-income portion of a retirement portfolio with broadly diversified bond fund like Vanguard Total Bond Index (MUTF:VBMFX).

The largest bond fund in the world, VBMFX tracks the Bloomberg Barclays U.S. Aggregate Float Adjusted Index, which covers more than 8,000 U.S. bonds. The allocation is roughly 70% U.S. government bonds and 30% corporate issues that include a full range of maturities.

Because of this broad diversification, VBMFX can be used as a core holding in almost any investor’s portfolio, including retirement.

10 Best Vanguard Funds for Retirement: Vanguard Balanced Index (VBINX)

10 Best Vanguard Funds for Retirement: Vanguard Balanced Index (VBINX)

Expenses: 0.19%
Minimum Initial Investment: $3,000

Investors in retirement looking for a core holding that includes a moderate mix of stocks and bonds are wise to consider Vanguard Balanced Index (MUTF:VBINX).

Although retired investors are generally cast as conservative investors, smart retirement planning will consider the fact that many retirees live for several years or even decades after their initial retirement date. Therefore it is prudent to take a bit more risk with investments to provide the potential for higher long-term returns. A moderately balanced, low-cost mutual fund like VBINX serves this objective well.

The VBINX portfolio allocation is approximately 60% stocks and 40% bonds, with each portion tracking respective indices. The stock portion consists primarily of large-cap U.S. stocks like AAPL, GOOGL and MSFT, while the bond portion consists of a broadly diversified mix of U.S. bonds.

In summary, VBINX is like two index funds wrapped into one low-cost fund. One more important note is that there is no ETF version of this fund.

10 Best Vanguard Funds for Retirement: Vanguard High-Yield Corporate (VWEHX)

10 Best Vanguard Funds for Retirement: Vanguard High-Yield Corporate (VWEHX)

Expenses: 0.23%
Minimum Initial Investment: $3,000

Investors looking for income in retirement may consider adding a bond fund like Vanguard High-Yield Corporate Fund (MUTF:VWEHX) to the mix.

VWEHX is actively managed; therefore you won’t find an ETF version of this fund. The manager tends to hold corporate junk bonds that are on the higher range of the credit quality compared to the average high-yield bond fund. So shareholders can get good yields without quite as much market risk that you’ll get with the junkier funds.

With a yield of 4.6%, VWEHX can make a fine addition to a broader fixed-income portfolio in retirement.

10 Best Vanguard Funds for Retirement: Vanguard High-Yield Tax-Exempt (VWAHX)

10 Best Vanguard Funds for Retirement: Vanguard High-Yield Tax-Exempt (VWAHX)

Expenses: 0.19%
Minimum Initial Investment: $3,000

One of the biggest enemies of investors in retirement is taxes, but Vanguard High-Yield Tax-Exempt Fund (MUTF:VWAHX) can provide income without the tax hit.

VWAHX is another outstanding Vanguard actively managed fund that’s not available as an ETF. Investors buying tax-exempt funds like VWAHX are typically high-income individuals with taxable accounts.

The holdings are municipal bonds, which are tax-exempt at the federal level.

10 Best Vanguard Funds for Retirement: Vanguard High Dividend Yield (VYM)

10 Best Vanguard Funds for Retirement: Vanguard High Dividend Yield (VYM)

Expenses: 0.08%

If you’re looking for a low-cost, high-yield dividend fund, it’s tough to beat Vanguard High Dividend Yield ETF (NYSEARCA:VYM).

VYM is an ETF that tracks the FTSE High Dividend Yield Index, which includes more than 420 stocks of companies like MSFT, Johnson & Johnson (NYSE:JNJ) and Exxon Mobil Corporation (NYSE:XOM), that pay above-average dividend yields.

The current yield for VYM is 3.1%, which combined with the rock-bottom expense ratio of just 0.08% makes this Vanguard ETF a fine prospect to include in a retirement portfolio. Compared to Vanguard’s mutual fund version of this ETF, the yield is higher and the expense ratio is lower.

10 Best Vanguard Funds for Retirement: Vanguard Consumer Staples (VDC)

10 Best Vanguard Funds for Retirement: Vanguard Consumer Staples (VDC)

Expenses: 0.1%

Consumer staples funds can be smart diversification tools and Vanguard Consumer Staples ETF (NYSEARCA:VDC) is one of the best among its category peers.

Low-cost consumer staples funds are not plentiful in the investment universe and the mutual fund version of VDC, Vanguard Consumer Staples (MUTF:VCSAX), has a minimum initial purchase of $100,000, which makes it inaccessible to the average investor.

VDC is a good diversification tool because of its defensive nature — holding stocks of companies like Proctor & Gamble Co (NYSE:PG), The Coca-Cola Co (NYSE:KO) and Philip Morris International Inc. (NYSE:PM), which sell products that consumers still generally buy in negative economic environments.

10 Best Vanguard Funds for Retirement: Vanguard Utilities (VPU)

10 Best Vanguard Funds for Retirement: Vanguard Utilities (VPU)

Expenses: 0.1%

Utilities stocks can make smart holdings in a retirement portfolio, and a low-cost ETF like Vanguard Utilities ETF (NYSEARCA:VPU) is a good way to fill this space.

The typical investor in retirement looks for a combination of income, growth and low relative risk compared to broad market indices, such as the S&P 500.

With VPU, shareholders get a basket of roughly 75 utilities stocks like NextEra Energy Inc (NYSE:NEE), Duke Energy Corp (NYSE:DUK) and Dominion Energy Inc (NYSE:D).

10 Best Vanguard Funds for Retirement: Vanguard International Dividend Appreciation (VIGI)

10 Best Vanguard Funds for Retirement: Vanguard International Dividend Appreciation (VIGI)

Expenses: 0.25%

Retirement is not a time to ignore international stocks and a good way to diversify outside the U.S. while getting income from dividends is with an ETF like Vanguard International Dividend Appreciation ETF (NASDAQ:VIGI).

VIGI tracks the Nasdaq International Dividend Achievers Select Index, which covers about 240 non-U.S. stocks like, mostly large-caps, like Tencent Holdings Ltd (OTCMKTS:TCTZF) Nestle (OTCMKTS:NSRGF) and Roche Holding (OTCMKTS:RHHBF).

The holdings include international stocks in both the developed market and emerging markets, and they have a history of growing dividends.

10 Best Vanguard Funds for Retirement: Vanguard International High Dividend Yield (VYMI)

10 Best Vanguard Funds for Retirement: Vanguard International High Dividend Yield (VYMI)

Expenses: 0.32%

Investors looking for exposure to international stocks that pay above-average dividends through a low-cost ETF will like what they see in Vanguard International High Dividend Yield ETF (NYSEARCA:VYMI).

VYMI tracks the FTSE All-World ex US High Dividend Yield Index, which includes about 925 non-U.S. stocks like NSRGF, Royal Dutch Shell (OTCMKTS:RYDBF), and Novartis (OTCMKTS:NVSEF) that pay high relative dividends.

Investors in retirement who buy VYMI are typically looking for income and diversification from non-U.S. stocks.

As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. However, he holds VBINX and VBMFX in some client accounts. Under no circumstances does this information represent a recommendation to buy or sell securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/06/best-vanguard-funds-retirement-vfinx-vbmfx-vwehx/.

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