In the world of mutual funds, Vanguard is one of the world’s giants. The firm operates nearly 425 funds and exchange-traded funds, which cover the main types of investment categories for any portfolio. Vanguard is also global, with operations in 19 countries.
At the core of the company is a compelling mission to “take a stand for all investors, to treat them fairly, and to give them the best chance for investment success.” This goes back to the inspiration from founder Jack Bogle (he died last year at the age of 89). He was a passionate advocate for investors. This means providing funds that were low cost and transparent.
So yes, when it comes to buying a mutual fund, going with an offering from Vanguard is usually a good idea. But with so many available, how do you go about selecting one?
Well, I have put together a list that covers the key areas for effective portfolios. Let’s take a look:
- Vanguard Real Estate Index Admiral (MUTF:VGSLX)
- Vanguard Dividend Growth Fund (MUTF:VDIGX)
- Vanguard Balanced Index Fund Admiral Shares (MUTF:VBIAX)
- Vanguard 500 Index Fund Admiral Shares (MUTF:VFIAX)
- Vanguard Global ESG Select Stock Fund Investor Shares (MUTF:VEIGX)
- Vanguard Total Bond Market Index Fund Admiral Shares (MUTF:VBTLX)
- Vanguard International Value Fund (MUTF:VTRIX)
Vanguard Real Estate Index Admiral (VGSLX)
It has certainly been a rough year for the real estate market. The novel coronavirus pandemic has resulted in slow growth in the U.S. along with higher vacancies.
But over the years, real estate has proven to adapt to changes. So yes, this may be a good time to think about investing in the sector.
One of the low-cost Vanguard funds for this is the Real Estate Index Admiral fund. It invests in REITs (real estate investment trusts), which have favorable tax treatment if 90% of funds are paid to shareholders in the form of dividends. Because of this, the VGSLX carries a nice yield of 3.86%. The expense ratio is also 0.12%.
Another advantage is that the fund is diversified across the main categories of real estate, such as healthcare, hotels/resorts, industrial, office, residential and development. Some of the top holdings include American Tower (NYSE:AMT), Prologis (NYSE:PLD) and Crown Castle International (NYSE:CCI).
It’s important to note that the VGSLX has changed its portfolio to the MSCI US Investable Market Real Estate 25/50 index. The move does look smart since the index focuses on growth areas like data centers and logistics.
Vanguard Dividend Growth Fund (VDIGX)
Many of the Vanguard funds are based on indexes. But the firm also has a good assortment of actively managed ones. While these generally have higher expenses, they can be worth it — so long as there is a top-notch manager at the helm.
This is the case with the Vanguard Dividend Growth Fund. The portfolio manager is Donald Kilbride, who came on board in 2006. His focus has been on looking at solid dividend-paying companies across all industry sectors. As for the performance, the return has been 12.30% for the past decade.
Granted, the current dividend yield is 1.75%, which may seem mediocre. But it is actually fairly good in a low interest rate environment.
And what about the expense ratio? It is 0.27%, which is actually quite low for an actively managed fund. Keep in mind that the industry average is 0.91%.
Vanguard Balanced Index Fund Admiral Shares (VBIAX)
A key to successful investing is finding the right asset allocation across stocks and bonds. But this can be difficult to optimize.
Yet there is a good rule of thumb: divide your portfolio into 60% stocks and the rest into bonds. By doing this, you can get diversification but also allow for upside when the markets are in the bull phase.
No doubt, there are Vanguard funds that can do the 60%/40% split for you, such as the Vanguard Balanced Index Fund Admiral Shares. The equity part of the portfolio is mostly made up of a blend of value and growth large capitalization stocks. Some examples include Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB) and Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B).
And for the bonds, they are generally government issues that have medium maturities.
The expense ratio is also attractive: It is only 0.07%.
Vanguard 500 Index Fund Admiral Shares (VFIAX)
The Vanguard 500 Index Fund Admiral Shares tracks the S&P 500. It was the first ever index fund (it was launched in 1976). But in the early days, it did not get much attention. Yet as the bull market gained momentum in the 1980s, VFIAX grew in popularity.
Fast forward to today: the fund has a whopping $573 billion in assets under management. The expense ratio is also only 0.04%. By comparison, a typical S&P 500 index fund has a ratio of about 0.91%.
All in all, the S&P 500 index is a good way to get exposure to stocks. It includes the top publicly traded U.S. companies based on the market capitalization. The returns on the index are also based on the relative sizes of the companies. This means there is more emphasis on those sectors that usually have higher growth like technology and healthcare. For example, the three top holdings are AAPL, MSFT and Amazon (NASDAQ:AMZN).
Vanguard Global ESG Select Stock Fund Investor Shares (VEIGX)
During the past few years, mutual funds based on environmental, social and governance (ESG) principles and practices have become much more popular. And yes, Vanguard has developed its own fund for this. It’s called the Vanguard Global ESG Select Stock Fund Investor Shares, which is actively managed. The portfolio managers include Mark Mandel and Yolanda Courtines, who were top research analysts at Wellington. They have developed a target list of 750 stocks from across the globe and have limited the VEIGX to 35 to 45 companies.
The fund is new, having been launched in June of last year. But the expense ratio is low — at 0.58% — when compared to other actively managed ESG funds. And so far, the returns have been encouraging. Since inception, the gain has been 11.94%.
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)
Low-cost Vanguard funds can be very important for bond investments. The reason is that rates are so low. In other words, investors will get some additional yield.
The good news is that there are many top Vanguard funds to choose from. Just look at the Vanguard Total Bond Market Index Fund Admiral Shares fund. This provides broad coverage of U.S. investment-grade bonds, such as U.S. Treasuries, mortgage-backed securities and high quality corporates. The maturities also span from short to long durations. This helps to increase returns while lowering the risk levels.
The expense ratio is 0.05% and the return for the past year has been 6.15%. As for the gain since the fund was launched in 2001, it is 4.36%.
Vanguard International Value Fund (VTRIX)
An international fund should be a part of everyone’s portfolio. Investments outside the U.S. can open up many more growth opportunities. But there is also the benefit of diversification. That is, if the U.S. market is struggling, there are likely to be foreign markets that are doing the opposite.
Yet one of the issues with international funds is the expense ratios. After all, it can be costly to setup operations in different parts of the world as well as to hire experienced portfolio managers.
But of course, Vanguard has some good options. One is the Vanguard International Value Fund, which is allocated across emerging markets (10.4%), Europe (46.9%), the Pacific (24.5%), North America (16.8%) and the Middle East (0.10). The expense ratio is 0.38%.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is an advisor/board member for startups and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.