An Investor’s Guide to the Top 10 Vanguard Index Funds

Vanguard is a well-regarded provider of low-cost index funds, favored by investors for their diversification and low expense ratios. The fund family was founded by John Bogle, the father of index funds and the advocate of indexing, as described in his influential book, The Little Book of Common Sense Investing. This article examines the “10 best Vanguard index funds to buy this year”, offering insights into their strategies and attributes for potential investors with a focus on long-term investors.

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Top 10 Vanguard Index Funds to Buy and Hold

1. Vanguard Total Stock Market Index Fund (VTSAX)

VTSAX provides comprehensive exposure to the U.S. stock market by tracking the CRSP US Total Market Index. It’s a popular fund with a very low expense ratio of 0.04% and a $3,000 minimum investment. This fund adopts John Bogle’s often quoted investing philosophy of owning the whole stock market via an index fund and then do nothing. VTSAX holds over 3,500 equities, with top holdings including Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA). The fund is heavily weighted in U.S. equities (98.99%) and the Technology sector (30.37%). This broad diversification across the U.S. market with a minimal expense ratio makes it a strong core holding for many investors. In fact, it is the largest mutual fund with over $1.5 trillion in assets.

2. Vanguard 500 Index Fund Admiral Shares (VFIAX)

VFIAX focuses on the largest U.S. companies by tracking the S&P 500 Index. It is like VTSAX with a 0.04% expense ratio and a $3,000 minimum investment. VFIAX offers diversification across major U.S. sectors like technology, healthcare, and financials. Its top holdings include Apple, Microsoft, Amazon, and Berkshire Hathaway. As a benchmark for large-cap U.S. equity performance, VFIAX is a cost-effective option for investors targeting this market segment. Notably, not much difference exists between VFIAX and VTSAX because of the overlap in sectors and holdings.

3. Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)

VTIAX offers exposure to international markets, tracking the FTSE Global All Cap ex US Index. It provides diversification across over 5,400 stocks in developed and emerging markets with an expense ratio of 0.11% and a $3,000 minimum investment. The fund’s top holdings as of October 31, 2024, were TSMC, Vanguard Market Liquidity Fund, and Tencent. Key sector exposures include Financial Services (22.30%) and Industrials (15.07%). VTIAX is crucial for geographical diversification in a portfolio. Combining VTIAX, VTSAX, and VBLTX is a good method to implement the Bogleheads Three Fund Portfolio.

4. Vanguard Real Estate Index Fund Admiral Shares (VGSLX)

VGSLX focuses on the U.S. real estate sector, tracking the MSCI US IMI Real Estate 25/50 Index. It invests in REITs with a minimum investment of $3,000 and an expense ratio of 0.13%. The fund holds 162 securities, with top holdings including Vanguard Real Estate II Index Fund, Prologis, and American Tower. While offering real estate exposure, its concentration in the top holdings indicates a potentially higher risk and volatility.

5. Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)

VBTLX provides broad coverage of the U.S. bond market, investing in treasury, corporate, and mortgage-backed securities. It has a small expense ratio of 0.05% and a $3,000 minimum investment. The fund’s assets are heavily in fixed income (98.99%), with top holdings primarily in U.S. Treasury Notes. Sector exposure is led by Government bonds (50.77%), Corporate bonds (25.82%), and Securitized bonds (21.86%). VBTLX is a core option for adding fixed income to an investor’s portfolio.

6. Vanguard Growth Index Fund Admiral Shares (VIGAX)

VIGAX targets large-cap growth stocks by tracking the CRSP US Large Cap Growth Index. It has a minimal expense ratio of 0.05% and a $3,000 minimum investment. Top holdings include growth-oriented companies like Apple, Microsoft, and Nvidia. The fund holds 178 assets, with a significant portion in the Technology sector (around 50%). VIGAX is suitable for investors seeking growth within the large-cap segment with a Technology focus.

7. Vanguard Balanced Index Fund Admiral Shares (VBIAX)

VBIAX offers a balanced approach with approximately 60% in stocks and 40% in bonds. It tracks the CRSP US Total Market Index for stocks and the Bloomberg U.S. Aggregate Float Adjusted Index for bonds. The expense ratio is 0.07%. VBIAX holds over 16,000 securities, with top holdings including Apple, Microsoft, Nvidia, and bonds. This fund provides a diversified, moderate-risk investment solution.

8. Vanguard Dividend Growth Fund (VDIGX)

VDIGX invests in companies with a history of increasing dividends. It aims for long-term capital growth and invests across market capitalizations. The expense ratio is 0.22%, with a $3,000 minimum investment for regular accounts ($500 for IRAs). VDIGX holds 42 assets, with top holdings including Apple, Microsoft, and McDonald’s. The main Sector exposure includes Healthcare, Industrials, and Technology.

9. Vanguard Tax-Managed Balanced Fund Admiral Shares (VTMFX)

VTMFX aims to minimize tax liability by allocating approximately 50% to stocks and 50% to tax-exempt municipal bonds. The minimum investment is $10,000, and the expense ratio is 0.09%. The fund tracks a benchmark composed of the Russell 1000 TR USD index and the Bloomberg Municipal 1-15 Year TR USD index. VTMFX holds over 4,100 securities, with top holdings including Apple, Microsoft, and Nvidia. It’s designed for investors in higher tax brackets seeking to save on taxes.

10. Vanguard Target Retirement Funds

These funds, like the Vanguard Target Retirement 2050 Fund (VFIFX), offer a simplified retirement savings approach by automatically adjusting asset allocation over time. VFIFX has a $1,000 minimum investment and a 0.08% expense ratio. It invests in other Vanguard funds, including the Vanguard Total Stock Market Index and Vanguard Total International Stock Index. Top holdings are Vanguard Total Stock Market Index Fund Institutional Plus Shares and Vanguard Total International Stock Index Fund Investor Shares. These funds are ideal for hands-off retirement investing.

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Summary of Top 10 Vanguard Index Funds

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Conclusion

This analysis of the 10 best Vanguard index funds highlights a range of options for investors seeking diversification and low costs. From broad market exposure to specific sectors and balanced strategies, these funds cater to various investment goals and risk profiles. Vanguard’s reputation for low expense ratios remains a key advantage, potentially enhancing long-term returns for investors. The variety within this list allows for the construction of well-diversified portfolios to meet diverse financial objectives.

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