When it comes to index funds, Vanguard has led the way from the very beginning. In 1976, it created the very first index mutual fund, the Vanguard 500 Index Fund (VFIAX). Ten years later, the group introduced the Vanguard Total Bond Market Index Fund (VBTLX).
Looking to innovate, Vanguard introduced an index fund of index funds with its LifeStrategy Funds. The funds are a series of broadly diversified, low-cost funds using total index funds as the foundation for creating different portfolio allocations based on risk objectives. Keep in mind that these funds are subject to any risks associated with the underlying funds.
Four underlying mutual funds comprise the Vanguard LifeStrategy Growth Fund (VASGX), which has $16.5 billion in assets and an expense ratio of 0.14% as of Oct. 17, 2022.
- Vanguard is one of the leaders in index funds, including the index fund of index funds.
- Vanguard launched the Vanguard LifeStrategy Growth Fund in 1994, which invests in four index funds.
- The LifeStrategy Growth Fund is subject to the risks associated with the underlying funds.
- VASGX is invested heavily in stocks, with just over 80% invested in two stock funds, while 20% is invested in bond funds.
- The top four holdings of VASGX are Vanguard's Total Stock Market Index Fund, the Total International Stock Index Fund, the Total Bond Market Index Fund, and the Total International Bond Index Fund.
1. Vanguard Total Stock Market Index Fund (VTSAX)
The Vanguard Total Stock Market Index Fund had the top position with a 48.2% weight as of September 2022.
VTSAX has 4,066 holdings across $257.6 billion in assets under management (AUM). It tracks the performance of the Spliced Total Stock Market Index, which is composed of nearly 100% of the total market capitalization of the U.S. stock market.
The fund leans toward large-cap stocks, but it includes weightings across all capitalization based on the weightings of the underlying index. The fund's annual return was -4.46% as of the third quarter of 2022. It returned 11.33% over the past 10 years as of Sept. 30, 2022.
2. Vanguard Total International Stock Index Fund (VTIAX)
The Vanguard Total International Stock Index Fund has a heavy 31.1% weighting in the LifeStrategy Fund as of Q3 2022.
VTIAX launched in 1996 and has $57.7 billion in assets invested in 7,991 stocks tracking the Spl Total International Stock Index. The index looks to gain equity exposure from both developed and emerging markets.
The fund's top three holdings include Taiwan Semiconductor (TSM), Nestle (NESN), and Roche Holding (ROG). As of September 2021, the fund returned an average annualized return of 3.31% for the last ten years, with an average 2.91% return since its inception.
Vanguard's index funds are passively managed, which means they track an underlying benchmark index. Unlike actively managed funds, passive funds offer lower fees and expense ratios.
3. Vanguard Total Bond Market II Index Fund (VBTLX)
The Vanguard Total Bond Market Index Fund had a 14.2% weighting as of Q3 2022.
The fund was established on Nov. 12, 2001, and has $271.1 billion in total net assets. Its primary focus is the intermediate-term bond market.
The fund is designed to track the performance and yield of the Spliced Bloomberg U.S. Aggregate Float Adjusted Index. As of September 2022, its average annual return was 0.85% over the previous 10 years, and 3.15% since its inception on Dec. 11, 1986.
4. Vanguard Total International Bond II Index Fund (VTABX)
The Vanguard Total International Bond Index Fund had a 6.5% weighting as of the third quarter ending Sept. 30, 2022.
The fund provides investors with a low-cost way to gain exposure to international bonds. The fund's $78.9 billion in assets are invested to track the performance of the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Hedged Index.
The fund is heavily weighted in government and government-related bonds from developed countries, but it has some exposure to emerging markets. The fund, which was launched on May 31, 2013, has an average annual return of 1.64% since inception. as of September 2022.