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 (VFINX). Ten years later, the group introduced the Vanguard Total Bond Market Index Fund (VBMFX).

Key Takeaways

  • Vanguard is one of the leaders in index funds, including the index fund of index funds.
  • Vanguard launched the Vanguard LifeStrategy Growth Fund (VASGX) in 1994, which invests in four index funds.
  • The VASGX is invested heavily in stocks, with just over 80% invested in two stock funds, while 20% is invested in bond funds.

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. Four underlying funds comprise the Vanguard LifeStrategy Growth Fund (VASGX), which has $16.9 billion in assets as of Aug. 31, 2020.

1. Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)

The Vanguard Total Stock Market Index Fund Investor Shares had the top position with a 48.2% weight as of Sept. 30, 2020. It has 3,495 holdings across $972.4 billion to track the performance of the CRSP US Total 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. As of Sept. 30, 2020, the fund has returned an average annual return of 9.81% since inception on Apr. 27, 1992, and an average of 13.36% over the past 10 years.

2. Vanguard Total International Stock Index Fund Investor Shares (VGTSX)

The Vanguard Total International Stock Index Fund Investor Shares had a heavy 32.40% weighting in the LifeStrategy Fund on Sept. 30, 2020. It was launched in 1996 and had $427.7 billion in assets invested in 7,403 stocks tracking the FTSE Global All Cap ex-US Index. The index looks to gain equity exposure from both developed and emerging markets.

The fund's top holdings include Alibaba Group (BABA), Tencent Holdings (TCEHY), and Taiwan Semiconductor Manufacturing (TSM). As of Sept. 30, 2020, over the last 10 years, the fund has returned an average annualized return of 4.14%, with an average 4.49% return since inception on Apr. 29, 1996. 

3. Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)

The Vanguard Total Bond Market Index Fund Investor Shares had a 13.7% weighting as of Sept. 30, 2020. The fund has $288.5 billion in assets invested in bonds.

The fund is designed to track the performance and yield of the Bloomberg Barclays U.S. Aggregate Float Adjusted Index. As of Sept. 30, 2020, it returned an annual average of 3.48% over the previous 10 years, and 5.91% since inception in Dec. 11, 1986. 

4. Vanguard Total International Bond Index Fund Investor Shares (VTIBX)

The Vanguard Total International Bond Index Fund Investor Shares had a 5.7% weighting as of Sept. 30, 2020. The fund provides investors with a low-cost way to gain exposure to international bonds. The fund's $154.4 billion in assets are invested to track the performance of the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index.

The fund is heavily weighted toward 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 4.17% since inception. as of Sept. 30, 2020.