Top Vanguard Funds for Retirement Diversification (VTSAX, VTIAX)

Saving for retirement can feel overwhelming. There are thousands of investment choices for you to evaluate and choose from, especially when trying to get the right asset allocation in place. Luckily there is an alternative to sorting through and using excessive numbers of mutual funds and exchange-traded funds (ETFs) to get the right allocations for retirement.

The Vanguard Group offers funds that allow for broad exposure by investing in just a few funds. With just three to five funds you can achieve that goal of being diversified. Additionally, many of Vanguard's funds are available as both mutual funds and ETFs so you can use your preferred investment tool and get the same results. Here are few of Vanguard’s funds that allow for easy allocation and diversification. (For more, see: Guide to ETF Providers: Vanguard.)

U.S. Stocks

The Vanguard Total Stock Market Index (VTSAX) mutual fund invests in the U.S. equity market with more than 3,800 stock holdings in this one fund. This allows you to invest in large-, mid- and small-capitalization stocks in one investment. Even better is that both the mutual fund and the ETF version, Vanguard Total Stock Market (VTI), have fees that are only 0.05%. Hard to beat this diversification and expense ratio.

International Stocks

The Total International Stock Index Fund (VTIAX) covers a wide range of international stocks including emerging markets and some international small caps. With over 5,800 stocks in its portfolio, this can be your only international holding. The expense ratio for the mutual fund is just 0.14%. Again the ETF version, Vanguard Total International Stock (VXUS), has the same fees as the mutual fund so you can select the fund that works best for you. (For more, see: ETFs Commonly Found in Retirement Accounts.)

If you prefer to add more emerging markets exposure than the Total International Stock Index provides you can supplement your international exposure with the Vanguard Emerging Markets Stock Index (VEMAX). With a fee of only 0.15% you can gain exposure to over 1,000 stocks from emerging markets such as Brazil, India and China. Again the ETF version, Vanguard FTSE Emerging Markets (VWO), has the same expense ratio as the mutual fund.

Bonds

The Vanguard Total Bond Market Index Fund (VBTLX) will give you exposure to almost every area of the U.S. bond market. This includes government bonds and corporate bonds of maturities varying from short to long term. The expense ratio is only 0.07% for both the mutual fund and the ETF, the Vanguard Total Bond Market (BND). (For more, see: Evaluating Bond Funds: Keeping It Simple.)

If you want to gain exposure to international bonds then you can add the Vanguard Total International Bond Index Fund (VTABX). This fund invests in bonds outside of the U.S. and includes government and corporate. Most of this fund is invested in developed countries' bonds. The expense ratio is 0.19% for both the mutual fund and ETF, the Vanguard Total International Bond (BNDX).

Specialty Funds

Vanguard offers many other specialty funds that you can add to your portfolio to fit your needs and investing beliefs. Examples include the Vanguard Dividend Appreciation Index Fund (VDADX), for those that are wanting more dividend income, the Vanguard Health Care Fund (VGHCX), for those that want more exposure to heath care companies, and the Vanguard REIT Index Fund (VGSLX) for exposure to real estate investments. (For more, see: Index Mutual Funds vs. Index ETFs.)

The Bottom Line

By using broad based, low-cost funds from a company like Vanguard you can easily save for retirement without having to manage a large number of funds and still achieve the right asset allocation and diversification. (For more, see: Top 3 Vanguard Managed ETFs.)