Vanguard is known in the investment community as having a wide range of investments, such as exchange-traded funds (ETFs) and mutual funds. Vanguard has developed a reputation for having the lowest industry average expense ratios and high-quality investments at lower prices.

Vanguard Funds Overview

Headquartered in Valley Forge, Pennsylvania, Vanguard Funds began official operations in 1975. As of Dec. 31, 2014, the firm offers around 160 U.S.-based funds and 120 international funds that total nearly $3 trillion in assets. Outside of fund management, Vanguard also offers its clients a variety of account types, such as traditional individual retirement accounts (IRAs), Roth IRAs, 529 plans and small business retirement plans. Vanguard also offers a variety of annuities, such as income annuities, fixed annuities and variable annuities with lifetime withdrawal benefits.

Vanguard Balanced Allocation Funds

Balanced funds are considered to be the actively managed funds with combinations of stocks and bonds within the portfolios. Vanguard offers balanced investment vehicles through ETFs or mutual funds. When choosing a balanced allocation fund, determine a couple of factors to narrow the selection, as Vanguard has over 39 different options.

Vanguard Balanced Mutual Funds

Determine whether active management is important. Mutual funds differ greatly this way over ETFs, which is why mutual funds have higher internal expense ratios. Vanguard’s flagship balanced fund is the Wellington Fund. This fund, founded in 1929, is the oldest balanced fund in the United States. It has developed a reputation as a rock-solid investment. Currently, the Wellington Fund has an expense ratio of 0.26%, which is 71% lower than funds in a similar category. The Wellington Fund has invested traditionally two-thirds in stocks and one-third in bonds, diversified across all sectors of the market.

Vanguard also offers several other funds outside Wellington. The company has four different LifeStrategy funds that are diversified across all asset classes and based on risk tolerance. If you are risk-averse, select the LifeStrategy Conservative Growth fund; it has an expense ratio of 0.15% and is invested 40% in stocks and 60% in bonds. If you are looking for longer-term growth, choose the LifeStrategy Growth Fund, which is 80% invested in stock and only 20% in bonds. Vanguard also offers balanced funds that are more income-oriented, providing a higher yield if you are looking for dividends.

Vanguard Target Date Mutual Funds

Vanguard established its Target Date mutual funds to make investment selections even easier. These funds have a very low expense ratio of 0.1% and are designed to take a hands-off approach to asset allocation. Each fund has a specific year tied to its title, which dictates how aggressive the portfolio is. As your retirement date draws closer, the fund automatically rebalances to be more conservative by adding bonds. Select the fund that corresponds with your desired retirement year. For example, if you are 40 years old and you want to retire at age 65, the correct fund would be the Vanguard Target Retirement 2040 Fund. This fund is growth-oriented, with nearly 89% invested in stocks and 11% in bonds. As you get closer to age 65, the fund automatically changes the allocations from stocks to bonds.

Vanguard Balanced ETFs

Unlike mutual funds, ETFs are not actively managed and are more passive investments tied to a specific sector or industry. Vanguard does not currently manage any balanced ETFs. However, it does offer a variety of stock, bond or international ETFs. As a service to its clients, Vanguard allows the purchase of third-party ETF providers, such as First Trust, WBI and PowerShares, all of which offer balanced ETF alternatives. However, these funds are considerably more expensive than Vanguard’s own proprietary ETFs.

Summary of Vanguard Balanced Allocation

If you are looking for a wide range of investment selections tailored to a particular risk type, a Vanguard balanced fund might be the right choice. Although not known for the best managers and benchmark outperforming funds, Vanguard is an excellent choice if you seek diversified investment options at one of the lowest expense ratios in the industry.

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