With more than $3 trillion of assets being managed in more than 200 funds, Vanguard is one of the largest investment companies in the world. Its well-earned reputation for low-cost investing is exceeded only by its track record of producing highly rated funds that populate all of the lists of best funds to own. Find out why Vanguard funds belong in your portfolio.
Vanguard's founder, John Bogle, was among the first industry leaders to make a direct link between investment expenses and investment performance. Numerous studies have shown that higher management fees definitely impede long-term investment performance. Vanguard has always offered no-load funds with some of the lowest expense ratios in the market. If you qualify for its Admiral class of funds (requiring a minimum $10,000 investment), the expense ratios are reduced even further.
Vanguard's leading position as a low-cost fund provider is secured by its ownership structure. Unlike most fund companies, which are owned by third-party companies or stockholders, Vanguard is owned by the mutual funds themselves, so all profits are invested in keeping costs down for its mutual fund shareholders.
King of the Low-Cost Indexed Funds
Bogle was also among the first to point out that the vast majority of actively managed funds cannot beat the market indexes with any degree of consistency. His core philosophy was built on the notion that, if you can't beat the market, you should become the market – and if you can do that at the lowest possible cost, you can outperform most of the actively managed fund managers. Vanguard pioneered index investing in the 1990s and now offers the broadest range of funds linked to just about any market index out there. If you are a passive investor, you can't achieve broader portfolio diversification anywhere else.
Portfolio Design for Any Situation
Vanguard offers low-cost actively managed funds that can help you navigate the muddy waters ahead. Its funds can give you a well-balanced portfolio to protect you against market volatility. No matter your needs or objectives, you can choose from nearly 300 funds and exchange-traded funds (ETFs) to create the perfect portfolio.
If you need help designing the perfect portfolio, Vanguard offers an online investment screening tool that recommends an asset allocation based on your financial situation, investment objectives and risk tolerance. If you are investing more than $50,000, you can have access to Vanguard’s Personal Advisor Services, which provides robo-advice along with a live personal advisor.
If You Only Want One Fund for Your Portfolio
It may not be the most highly recommended investment strategy, but if you wanted to streamline your portfolio and keep just one fund, the Vanguard Total Stock Market Index fund might be the one. It is Vanguard's largest index fund, embodying Bogle's core philosophy. The fund gives you exposure to the entire U.S. stock market with broad diversification among large-, mid- and small-cap companies on both sides of the growth and value spectrum. It's a passively managed fund, so its expenses are as low as they come at 0.17%. Because of its portfolio turnover, it is very tax-efficient, so it is a great fund for taxable accounts.
Of course, holding just one investment in a portfolio is not recommended due to the one-sided exposure risk. A better investment strategy would be to make the Vanguard Total Stock Market Index fund a core holding in a diversified portfolio that includes other asset classes, such as bonds, foreign securities and cash.
Vanguard has been the leader in low-cost funds for several decades, over which it has also managed to produce many top performing funds. You can find lower-cost funds; other fund companies need to compete with Vanguard. You can also find better-performing funds, but few fund companies have as many top-performing funds across multiple categories as Vanguard.
You can never know if you have the very best funds for your portfolio. At least with Vanguard funds, you know they'll be among the best.