Vanguard, the king of low-cost investing, has landed on Money Magazine's Annual Investment Guide again this year, with 42 of its mutual funds and exchange-traded funds (ETFs) getting top billing on Money's 50 recommended mutual funds and 50 recommended ETFs lists.
According to Vanguard, of the 42 investment products to be recommended by Money Magazine, 23 are mutual funds and 19 are ETFs. The fund company noted that its investment products have topped the rankings at Money for the past 18 years, but this marks the first time there was such a high concentration of Vanguard's funds and ETFs on the recommendation lists. Vanguard said that the highest number of mutual funds from a rival to land on the list is eight. On the ETF front, the closest rival got 13 of its funds named to Money's 50 recommended ETFs list.
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The funds and ETFs that landed on the lists cover a whole swath of investment areas including small-capitalized stocks, international companies paying dividends, fixed-income funds and ETFs, mid-capitalized stocks, and emerging market investments, among other investment classes. Vanguard noted that Money looks at steady performance, costs, skill of the managers and consistency of the investment strategy when choosing mutual funds and ETFs to add to its annual recommendation lists.
The Money ranking isn't the only good news Vanguard had on the mutual fund and ETF front this month. Earlier in February, the company announced that 86% of its funds exceeded their peer group averages over the past five years. That impressive number jumps to 94% on a 10-year basis as of the end of 2017. When it comes to fund performance compared with rivals, Vanguard had impressive performance numbers, but it is bond and balanced funds that did the best in the five-year period, outperforming 88% of the funds invested in those asset classes. Meanwhile, Vanguard's stock funds did better than 84% of competing funds, and 100% of its money market funds bested their rivals.
Over a 10-year period, Vanguard said that 94% of its stock funds, 93% of its bond funds and 95% of its balanced funds outperformed their competitors. When you look at the funds on a one-year performance basis, they still beat peers – but not by so much. According to Vanguard, 68% of stock funds are outperforming their peers on a one-year basis, while 63% of bond funds and 68% of balanced funds are doing better than their competitor averages over that time frame.
Vanguard's performance, while impressive, does come at a time when competitors are closing in. In a recent analysis covered by Barron's, Morningstar analysts said that, while Vanguard dominated fund investing in 2017, there were "significant" differences in the inflows and outflows when compared with past years. In 2015 and 2016, Vanguard enjoyed positive flows while the rest of the industry suffered from declines. In 2017, flows for both Vanguard and other fund providers were positive, underscoring how the rest of the industry is catching up.