If you own a health savings account (HSA) but plan to use it more like a secondary investment account, Vanguard provides some of the most effective ways to put your tax-advantaged funds to work.
Vanguard, if you’re not already aware, is the creator of the index fund—a product that triggered a 30-year decline in expenses not just within Vanguard, but across the entire fund industry. Fast-forward to today, and Vanguard is still a low-cost leader, making it a favorite hidey-hole of people looking to grow their HSA money.
Today, I’m going to introduce you to seven Vanguard retirement-focused mutual funds you can invest in through your HSA plan. They all sport long-term investing objectives and reasonable-to-downright-low costs. You can also consider holding them in other tax-advantaged accounts, such as an IRA or (when available) a 401(k).
Disclaimer: This article does not constitute individualized investment advice. These securities appear for your consideration and not as personalized investment recommendations. Act at your own discretion.
Editor’s Note: Tabular data included in this article are up-to-date as of Jan. 28, 2025.
Table of Contents
Can You Invest Through Your HSA?
Health savings accounts (HSAs) can best be described as part cash account, part investment account. While the money is primarily intended to be spent on qualified medical expenses, you can invest some or all of it—and many people (myself included) do.
While many HSA providers offer several investment options, you’ll often need to meet a minimum balance in your HSA before you can start investing. For instance, some HSA administrators might require you to have at least $2,500 in your cash account before you can invest; but some accounts don’t have this requirement.
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How to Invest in Your HSA
As far as how to invest is concerned, that’s largely dependent on the investments your HSA provider offers, which can vary widely. (We’ll cover our top Vanguard retirement picks for your HSA account momentarily.)
Some HSAs are self-directed and let you choose from thousands of stocks, bonds, exchange-traded funds (ETFs), and mutual funds. In that case, how you invest is just about the same as how you’d invest in a traditional brokerage account or individual retirement account (IRA).
However, other HSAs might require you to choose from a very limited set of mutual funds or ETFs. Even then, the process is pretty simple—just select which fund or funds you want to purchase with your available funds.
If you have a high-deductible health care plan (HDHP) and are eligible for an HSA, research different HSA providers and their investment choices to determine which investments are available to you.
What Should You Want in a Retirement Fund?
When investing your retirement savings in an HSA, you need to consider a few critical factors.
— Diversification: A robust retirement portfolio should hold multiple asset classes. This typically means stocks and bonds, though it can also mean alternatives such as real estate or commodities. Diversifying your retirement portfolio across these assets can help defray your risk and smooth your returns.
— Costs: Every dollar spent on fees and expenses is a dollar no longer available to grow and compound over time, so keeping expenses cut to the bone is vital. No worries in that department: The best Vanguard retirement funds‘ fees typically sit near or at the bottom of their category.
— Taxes: A taxable account, such as a standard brokerage account, is better suited to take advantage of certain tax-advantaged investments, such as municipal bonds. For tax-advantaged accounts, such as an HSA, some of the best investments include bond funds (where the interest income won’t be taxed) and actively managed stock funds (where the capital gains distributions from heavy trading won’t be taxed).
— Income: You ideally want your retirement portfolio to produce regular income—in the form of both bond interest and dividend income. Stock prices can suffer during nasty corrections and bear markets, but income-generating funds can help provide for your living expenses without forcing you to sell at an inopportune time.
Related: The 7 Best Vanguard Dividend Funds to Buy [Low-Cost Income]
Why Vanguard?
Vanguard Group is a massive firm that, as it points out itself, “is owned by its funds, which in turn are owned by Vanguard’s fund shareholders.” Its sheer scale—$8.7 trillion in assets—and alignment with shareholders’ interests allow it to charge a laughably low 0.08% expense ratio (a mere 80¢ for every $1,000 invested) on average across its 400-plus mutual funds and ETFs.
The average asset-weighted expense ratio for U.S. mutual funds and ETFs is more than five times that, at 0.44%.
So even when a Vanguard fund isn’t the absolute cheapest in its category, it’s still going to be one of your most cost-efficient options.
Related: Best Vanguard Retirement Funds for a 401(k) Plan
The Best Vanguard Retirement Funds for an HSA in 2025
With all that out of the way, let’s dig into some of the best Vanguard retirement funds to hold in an HSA to consider diving into this year.
I’m splitting this list into needs for two types of investors:
1. People who just want to earn a little money on their health savings. These people plan on using their HSA for health-related expenses, but would like to make at least a little money while those funds are just sitting around.
2. People treating their HSA as a second IRA. They’re looking for some long-term growth, and they’re willing to accept some—not a lot, but some—risk.
Also note that these Vanguard retirement funds are ordered by their Morningstar Portfolio Risk Score for the trailing 10-year period. Here are the risk levels each score range represents:
— 0-23: Conservative
— 24-47: Moderate
— 48-78: Aggressive
— 79-99: Very aggressive
— 100+: Extreme
These scores are a general gauge of risk compared to all other investments. For example, a bond fund with a score of 20 might be considered a conservative strategy overall, but it could simultaneously be riskier than a number of other bond funds.
Lastly, these funds have a required minimum initial investment of $3,000 unless otherwise indicated. In other words, if you want to invest in these funds via an HSA, you’ll need to be able to purchase at least $3,000 worth of shares up front. Once invested, you can spend as much or as little as your HSA provider allows on subsequent purchases.
Related: How to Max Out Your 401(k) + Other Retirement Accounts
Earn Money on Health Savings Fund #1: Vanguard Short-Term Treasury Index Fund Admiral Shares
— Style: Short-term U.S. Treasury bond
— Management: Index
— Assets under management: $25.5 billion*
— SEC yield: 4.3%**
— Expense ratio: 0.06%, or 60¢ per year for every $1,000 invested
— Morningstar Portfolio Risk Score: 6 (Conservative)
No retirement asset allocation is complete without bond funds. As an asset class, bond funds play an important role in lowering volatility and providing regular income. However, bond interest is taxable at less favorable (read: ordinary) rates—if you’re in the 37% tax bracket, then you’re losing 37% of your bond interest to taxes—and because interest is the predominant source of returns on bonds, bond funds are best held in tax-advantaged accounts such as HSAs.
While the yield curve is no longer inverted (inversion is when short-term rates are higher than long-term rates), short-term bonds still offer relatively high yields for relatively low risk. Thus, it makes sense to keep a decent chunk of your overall bond exposure in short-term bond funds, such as the Vanguard Short-Term Treasury Index Fund Admiral Shares (VSBSX).
VSBSX tracks the Bloomberg US Treasury 1-3 Year Bond Index—a collection of roughly 100 federal bond issues with maturities of between one and three years. U.S. Treasuries are among the best-rated bonds on the planet, meaning that the major credit-rating agencies believe bonds issued by our federal government are likelier than most to repay you fully with interest. These bonds are considered all the more secure given their short maturities—at most, these bonds will mature in just three years, which is a relatively small time for the security of those bonds to change.
One of the most critical metrics to consider when considering bond funds is duration, which is a measure of interest-rate sensitivity. As an example, a bond with a duration of two years would see its price rise by 2% if interest rates fell by 1 percentage point (or conversely, would see its price fall by 2% if interest rates rose by 1 percentage point). The actual calculation of duration is fairly complex; it’s the weighted average of the bond’s cash flows. But the key takeaway is that, all else equal, the longer a bond’s time to maturity, the higher its duration—and thus the higher the interest-rate risk.
VSBSX has a duration of just 1.9 years, which is exceedingly low. And in return, you currently receive a yield of more than 4%. That makes Vanguard Short-Term Treasury Index Fund one of the very best Vanguard HSA funds for its low risk and competitive yield.
* Many Vanguard funds have multiple share classes, including ETFs. Listed net assets for Vanguard funds in this story refer to assets under management across all of a given fund’s share classes.
** SEC yield reflects the interest earned across the most recent 30-day period. This is a standard measure for funds holding bonds and preferred stocks.
Related: The 7 Best Dividend ETFs [Get Income + Diversify]
Earn Money on Health Savings Fund #2: Vanguard Total Bond Market Index Fund Admiral Shares
— Style: Intermediate-term core bond
— Management: Index
— Assets under management: $342.4 billion
— SEC yield: 4.6%
— Expense ratio: 0.05%, or 50¢ per year for every $1,000 invested
— Morningstar Portfolio Risk Score: 20 (Conservative)
Bond funds play an important role in lowering volatility and providing regular income, though they don’t need to be as conservative as the aforementioned VSBSX.
Within the world of Vanguard bond funds, the Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) stands out as one of the very best Vanguard retirement funds for its combination of high-quality holdings, competitive yield, and rock-bottom fees and expenses.
Related: 10 Best Vanguard Funds for the Everyday Investor
VBTLX provides broad exposure to a wide universe of bonds. A little less than half of its portfolio is Treasury or agency debt backed by the U.S. government, and another 20% is invested in government mortgage-backed securities (MBSes). Industrial-sector corporate bonds make up a little over 15%, banks and financial institutions make up 9%, and the rest is spread across foreign bonds, utilities, and commercial mortgage-backed securities (CMBSes).
Risk is higher than Vanguard’s short-term Treasury fund for a number of reasons. For one, roughly a third of VBTLX’s bonds aren’t government- or agency-related—they’re corporates and other issues with ratings that, while high, are lower than U.S. Treasury debt. Time remaining on these bonds is longer, too, with an average effective maturity of more than eight years. As a result, duration is higher—at six years, a percentage-point increase in rates would theoretically send the fund 6% lower.
On the flip side, you’re rewarded with a higher yield and more potential upside should rates go lower.
And with an expense ratio of just 0.05%, Vanguard Total Bond Market Index Funds is all but free to own.
Related: The 7 Best T. Rowe Price Funds to Buy and Hold
Earn Money on Health Savings Fund #3: Vanguard Wellesley Income Fund Investor Shares
— Style: Moderately conservative allocation
— Management: Active
— Assets under management: $49.0 billion
— SEC yield: 4.1%*
— Expense ratio: 0.23%, or $2.30 per year for every $1,000 invested
— Morningstar Portfolio Risk Score: 28 (Moderate)
If you want both stocks and bonds in your portfolio, you have three choices:
1. Buy individual stocks and/or bonds.
2. Buy stock funds and bond funds.
3. Buy an “allocation” fund.
I affectionately refer to allocation (also “balanced”) funds as “portfolios in a can.” That’s because, if you so desired, you could literally invest in that single fund and have an entire portfolio of stocks and bonds. That’s not to say investors necessarily should do this, but they certainly can.
Related: 9 Best Fidelity Index Funds to Buy
Still, if you find one of these funds that has an excellent track record and savvy management, they can be useful for allocating certain portions of your nest egg—like, say, the money in your HSA.
Enter Vanguard Wellesley Income Fund Investor Shares (VWINX), a “moderately conservative” allocation fund that’s much more defensively positioned. Here, bonds make up more than 60% of the portfolio. VWINX holds well more than 1,200 different debt issues—primarily corporate debt, but also Treasury and agency bonds, and even sprinklings of foreign bonds and MBSes. The remaining equity portion is spread across roughly 75 stocks or so, with a distinct value tilt and with a little exposure to developed international markets.
And per that track record and well-regarded management? Well, VWINX has both.
Related: The 10 Best Vanguard Index Funds You Can Buy
“The two lead managers [Matthew Hand and Loren Moran] avoid making large shifts between stocks or bonds; instead, they’ve kept the equity allocation within a 4-percentage-point range over their shared tenure,” says Morningstar analyst Stephen Margaria. “Keeping the stock/bond split relatively steady means the team’s strength of security selection, rather than asset-allocation decisions, will be the primary driver of returns, which should benefit long-term shareholders.”
From a tax perspective, Wellesley generates a lot of interest income and has high turnover of almost 60%, which means, on average, 60% of the portfolio changes every year—meaning capital gains distributions are in play. That means VWINX is best held in a tax-advantaged account, and HSAs very much fit the bill.
* SEC yield is used instead of dividend yield here because of the fund’s bond-heavy allocation.
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HSA-as-an-IRA Fund #1: Vanguard Global Minimum Volatility Fund Investor Shares
— Style: Global large-cap stock
— Management: Index
— Assets under management: $2.0 billion
— Dividend yield: 1.9%
— Expense ratio: 0.21%, or $2.10 per year for every $1,000 invested
— Morningstar Portfolio Risk Score: 58 (Aggressive)
Vanguard Global Minimum Volatility Fund Investor Shares (VMVFX) checks off a lot of boxes. It invests in U.S. stocks. It invests in international stocks. It provides an above-average level of yield. And it’s designed to reduce volatility.
If you want to diversify your portfolio to also hold non-U.S. stocks, you’ll need a quick terminology lesson. An “international” fund invests only in companies outside the U.S., while a “global” fund invests in both U.S. and international companies. VMVFX is the latter.
Related: Best Target-Date Funds: Vanguard vs. Fidelity vs. Schwab
Like many global funds, Vanguard Global Minimum Volatility dedicates the largest chunk of its assets to the U.S., which sits around 60% of the portfolio right now. The rest of its assets are spread across 23 other countries, including the U.K. (6%), Canada (5%), India (5%), and Taiwan (4%). In general, this roughly 240-stock portfolio is chock-full of dividend-paying large caps that power a nearly 2% fund yield—not massive, but certainly more than you’re getting out of America’s blue-chip S&P 500 Index.
Managers John Ameriks and Scott Rodemer have built this portfolio to deliver less volatility than your average global equity fund. They use a rules-based strategy that’s similar to what an index would provide, but they’re not forced to rebalance the portfolio on a set schedule, and they also use contracts to hedge against currency risk.
Related: 7 Best Vanguard Retirement Funds [Save More for Retirement, for Less]
Low- and minimum-volatility strategies are generally a trade-off: You sacrifice some upside potential in bull markets to get portfolio protection when markets decline. And in VMVFX’s case, the downside protection is quite good. According to Morningstar Analyst Ryan Jackson, “Investors shouldn’t expect this fund to keep pace when the market rallies or excel every time it wobbles, but its risk-adjusted returns should stack up well in the long run.”
Also note that VMVFX has a fair bit of turnover, at about 35%, so it’s turning over roughly a third of its portfolio every year. As a result, the fund can and does make capital gains distributions, making this a fine fit for a tax-advantaged account such as an HSA.
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HSA-as-an-IRA Fund #2: Vanguard Dividend Growth Investor Shares
— Style: U.S. dividend-growth stock
— Management: Active
— Assets under management: $49.9 billion
— Dividend yield: 1.7%
— Expense ratio: 0.29%, or $2.90 per year for every $1,000 invested
— Morningstar Portfolio Risk Score: 65 (Aggressive)
Vanguard Dividend Growth Investor Shares (VDIGX) is an excellent Vanguard fund for virtually any account—just understand what you’re buying before you purchase.
Vanguard says the actively managed VDIGX “focuses on high-quality companies that have both the ability and the commitment to grow their dividends over time.” In other words, the fund might not have a great yield now, but owners of this fund should enjoy a higher “yield on cost” (the yield you’re actually earning based on the price you bought the stock) as the years roll on. Also, dividend growers tend to be high-quality companies; only firms with strong financials and excellent cash flows can afford to keep paying shareholders more every year.
Related: 10 Monthly Dividend Stocks for Frequent, Regular Income
Said differently: Dividend growth acts like a quality screen that ensures you’re owning a higher grade of stock.
Portfolio Manager Peter Fisher has a tight holding set of roughly 40 predominantly mega-cap equities with bulletproof balance sheets. All of them have raised their payouts for at least a few years, but some have long histories of uninterrupted dividend growth. Procter & Gamble (PG) and Colgate-Palmolive (CL), for instance, are Dividend Kings, which are companies that have raised their dividends annually for at least 50 consecutive years.
It’s worth noting that Fisher has only had sole control over the fund since Jan. 1, 2024. That’s when longtime manager Donald Kilbride stepped down, leaving the reins of VDIGX to his comanager. But Kilbride will continue to provide ideas for the portfolio.
Related: The 10 Best Fidelity Funds You Can Own
Morningstar, which gives Vanguard Dividend Growth a Gold Medalist rating, says “the strategy’s resulting performance is unusual and not for everyone. The process organically creates a low-volatility portfolio that holds up dependably in downturns. On the other hand, as Fisher directly notes, it lags in rising markets. … But its strikingly low volatility drives an excellent long-term risk/reward profile.”
The tax situation here isn’t as dire as most of the other funds on this list. VDIGX’s turnover is low—under 10% currently—so while the fund does create capital gains distributions, it’s pretty tax-efficient. This, much like the next Vanguard fund on this list, is simply worth holding in an HSA because it’s a high-quality fund that achieves an important goal (holding high-quality stocks that pay dividends).
Related: The 10 Best Dividend Stocks to Buy
HSA-as-an-IRA Fund #3: Vanguard 500 Index Fund Admiral Shares
— Style: U.S. large-cap stock
— Management: Index
— Assets under management: $1.3 trillion
— Dividend yield: 1.2%
— Expense ratio: 0.04%, or 40¢ per year for every $1,000 invested
— Morningstar Portfolio Risk Score: 73 (Aggressive)
If we’re talking about tax consequences alone, a taxable account is much better positioned to take advantage of an index fund’s tax efficiency than a tax-advantaged account. Still, if you’re looking to use your health savings account as a second IRA, and if performance is your ultimate goal, an S&P 500 index fund absolutely belongs in any HSA.
Related: 5 Best Money Market Funds [Protect Your Savings]
Why? Well, the S&P 500 is hard to beat. Through mid-year 2024, “57% of all active large-cap U.S. equity funds underperformed the S&P 500,” says S&P Dow Jones Indices. That’s no anomaly: In 21 of the past 24 years, a majority of active fund managers that have tried to beat the S&P 500 have failed to do so.
So if you can’t beat it, join it.
The Vanguard 500 Index Fund Admiral Shares (VFIAX), by virtue of tracking the S&P 500, holds shares of 500 large U.S. companies. But it doesn’t hold them equally. The S&P 500 is “market-cap weighted,” which means the larger the company, the more weight the stock has in the index (and thus the more impact it has on returns). Thus, right now, VFIAX dedicates the largest portions of its assets to companies like Apple (AAPL), Nvidia (NVDA), and Microsoft (MSFT), whose market caps are measured in trillions of dollars. It’s also considered to be a “blend” fund, which means it has relatively even exposure to value stocks and growth stocks.
Related: 12 Best Investment Opportunities for Accredited Investors
Turnover tends to be low, as only a handful of stocks enter or leave the index in any given year. So it typically makes little to no capital gains distributions. This makes VFIAX an extremely tax-efficient option for taxable accounts. But again, if you’re treating your HSA like a second IRA, and your goal is simply to maximize performance, VFIAX makes a lot of sense in your health savings account. (Though it is worth noting that VFIAX’s ETF share class, VOO, has no investment minimum and costs 1 basis point less in fees.)
VFIAX is Vanguard’s oldest index strategy, and it remains one of the very best Vanguard retirement funds—for HSAs or wherever else you can stash it.
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HSA-as-an-IRA Fund #4: Vanguard Explorer Fund Investor Shares
— Style: U.S. small-cap growth stock
— Management: Active
— Assets under management: $22.1 billion
— Dividend yield: 0.4%
— Expense ratio: 0.45%, or $4.50 per year for every $1,000 invested
— Morningstar Portfolio Risk Score: 81 (Very aggressive)
Vanguard Explorer Fund Investor Shares (VEXPX) is an actively managed mutual fund that invests in predominantly American small- and midsized stocks with growth potential.
VEXPX’s portfolio currently spans around 740 stocks with an average market cap of $7.1 billion—right around the midpoint of the mid-cap range ($2 billion to $10 billion), though the majority of its holdings fall into the small- ($500 million to $2 billion) and micro-cap ($500 million or less) ranges. Holdings right now include the likes of Texas tank barge operator Kirby Corp. (KEX) and mid-cap investment bank Houlihan Lokey (HLI).
Related: 17 Best Income-Generating Assets [Invest in Cash Flow]
While larger companies also have the potential for outsized growth, smaller companies, as a group, tend to be more explosive—for better or worse. They benefit from investing’s rule of large numbers (effectively, doubling your revenues from $1 million to $2 million is a lot easier than doing so from $1 billion to $2 billion). And when institutional investors become interested in these stocks, large influxes of new investment money can send their stocks skyward.
But they’re riskier. Smaller firms have fewer and narrow revenue streams, meaning if a core product line struggles, it can more easily lead to stock turbulence and losses. They also have less access to capital than larger companies, so if times get tight, it’s harder for them to survive.
Funds like VEXPX help defray that risk by allowing you to buy many smaller companies at once, so one stock’s failure doesn’t torpedo your portfolio’s worth. That risk is further reduced by Explorer’s management style—holdings are selected by five different investment advisors that manage independent subportfolios, allowing them to use their specialities to generate outsized returns while preventing any one manager’s strategy from upending the entire fund’s performance.
Turnover is elevated, too, at about 40%, but you can snuff out that liability by holding VEXPX in an HSA or other tax-advantaged account.
Related: The 7 Best Vanguard Index Funds for Beginners
How Does Your Portfolio Look? Ask Empower
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Wondering how your portfolio is shaping up? Sign up with Empower to use its free Investment Checkup tool, which can help you assess your portfolio risk, analyze past performance, and get a target allocation for your portfolio. You can even compare your portfolio to both the S&P 500 and Empower’s “Smart Weighting” Recommendation.
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Regardless of how much money you bring to the table, if you sign up, you will be given the option to schedule an initial 30-minute financial consultation with an Empower advisor.
Is Investing Health Savings Account Funds a Good Idea?
Yes, it can be a good idea to invest the funds in your health savings account—after all, investing is generally the best way to grow wealth over time. But you should also keep at least a portion of your HSA balance saved as cash so you can still easily spend it if you need it.
For instance, I typically keep my estimated annual out-of-pocket expenses in the savings portion of my HSA and invest the remaining balance for long-term needs, such as medical expenses in retirement. This gives me added peace of mind that the money is available if we can’t afford to cover unexpected health care costs with our normal checking account.
Related: How to Get Free Stocks for Signing Up: 9 Apps w/Free Shares
Why You Should Invest Your HSA Funds
Some people just aren’t in a financial position where they can invest their HSA funds. But if you are, there are oh-so-many reasons to put at least some of that HSA money to work.
1. Triple Tax Advantage
HSAs offer an impressive trifecta of potential tax benefits, including:
— Pre-tax contributions: Contributions to an HSA made via payroll deduction are pre-tax. Any contributions you make on your own (not via payroll deduction) may be 100% tax-deductible.
— Tax-free investment growth: Your HSA investment earnings and interest earned on the savings portion aren’t subject to taxes either.
— Tax-free withdrawals for qualified medical expenses: If you withdraw HSA dollars for a qualified medical expense, you won’t be taxed on the withdrawal.
You will pay income taxes and a 20% penalty on withdrawals for non-qualified costs before age 65. However, after age 65, while you’ll still have to pay ordinary income tax on non-qualified withdrawals, you’ll no longer have to pay any penalties.
2. Long-Term Growth
Chances are your health care expenses will probably rise as you age. If you have a high-deductible health plan and start investing in an HSA early, you can build a sizable nest egg for medical costs (or other expenses) in retirement. This will provide some assurance that your future health care costs will be covered even if they grow more expensive when you’re older.
3. Investment Options
Similar to what you’d see with a taxable brokerage account, HSAs sometimes offer numerous investment options, including individual stocks, bonds, certificates of deposit (CDs), funds, and more.
For instance, with a self-directed HSA, investors can allocate a portion of their investments to equities, fixed-income assets, exchange-traded funds (ETFs), and mutual funds. Unlike many other HSA administrators, Fidelity also supports fractional share investing, which makes higher-priced shares more accessible for investors working with smaller dollar amounts.
Do you want to get serious about saving and planning for retirement? Sign up for Retire With Riley, Young and the Invested’s free retirement planning newsletter.
Do I Qualify for a Health Savings Account (HSA)?
To be eligible for a health savings account, you’ll need to be enrolled in a qualifying high-deductible health plan (HDHP). If you enroll in a high-deductible health plan through your employer, you can open an HSA account through your employer if they also offer that, but if not, you can sign up for your own personal HSA account.
For 2025, deductibles with an HDHP are at least $1,650 for self-only coverage or $3,300 for family coverage, which can be a hefty sum to pay out of pocket. But pre-tax money saved in your HSA can be used to offset those costs and other qualified medical expenses.
Note that in 2025, the HSA contribution limit is $4,300 for individuals and $8,550 for families. And HSAs do have catch-up contributions for those 55 and older: In 2025, that’s an extra $1,000, bringing the limits to $5,300 and $9,550, respectively.
What is the Minimum Investment Amount on Vanguard Mutual Funds?
Vanguard funds are known for being shareholder-friendly. The Vanguard mutual fund company blazed new trails with the index fund, and Vanguard has done more than any other investment firm to keep costs to a minimum for investors.
But there is one hitch. Many of Vanguard’s cheapest funds in terms of fees have initial investment minimums of around $3,000.
If that is a problem for you, don’t sweat it. Most popular Vanguard index funds are also available as ETFs. Most self-directed HSAs will allow you to buy as little as one share, and some even allow for fractional shares. And if you use a commission-free brokerage, you can buy those ETFs without incurring additional fees. ETF prices vary, of course, but many cost less than $100, and they rarely exceed $400 per share.
Related: The 15 Best ETFs to Buy in 2025
Why Does a Fund’s Expense Ratio Matter So Much?
Every dollar you pay in expenses is a dollar that comes directly out of your returns. So, it is absolutely in your best interests to keep your expense ratios to an absolute minimum.
The expense ratio is the percentage of your investment lost each year to management fees, trading expenses and other fund expenses. Because index funds are passively managed and don’t have large staffs of portfolio managers and analysts to pay, they tend to have some of the lowest expense ratios of all mutual funds.
This matters because every dollar not lost to expenses is a dollar that is available to grow and compound. And over an investing lifetime, even a half a percent can have a huge impact. If you invest just $1,000 in a fund generating 5% per year after fees, over a 30-year horizon, it will grow to $4,116. However, if you invested $1,000 in the same fund, but it had an additional 50 basis points in fees (so it only generated 4.5% per year in returns), it would grow to only $3,584 over the same period.
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Related: 7 Best High-Quality, High-Yield Dividend Stocks to Buy
Looking to earn some serious dividend income? These high-quality, high-yield dividend stocks are well-regarded not only for their high payouts, but for the sustainability of those dividends (at least in the eyes of investment professionals covering the stocks).
We look into these seven companies’ dividend profiles and why analysts think their stocks are well worth holding in your income portfolio.
Related: The Best Fidelity ETFs for 2025 [Invest Tactically]
If you’re looking to build a diversified, low-cost portfolio of funds, Fidelity’s got a great lineup of ETFs that you need to see.
In addition to the greatest hits offered by most fund providers (e.g., S&P 500 index fund, total market index funds, and the like), they also offer specific funds that cover very niche investment ideas you might want to explore.
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