If you’re looking for a way to get triple exposure to Nvidia or want to make income through covered-call funds, you’ll probably want to seek out some of the ETF industry’s more agile, mid- to small-sized firms.
But if you’re just looking for portfolio staples—strategies that large swaths of investors commonly put to work to grow their wealth over time—Vanguard will usually be one of your first stops.
That’s because Vanguard pioneered the index fund roughly half a century ago, and they’ve spent the 50 years since honing their craft. Today, Vanguard offers some of the oldest, largest, and least expensive index funds on the market, representing core market exposure like large-cap stocks and investment-grade bonds.
And today, I’d like to show you their crème de la crème.
Read on as I look at Vanguard’s best “core” index funds—a short list of products that allow you to meet common investment goals while charging skinflint fees compared to what other providers charge.
Editor’s Note: Tabular information presented in this article is up-to-date as of March 12, 2026.
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Disclaimer: This article does not constitute individualized investment advice. Individual securities, funds, and/or other investments appear for your consideration and not as personalized investment recommendations. Act at your own discretion.
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Why Invest in Vanguard Funds?
Vanguard Group is both a leader and a pioneer in the index fund world.
In 1976, Vanguard founder Jack Bogle launched the first index fund for U.S. retail investors—the Vanguard First Index Investment Trust, which is now the Vanguard 500 Index Fund Admiral Shares (VFIAX). In the nearly five decades that have followed, Vanguard Funds have grown to become the dominant force in index investing.
Today, this former upstart mutual fund company’s products boast roughly $12 trillion in assets under management with an average expense ratio of just 0.06%, or a mere 60¢ for every $1,000 invested. It was 0.08% just two years ago—then in 2025, the company dropped the price of 168 share classes across 87 funds, and in 2026, it slashed fees on another 84 share classes across 53 funds. All told, Vanguard estimates those two cuts will generate $600 million in savings for investors, which the firm claims is its “largest-ever two-year combined cost reduction.”
There are currently more than 400 Vanguard funds, including mutual funds and ETFs. Vanguard index funds, which account for roughly half that number, cover every conceivable pocket of the investable universe, including individual sector funds and emerging markets.
Vanguard grew into the powerhouse mutual fund company it is today by taking care of its clients and genuinely looking after their interests. Vanguard funds really started and continue to accelerate the trend of fee compression. We all collectively pay less in fees and expenses and enjoy better returns because of the index revolution started and led by Vanguard’s founder Jack Bogle.
Today, I’m going to take a look at Vanguard’s best core index funds—a group of low-fee products that are perfect for beginning investors, but that savers of any experience level can use to address their most important portfolio needs.
The 8 Top Beginner-Friendly Index Funds From Vanguard
It’s not particularly easy to narrow down the universe of Vanguard funds to just eight of the very best Vanguard index funds. And this list shouldn’t be considered a comprehensive portfolio.
But you can absolutely use these to build a core portfolio. For the beginning investor, this particular mix of Vanguard funds covers the major bases, giving you exposure to U.S. stocks, stocks in developed and emerging markets, and government and corporate bonds.
This list is also heavy in what are called “Admiral Shares,” which is a popular Vanguard share class. Some Vanguard Admiral Shares trade a lower expense ratio for a somewhat higher investment minimum, but others are the default for a fund, offering both reasonable investment minimums and low expense ratios. We’re focusing only on the latter; all minimum investments for mutual funds are $3,000, which is typically as low as it goes at Vanguard.
And if that’s too much, good news: You can probably buy it as an ETF, which costs only as much as one share to buy. We’ll let you know whenever a mutual fund is also offered as an ETF.
With that said, let’s jump into it.
Best Large-Cap Fund: Vanguard 500 Index Fund Admiral Shares
— Type: Mutual fund (ETF available)
— Style: U.S. large-cap stock
— Assets under management: $1.5 trillion*
— Dividend yield: 1.1%
— Expense ratio: 0.04%, or 40¢ per year for every $1,000 invested
— Minimum initial investment: $3,000
Professional managers of large-cap** mutual funds (funds that invest in larger companies) really have a difficult time beating the S&P 500 Index on a consistent basis, especially once their fees are factored in.
Consider this: According to S&P Dow Jones Indices, in 2025, “79% of all active large-cap U.S. equity funds underperformed the S&P 500, worse than the 65% rate observed in 2024 and the fourth-worst year for active large-cap managers over the 25-year history of our SPIVA Scorecards.” That merely continued a long history of underperformance; just 14% of managers beat the S&P 500 over the trailing 10-year period, and that number shrinks to about 10% over the trailing 15 years.
If the pros can’t beat it, maybe we should join it—which we can do by purchasing Jack Bogle’s original fund.
The Vanguard 500 Index Fund Admiral Shares (VFIAX) boasts about $640 billion in assets under management in the VFIAX share class alone. Across all share classes, this fund manages roughly $1.5 trillion! Meanwhile, VFIAX offers an expense ratio of just 0.04%—that’s not free, but it’s awfully close.
Related: 11 Best Vanguard Funds for the Everyday Investor
The S&P 500 is a collection of the largest and most dominant American companies. To join this stock market index, a company must have a market capitalization of at least $22.7 billion, its shares must be highly liquid (shares are frequently bought and sold), and at least 50% of its outstanding shares must be available for public trading, it must have positive earnings in the most recent quarter, and the sum of its previous four quarters must be positive. Even then, it’s not automatic; a selection committee has to admit the stock, which is different from how most indexes work. (Note: Once a company is in the index, it doesn’t necessarily get kicked out if it fails to meet all of the criteria at some point in the future, but the selection committee would take that under consideration.)
Turnover—how much the fund tends to buy and sell holdings—tends to be low, as only a handful of stocks enter or leave the index in any given year. Why does that matter? If mutual funds rack up net capital gains from trading throughout the year, they must make capital gains distributions to shareholders, which are taxable. VFIAX’s low turnover means it’s extremely tax-efficient, which is especially useful for people who invest in taxable brokerage accounts.
If the $3,000 minimum is a problem, the exact same strategy is available via the Vanguard S&P 500 ETF (VOO), which charges an even cheaper 0.03% in annual expenses. At time of writing, a single share can be purchased for around $620. (However, if your brokerage platform offers fractional shares, you can buy a slice of VOO for as little as $1.)
This may be Vanguard’s oldest index strategy, but it remains one of the very best Vanguard index funds.
* 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.
** There are different ways to define “cap” levels. We’re adhering to Morningstar’s definition, which says the largest 70% of companies by market capitalization within a fund’s “style” are large caps, the next 20% by market cap are mid-caps, and the smallest 10% by market cap are small caps.
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Best Small-Cap Fund: Vanguard Small-Cap Index Fund Admiral Shares
- Type: Mutual fund (ETF available)
- Style: U.S. small-cap stock
- Assets under management: $173.8 billion
- Dividend yield: 1.2%
- Expense ratio: 0.05%, or 50¢ per year for every $1,000 invested
- Minimum initial investment: $3,000
Small-cap companies exhibit more potential for explosive growth than their larger peers, so investors who have both an interest in additional upside and a healthy risk appetite often try to chase down the market’s more diminutive firms.
Why the growth potential? Well, they benefit from the business law of large numbers, for one: It’s much easier to double your revenues from $1 million than $1 billion. But also, as these stocks become noticed by institutional investors and fund managers, large investments can help drive their prices further higher, too.
There’s a catch, however. Smaller stocks are frequently riskier and more volatile. A more diminutive company’s revenues might be dependent on just one or two products or services, meaning a single disruption could have massive financial consequences. Small caps also have less access to capital than their larger peers, meaning they’re less likely to get a lifeline should they suffer from broader economic headwinds.
High risk, high reward. A small company could feasibly double overnight … or get cut in half.
Related: What Is FIRE? A Beginner’s Guide to the Early Retirement Movement
But if you wanted to harness small caps’ upside while mitigating some of that risk, you could invest in a small-company fund, such as the Vanguard Small-Cap Index Fund Admiral Shares (VSMAX).
Vanguard scatters that risk across 1,320 U.S. stocks. To be precise, they’re not all “true” small caps—a good third of the portfolio includes smaller mid-cap stocks. But this kind of bleed isn’t unusual for cap-based funds; different fund companies and index providers may define each cap class by different thresholds.
Single-stock risk is extremely minimal in VSMAX. The fund’s biggest holding, SanDisk (SNDK), accounts for more than 1% of the fund’s assets. No other component makes up more than 0.6%. Yes, that means you won’t enjoy the full potential of any wild upswing in any individual stock, but you also won’t feel the full brunt of a collapse, either.
VSMAX is also available as an ETF: The Vanguard Small-Cap ETF (VB, 0.03% expense ratio), which goes for around $265 per share currently.
Related: How to Rebalance Your Portfolio: A Quick Guide
Best Dividend Fund: Vanguard High Dividend Yield Index Fund Admiral Shares
— Type: Mutual fund (ETF available)
— Style: U.S. high-dividend stock
— Assets under management: $92.3 billion
— Dividend yield: 2.2%
— Expense ratio: 0.08%, or 80¢ per year for every $1,000 invested
— Minimum initial investment: $3,000
Stock-price returns won’t always materialize when we want or need them to. Bear markets are an unwelcome reminder of this. However, dividends allow you to realize a steady stream of returns without having to sell your shares at potentially inopportune times. Furthermore, dividend stocks tend to be more stable, mature, and shareholder-focused than their non-dividend-paying peers.
One of the best Vanguard index funds for beginning investors (and one of the best dividend mutual funds period) is the Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX): an index fund that tracks the FTSE High Dividend Yield Index. The companies in the index have a history of paying above-average dividends, hence a competitive 2.2% yield that’s twice what the S&P 500 offers.
As you might expect from a dividend-focused mutual fund, the Vanguard High Dividend Yield Index Fund has a high allocation to steady “blue chips” (stocks representing large, established companies) such as top holdings Broadcom (AVGO), JPMorgan Chase (JPM), and Exxon Mobil (XOM). It currently invests the largest slice of its assets in the financial sector (21%), though four other sectors enjoy low-double-digit weights, and another two are at high single digits.
Related: 6 Best Money Market Funds for 2026
“Vanguard High Dividend Yield strikes a nice balance between higher-yielding stocks and distressed yield traps,” Morningstar Director Bryan Armour says. “Market-cap weighting emphasizes larger, more stable firms that should have the capacity to continue making dividend payments. This mitigates the impact of yield traps because their weight drops as their prices fall.”
Just understand that your investment in Vanguard High Dividend Yield Index won’t provide exposure to the real estate sector. In fact, VHYAX’s underlying index explicitly excludes real estate investment trusts (REITs). Given that REITs are usually the market’s highest-yielding sector, that seems like an odd exclusion. One possible explanation? Most common stocks, like those held in this Vanguard fund, pay qualified dividends, which enjoy favorable tax treatment at the long-term capital gains tax rate. Most REIT dividends, however, are nonqualified, which are taxed as ordinary income at federal income tax rates. By excluding REITs, VHYAX can pay out 100% qualified dividend income, helping shareholders avoid a potential tax headache.
In short: VHYAX is a solid option for beginning investors who want to own high-yield dividend stocks while minimizing the risk that any single stock could have an outsized negative impact on their portfolio.
If the $3,000 minimum is a challenge for a beginning investor, the same strategy is offered as an ETF via the Vanguard High Dividend Yield ETF (VYM), which charges 0.04% in annual expenses. At time of writing, a single share can be purchased for around $150.
Related: The 11 Best Fidelity Funds You Can Own
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Best Dividend Growth Fund: Vanguard Dividend Appreciation Index Fund Admiral Shares
— Type: Mutual fund (ETF available)
— Style: U.S. dividend-growth stock
— Assets under management: $123.8 billion
— Dividend yield: 1.5%
— Expense ratio: 0.07%, or 70¢ per year for every $1,000 invested
— Minimum initial investment: $3,000
There’s more to dividend investing than simply seeking out the highest yield. In fact, the yield itself is only one small part of the story.
The payment of dividends serves as a quality filter. Earnings can be manipulated by clever accountants, but dividends have to be paid in cold, hard cash. There’s no room for fudging there.
Furthermore, there are few better signs of company health than a long history of rising dividends. As the old Wall Street maxim goes: The safest dividend is the one that was just raised. And on the other side, slashing a dividend is a major embarrassment for management and tends to infuriate shareholders. So you can bet that company boards only raise the dividend when they are confident they will have the cash to back it up.
Related: The 10 Best Index Funds You Can Buy for 2026
For this reason, the Vanguard Dividend Appreciation Index Fund Admiral Shares (VDADX) is one of the very best Vanguard index funds for those looking to invest for the long haul.
The Vanguard Dividend Appreciation Index Fund tracks the performance of the S&P U.S. Dividend Growers Index, which is composed of hundreds of U.S. companies that have followed a policy of consistently increasing dividends every year for at least 10 consecutive years. As an additional filter, the index excludes the top 25% highest-yielding eligible companies from the index, as exceptionally high-yielding stocks are often at risk for dividend cuts. It also excludes REITs.
Despite its name, income is not VDADX’s main allure. This Vanguard dividend fund yields a modest 1.7%, which isn’t much higher than that of the S&P 500. But it most assuredly is a collection of some of the strongest and most shareholder-friendly dividend-growth stocks in America, such as Visa (V), Johnson & Johnson (JNJ) and Walmart (WMT).
If the $3,000 minimum is a stretch on your budget, the same strategy is available via the Vanguard Dividend Appreciation ETF (VIG), which charges 0.04% in annual expenses and trades for around $220 per share.
Related: The 10 Best Dividend ETFs [Get Income + Diversify]
Best ESG Fund: Vanguard ESG U.S. Stock ETF
— Type: ETF
— Style: U.S. large-cap ESG stock
— Assets under management: $12.0 billion
— Dividend yield: 0.9%
— Expense ratio: 0.09%, or 90¢ per year for every $1,000 invested
— Minimum initial investment: N/A*
Generally speaking, it’s probably better to keep your political views separate from your investment decisions. Politics tends to be emotional, and it’s generally best to strip out your emotions when investing and stick with the numbers.
That said, many investors feel strongly that investing should be ethical, and they have serious moral qualms about investing in certain industries or in companies with questionable labor practices or corporate governance. Furthermore, studies have found that companies with strong corporate governance structures in place tend to outperform, and companies with good labor relations tend to do a better job of avoiding costly strikes or work stoppages.
Related: 10 Best ETFs to Beat Back a Bear Market
For investors wanting to feel good about their investments, the Vanguard ESG U.S. Stock ETF (ESGV) is a solid option.
This Vanguard ETF seeks to track the performance of the FTSE US All Cap Choice Index—a market-cap-weighted index screened for environmental, social, and corporate governance (ESG) criteria. The index excludes stocks of companies related to adult entertainment, alcohol, tobacco, cannabis, gambling, chemical and biological weapons, cluster munitions, anti-personnel landmines, nuclear weapons, conventional military weapons, civilian firearms, nuclear power, and coal, oil, or gas.
It also excludes stocks of companies that do not meet certain labor, human rights, environmental, and anti-corruption standards as defined by the UN Global Compact Principles and companies that do not meet certain diversity criteria.
The resulting portfolio is nearly 1,260 qualifying equities, currently heavily bunched in tech stocks (45%), with double-digit weightings to the consumer discretionary, financial, and health care sectors. You can buy this fund for a low 0.09% in annual fees.
* As an ETF, ESGV has no minimum initial investment. You can buy as little as one share (or a fraction of a share if your brokerage supports fractional shares).
Related: Best Vanguard Retirement Funds for an IRA
Best International Developed Markets Fund: Vanguard Developed Markets Index Fund Admiral Shares
— Type: Mutual fund (ETF available)
— Style: Developed-market stock
— Assets under management: $307.3 billion
— Dividend yield: 2.8%
— Expense ratio: 0.05%, or 50¢ per year for every $1,000 invested
— Minimum initial investment: $3,000
The U.S. economy ranks as the world’s largest. America is home to many of the world’s most innovative and profitable companies. And American investors have expenses denominated in U.S. dollars. So, it only makes sense to keep the bulk of your investments in U.S. assets.
However, opportunities also abound in developed (established, slower-growing) and emerging (less stable but faster-growing) markets. And there can be multi-year stretches in which non-U.S. stocks massively outperform their American peers. This was certainly the case from 2000-08, the last major bull market in overseas shares. And it was also the case as recently as 2025, in which international stocks far surpassed what was an above-average return for U.S. stocks.
Related: 7 Low- and Minimum-Volatility ETFs for Peace of Mind
For index exposure to the world’s major developed foreign markets, consider the Vanguard Developed Markets Index Fund Admiral Shares (VTMGX). The fund tracks the performance of the FTSE Developed All Cap ex US Index, a market-cap-weighted index that is made up of nearly 3,900 common shares of large- mid-, and small-cap stocks located in Europe, Canada, and the Pacific region. Currently, about half of VTMGX’s assets are invested in European shares. Asia and the Pacific Rim enjoy a collective 35% weight, North America (basically just Canada) earns a 10% weight, and the remaining sliver represents the Middle East’s exposure.
VTMGX also pays an attractive dividend yield of 2.8% currently. That’s much better than you’d get from a similar collection of American blue chips but par for the course for large-cap developed-market stock funds. Meanwhile, you pay a skinflint expense ratio of just 0.05%.
If the $3,000 investment minimum is a little on the high side for you, consider the Vanguard FTSE Developed Markets ETF (VEA). It tracks the same index, charges just 0.03%, and a single share can be bought for a little more than $65 as of this writing.
Related: Best Vanguard Retirement Funds for a 401(k) Plan
Best International Emerging Markets Fund: Vanguard Emerging Markets Stock Index Fund Admiral Shares
— Type: Mutual fund (ETF available)
— Style: Emerging-market stock
— Assets under management: $158.4 billion
— Dividend yield: 2.5%
— Expense ratio: 0.13%, or $1.30 per year for every $1,000 invested
— Minimum initial investment: $3,000
The United States is still the world’s idea factory, but it is also already a developed country with high living standards. The same is true of Canada, Japan, and much of Europe. In a developed country, if you produce economic growth of 3% to 4%, government officials are doing cartwheels and slapping five.
But it’s a much different story in emerging markets. Because they are starting at lower levels of development, it’s possible for them to grow significantly faster than their developed-world peers. Economic growth in excess of 8% or even 10% is not uncommon during booms.
Related: The 7 Best Mutual Funds for Beginners
For broad index exposure to emerging markets, consider the Vanguard Emerging Markets Stock Index Fund Admiral Shares (VEMAX). The Vanguard fund tracks the performance of the FTSE Emerging Markets All Cap China A Inclusion Index, a market-cap-weighted index of almost 6,300 stocks representing companies located in emerging markets around the world. China, by the way, is the largest country by weight (by a lot) at more than 30% of assets. VEMAX also has heavy exposure to Taiwan (24%) and India (18%), as well as more modest holdings in Brazil, Saudi Arabia and a host of other developing countries.
Emerging markets really struggled over the past decade, and the COVID pandemic didn’t help. But they’ve been doing better in recent years thanks to loosening monetary policy from the federal Reserve and other major central banks. If you believe in the long-term growth prospects of the developing world, it certainly makes sense to have exposure here. However, you might want to start small when investing in emerging markets, then gradually build your position over time.
As with most Vanguard Admiral shares, the Vanguard emerging market fund has a $3,000 minimum investment. If this is too steep for you, consider the Vanguard FTSE Emerging Markets ETF (VWO). It runs the same portfolio, has an even cheaper 0.06% expense ratio, and shares trade for around $55.
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Best Bond Fund: Vanguard Short-Term Bond Index Fund Admiral Shares
— Type: Mutual fund (ETF available)
— Style: Short-term bond
— Assets under management: $70.0 billion
— SEC yield: 3.7%*
— Expense ratio: 0.06%, or 60¢ per year for every $1,000 invested
— Minimum initial investment: $3,000
2022 and 2023 were volatile years in the stock market, but they were also turbulent for long-term bonds. Bonds that mature in 20 to 30 years actually saw greater price declines than the S&P 500!
So if you are looking to earn a competitive yield while keeping your portfolio safe from wild price swings, consider the Vanguard Short-Term Bond Index Fund Admiral Shares (VBIRX)—a diversified bond index fund including both government and corporate bonds.
Related: 8 Best-in-Class Bond Funds to Buy
This bond fund attempts to track the performance of the Bloomberg U.S. 1-5 Year Government/Credit Float Adjusted Index. Now, this fund doesn’t hold all of the bonds in the benchmark—instead, it uses “sampling” to hold fewer bonds while still closely matching index characteristics such as sector weight, maturity, coupon, and credit quality. Even then, this is a very diversified portfolio of roughly 3,150 bonds (versus the benchmark’s 4,000 or so).
This Vanguard index fund currently invests about 70% of assets in bonds issued either by the U.S. Treasury or other federal agencies; most of the rest is spent on corporate bonds. Given the relatively short duration of the bonds in the portfolio, the fund’s risk to rising interest rates is low. (Duration is a measure of bond risk. VBIRX’s duration of 2.6 years implies that a 1-percentage-point rise in interest rates would mean a short-term capital loss of about 2.6% for the fund. And vice versa: A 1-point rise should result in a 2.6% gain for VBIRX.)
Like the other Vanguard funds on the list, VBIRX has a $3,000 minimum initial investment. If this is an issue, the same strategy can be followed via the Vanguard Short-Term Bond ETF (BSV), which charges 0.03% annually and trades for around $80 per share.
* An 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: 9 Best Non-Stock Investments [Alternatives to the Stock Market]
What Is an Index Fund?
Most investors own index funds, whether they realize it or not. They are the dominant investment vehicle in most retirement plans these days, and with good reason: Low-cost index funds generally perform as well or better than most actively managed funds.
And naturally, Vanguard Group—which launched the very first index fund for U.S. retail investors nearly 50 years ago—is a leader in index funds. If your workplace offers a 401(k) plan, it likely offers some of the best Vanguard index funds; if you have a brokerage account, you certainly have access to these products.
But if you’re new to investing, you need to understand what index funds do. So first, let’s look under the hood to see what makes the best index funds tick.
The best way to explain index funds is to compare them to their cousins: actively managed funds.
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What Are Actively Managed Funds?
Actively managed funds are run by one or more fund managers, who collect money from investors, then allocate that money to stocks, bonds, or other assets. With active funds, the managers are often tasked with beating some sort of benchmark index, but they’ll generally have a lot of discretion as to what they can buy and sell to accomplish that.
Related: How to Invest in Your 20s [Best Ways to Start Investing Money]
How Do Actively Managed Funds Compare to Index Funds?
Index funds, in contrast, are passive. The fund manager isn’t actively looking to “beat the market” or “beat an index.” They’re simply looking to mimic a stock market index—like, say, the S&P 500—enjoying that underlying investment exposure. (Indeed, one of the best Vanguard index funds for beginners is its core S&P 500 offering.)
Let’s use the S&P 500 as an example. The S&P 500 holds the stocks of 500 companies, but it doesn’t hold equal amounts of each—it “weights” each stock by size. The larger the market capitalization (stock price times number of shares outstanding), the larger the percentage of the index is allocated to that stock. As I write this, the S&P 500 weights tech stocks Nvidia (NVDA), Apple (AAPL), and Google parent Alphabet (GOOG, GOOGL) at roughly 8%, 7%, and 6%, respectively. So an index fund mimicking the S&P 500 should invest about 8% of its assets in NVDA, about 7% in AAPL, and 6% across Alphabet’s A and C class shares.
Is There an Advantage to Using Actively Managed Funds?
The primary advantage of actively managed funds is that a talented manager can potentially outperform over time and might be adept at navigating a difficult period such as a bear market. But you pay for that possibility in the form of higher fees and often worse tax efficiency.
With index investing, you generally get much lower costs in terms of management fees and trading expenses, better tax efficiency, and performance that often ends up being better than that of many active managers.
If you believe the stock market will generally rise over time, an index fund is the easiest and most direct way to get exposure.
Related: The 7 Best Closed-End Funds (CEFs) for 2026
What Are Vanguard Target Retirement Funds?
If you are new to investing and looking for a simple, hands-off way to get started, a Vanguard Target Retirement Fund could be a good option.
Investing in mutual funds isn’t difficult, but it does require your attention. You should regularly check your allocation to make sure that the risk you’re taking is appropriate for your age and stage of life. You generally don’t want to be too heavy in stocks later in life, as you won’t have time to recover any potential losses. And you generally don’t want to be too heavy in bonds early in your career because you’re unlikely to keep pace with inflation. Ideally, you follow a glidepath from a more aggressive to a more conservative portfolio over the course of your investing life.
Related: Beginner’s Guide to Schwab Target-Date Funds
Well, Vanguard Target Retirement Funds do that for you, making them particularly good options for beginners.
Target-date funds start out by compiling their holdings with a specific retirement date in mind, then they adjust the asset allocation as we get closer to that date. A target-date fund with decades until the retirement date will generally be heavy in stocks, whereas a target-date fund very close to its retirement year will generally be a moderate balance of stocks and bonds.
Let’s say you’re 25 years old and looking to retire around the age of 70. You’d hit that age in the year 2070, which would make the Vanguard Target Retirement 2070 Fund (VSVNX) an appropriate option. But let’s say you’re 45. You’ll likely be retiring around the year 2050, so rather than buy VSVNX, you might instead opt for its sister fund, the Vanguard Target Retirement 2050 Fund (VFIFX).
You don’t have to get the year exactly right here, as we don’t necessarily know decades ahead of time the precise day and time we intend to retire. Being within a three- to five-year window will generally get you close enough. The key is simply to find a target-date fund that aligns fairly closely to your expected retirement date and allow the glidepath to do the work for you. My suggestion: Check out our review of Vanguard’s full line of target-date funds to make sure you get both the right date and the right fund type for you.
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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.
Related: The 7 Best Index Funds for Beginners
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.
What Is the Minimum Investment Amount on a Vanguard Fund?
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 brokers 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.
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Related: 10 Best Monthly Dividend Stocks for Frequent, Regular Income
The vast majority of American dividend stocks pay regular, reliable payouts—and they do so at a more frequent clip (quarterly) than dividend stocks in most other countries (typically every six months or year).
Still, if you’ve ever thought to yourself, “it’d sure be nice to collect these dividends more often,” you don’t have to look far. While they’re not terribly common, American exchanges boast dozens of monthly dividend stocks.
Related: 9 Best Fidelity ETFs You Can Buy [Invest Tactically]
Investors often look to exchange-traded funds (ETFs) for cheap, passive exposure to basic broader market indexes like the S&P 500.
But Fidelity’s ETF suite really shines because in addition to some of those plain-vanilla offerings, Fidelity also provides more tactical ways of tapping into specific corners of Wall Street. See what we mean by checking out our list of the best Fidelity ETFs.
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