WealthUpdate

Fidelity Target-Date Funds: Everything You Need to Know

Charles Lewis Sizemore, CFA — Tue, 16 Jun 26 08:30:58 -0400

Financial experts commonly tell us that the key to achieving long-term investment success is simply to make an investment plan and stick to it. Heck, you'll even see that in the marketing literature for mutual funds and ETFs.

Making a plan is relatively easy; sticking to the plan is where it gets tricky. Fortunately, target-date funds (TDFs) can help. And today, I'm going to spend a little time on one particular TDF lineup: Fidelity's target-date funds.

Investing isn't necessarily difficult, but it does require your attention. You have to regularly check your allocation to make sure the risk you’re taking is appropriate for your age and stage of life. You generally don't want to be too heavy in bond funds early in your career because you’re unlikely to keep pace with inflation. You have the ability to take more risk because time is on your side; you have years or even decades to recover losses. You’re also pulling in a paycheck and have the ability to offset losses by simply saving and investing more.

However, you generally don't want to be too heavy in stock mutual funds later in life, as you won't have time to recover any potential losses. The calculus changes. You have less time to recoup losses, and once you are retired you can't replace losses by saving and investing more. So, it's important to invest more conservatively and avoid gambling with your golden years.

In an ideal investment plan, you follow a glidepath (a plan that shifts your investing mix over time) from more aggressive to more conservative over the course of your investing life.

It can be difficult to do this on your own. You might not have the skills, time, nor patience, plus market noise has a way of distracting us. When the market is ripping higher, it's natural to want to take more risk, regardless of whether you should. And when the market is looking rough, it's psychologically hard to add risk even when you need to in order to meet your long-term goals. But target-date funds can stay our hand.

Today, I want to talk to you about four Fidelity target-date fund lineups: the three Fidelity Freedom target-date fund series, as well as a fourth set of sustainable TDFs. I'll start by going over what a target-date fund is and does, discuss why shifting assets is so important, and then delve into specifically what Fidelity's target-date funds have to offer.

Editor's Note: The tabular data is up-to-date as of June 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.

What Is a Target-Date Fund?

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Target-date funds are a type of mutual fund that have become a retirement planning staple. You might also know them as lifecycle funds, age-based funds, and dynamic-risk fund.

Whatever you call them, the concept is simple: Target-date funds invest in a more aggressive portfolio of predominantly equity funds to start, then gradually shift to a more conservative portfolio of mostly bond funds as they approach a target retirement date. However, the target-date fund's allocation to stocks will generally never go to zero. Retirees need at least some growth, which means they should maintain at least a little exposure to the stock market.

The beauty of the target-date fund is that it changes your asset allocation to match your risk tolerance as you age—and it does it automatically without requiring you to actually do anything.

Also, the target retirement dates are intended to be estimates; they don't have to be super precise. Most mutual fund families will create target date funds in five-year increments (say, 2025, 2030, 2035, etc.).

For the investor, the math here is simple enough.

Target-Date Funds Example

Let's say you turned 40 years old in 2025, and that you expect to work until age 70. Your expected retirement date would be in the year 2055. So, investing in a target-date fund with a retirement date of 2055 would make sense.

If your retirement date falls in between five-year increments, that's no problem! If you planned on retiring in 2058, for instance, you could invest in a 2055 fund, a 2060 fund, or a combination of the two.

What if your expected retirement age changes? No problem! Target-date funds are normal mutual funds and can be bought or sold as your needs change.

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What Is Asset Allocation?

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A lot of investors (and particularly young investors) dream of making a killing picking stocks. And why not? Stock picking is stimulating and, if done well, can add some zeros to your net worth!

When push comes to shove, however, your asset allocation strategy is far more important than individual stock picking when it comes to meeting your financial goals. Asset allocation sits at the core of target-date funds and, really, at the core of all financial planning.

But what exactly is asset allocation?

Every planner has their own take, but the basic idea is simple. You diversify your portfolio across different asset classes (stocks and bonds, for instance) that, ideally, move at least somewhat independently of each other. A typical asset allocation will include:

Stocks (or stock mutual funds)
Fixed-income investments (bonds or bond funds)
Cash
Alternative assets such as gold, commodities, or real estate

You arrange the parts so that the overall portfolio has a risk and return profile that makes sense for you. And (importantly) you rebalance the portfolio when the weights to each asset start to divert from your plan.

Asset Allocation Example

Let's say your ideal asset allocation had you 70% allocated to stocks and 30% allocated to fixed income.

First, let's say the stock market crashes. Your stock weighting has suddenly dropped to just 50%, and your fixed-income investments have jumped to 50% of your portfolio's worth. You need to rebalance your portfolio to get back to 70/30. You would do that by selling off some of the fixed-income investments and buying some stock.

Now, let's say instead that the stock market shoots higher, and you find yourself allocated 80% to stocks and 20% to fixed-income investments. If you wanted to rebalance back to 70/30, you would sell some of your stocks and buy new fixed-income investments.

The idea here is to constantly reduce risk and smooth out your returns by buying low and selling high.

Asset allocation within a target-date fund takes it a step further. Apart from regular rebalancing due to market moves, the target-date fund’s asset allocation decisions involve gradually reducing the risk (buying fewer and less risky stocks, and buying more bonds) as the fund gets closer to its target retirement date.

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A Look at Fidelity's Target-Date Funds

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Fidelity is, of course, one of the largest mutual fund companies in the world. I've personally discussed Fidelity’s best index funds for Young and the Invested, and it's worth noting that Fidelity ETFs can be useful for tactical investors.

Fidelity also manages one of the largest target-date fund families. In fact, there's a good chance your company 401(k) plan has Fidelity target-date funds as an investment option.

There are literally dozens of Fidelity target-date funds, and we will cover each in a moment. But all share certain characteristics. For example, all Fidelity target-date funds hold underlying funds managed by Fidelity. So, essentially, you can think of a Fidelity target-date fund as a portfolio of regular Fidelity mutual funds specifically allocated for a person your age.

That said, there are some significant differences, particularly when it comes to fees and the expense ratio of each particular fund.

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Fidelity Freedom Funds

The Fidelity Freedom Funds are a family of 14 total funds: 13 target-date funds with target retirement dates currently spanning 2010 to 2070, as well as an income-focused fund, the Fidelity Freedom Income Fund (FFFAX):

Fidelity Freedom Retirement Fund (FFFAX): 0.46% expense ratio, or $4.60 annually for every $1,000 invested
Fidelity Freedom 2010 Fund (FFFCX): 0.46%
Fidelity Freedom 2015 Fund (FFVFX): 0.50%
Fidelity Freedom 2020 Fund (FFFDX): 0.55%
Fidelity Freedom 2025 Fund (FFTWX): 0.59%
Fidelity Freedom 2030 Fund (FFFEX): 0.61%
Fidelity Freedom 2035 Fund (FFTHX): 0.64%
Fidelity Freedom 2040 Fund (FFFFX): 0.66%
Fidelity Freedom 2045 Fund (FFFGX): 0.68%
Fidelity Freedom 2050 Fund (FFFHX): 0.68%
Fidelity Freedom 2055 Fund (FDEEX): 0.68%
Fidelity Freedom 2060 Fund (FDKVX): 0.68%
Fidelity Freedom 2065 Fund (FFSFX): 0.68%
Fidelity Freedom 2070 Fund (FRBDX): 0.68%

Fund managers build the allocations for each up exclusively from underlying Fidelity funds. And each of the Fidelity Freedom Funds are expected to reach their most conservative allocation 10 to 19 years after the target date. At that point, the target asset allocation is expected to be similar to Fidelity Freedom Retirement (25% stocks, 70% bonds, and 5% cash or short-term funds). Once the fund has passed its target date, its assets will eventually be merged with FFFAX.

While the process is designed to follow a glidepath, the funds are actively managed and involve a degree of human discretion.

Let’s take a look at a couple examples.

Fidelity Freedom 2065 Fund (FFSFX)

The most aggressive fund currently in the lineup is the Fidelity Freedom 2065 Fund (FFSFX), which would be appropriate for an investor in their late 20s/early 30s who intends to retire around the age of 70.

FFSFX allocates 92% of its assets to stocks (split between 53% U.S. and 39% international)*. The remaining 8% is invested in bonds. That's the highest exposure to stocks within this Fidelity Freedom series; the closer to retirement, the less exposure to equity and the more exposure to debt.

Fidelity Freedom 2065 gets its stock exposure through funds such as the Fidelity Series Emerging Markets Opportunities Fund (FEMSX), Fidelity Series Large Cap Stock Fund (FGLGX), and Fidelity Series Growth Company Fund (FCGSX). Its bond exposure is provided through funds such as the Fidelity Series Long-Term Treasury Bond Index Fund (FTLTX). Note: Fidelity's "Series" share class is only open to Freedom Funds and other asset management programs; you and I can't just buy them through our brokerage accounts.

FFSFX charges 0.68% in annual expenses, which is lower than the average across traditional actively managed mutual funds.

Fidelity Freedom 2035 Fund (FFTHX)

Now, let's consider the Fidelity Freedom 2035 Fund (FFTHX). The 2035 fund would be appropriate for someone in their late 50s or early 60s that planned to retire around the age of 70. This fund is more conservative than the 2065 fund, but it still has a 70% allocation to stocks (39% U.S. equities, 31% international equities). It charges 0.64% in annual expenses.

Remember, Fidelity's concept of what an ideal asset allocation is for a person at a given age might not exactly line up with yours. By the time you're 60, you might consider having a 69% allocation to stocks to be far too aggressive. So, while target-date funds are designed to be "set it and forget it," you still need to periodically check in to make sure you're comfortable with the risk being taken.

Fidelity Freedom Index Funds

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Index funds have made the world a better place for investors ever since Vanguard's John Bogle launched the concept in 1975. Due in large part to their lower fees and lower frictional expenses like brokerage commissions, index funds generally outperform their actively managed counterparts over time.

So, if index funds are good for your stock and bond funds, why not for your target-date funds too?

That's exactly what the Fidelity Freedom Index Funds offer. It's the exact same target-date concept as the original Fidelity Freedom funds, but this family of index target-date funds builds its portfolios exclusively from Fidelity's large selection of low-cost index funds:

Fidelity Freedom Index Retirement Investor Fund (FIKFX): 0.12% expense ratio, or $1.20 annually for every $1,000 invested
Fidelity Freedom Index 2010 Investor Fund (FKIFX): 0.12%
Fidelity Freedom Index 2015 Investor Fund (FLIFX): 0.12%
Fidelity Freedom Index 2020 Investor Fund (FPIFX): 0.12%
Fidelity Freedom Index 2025 Investor Fund (FQIFX): 0.12%
Fidelity Freedom Index 2030 Investor Fund (FXIFX): 0.12%
Fidelity Freedom Index 2035 Investor Fund (FIHFX): 0.12%
Fidelity Freedom Index 2040 Investor Fund (FBIFX): 0.12%
Fidelity Freedom Index 2045 Investor Fund (FIOFX): 0.12%
Fidelity Freedom Index 2050 Investor Fund (FIPFX): 0.12%
Fidelity Freedom Index 2055 Investor Fund (FDEWX): 0.12%
Fidelity Freedom Index 2060 Investor Fund (FDKLX): 0.12%
Fidelity Freedom Index 2065 Investor Fund (FFIJX): 0.12%
Fidelity Freedom Index 2070 Investor Fund (FRBVX): 0.12%

Let's look at an example.

Fidelity Freedom Index 2065 Fund (FFIJX)

We'll compare the Fidelity Freedom Index 2065 Fund (FFIJX) to its sister product, the Fidelity Freedom 2065 Fund.

The index-only Fidelity Freedom fund has an expense ratio of just 0.12% compared to 0.68% for the active target-date fund. Those 56 basis points (a basis point is one one-hundredth of a percentage point) might not sound like much of a difference, but over time it compounds. If you invested $10,000 into both funds over the course of 10 years, and both earned 10% before fees, you would earn $1,278 more from the index fund once fees were factored in—and the difference would get wider with time.

But understand there can be slight differences in asset allocation between the active Fidelity Freedom funds and their Index Freedom Fund peers.

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Fidelity Freedom Index 2065 Fund (FFIJX) Composition

The indexed 2065 fund invests roughly 92% of assets in equities, which is on par with the active 2065 fund. However, the U.S./international splits are a little different, at 53/39 for FFSFX but 56/36 for FFIJX.

This isn't a static allocation, either. Sometimes, the actively managed FFSFX has a more aggressive stance, favoring stocks as a whole (and U.S. stocks specifically) more than FFIJX. Sometimes it's less. You can chalk this up to the preferences of FFSFX's managers. For what it's worth, the actively managed 2065 fund has an average annual return of 9.7% over the trailing five-year period, versus 9.1% for its indexed sister. That lead might revert over time—but it might not.

Thus, when choosing between the active and indexed Fidelity Freedom funds, you have to weigh the benefits of manager discretion against the lower cost of index investing.

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Fidelity Freedom Blend Funds

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Typically, the term “blend fund” actually refers to a type of stock fund that holds both value and growth stocks. But in the case of the Fidelity Freedom Blend Funds, what Fidelity is “blending” is active and passive management.

That is, Fidelity Freedom Blend Funds are target-date funds that hold a combination of actively managed and indexed Fidelity funds to meet their goals:

Fidelity Freedom Blend Retirement Fund (FHBZX): 0.41% expense ratio, or $4.10 annually for every $1,000 invested
Fidelity Freedom Blend 2010 Fund (FHAYX): 0.41%
Fidelity Freedom Blend 2015 Fund (FHAWX): 0.42%
Fidelity Freedom Blend 2020 Fund (FHAVX): 0.43%
Fidelity Freedom Blend 2025 Fund (FHAUX): 0.44%
Fidelity Freedom Blend 2030 Fund (FHATX): 0.46%
Fidelity Freedom Blend 2035 Fund (FHASX): 0.47%
Fidelity Freedom Blend 2040 Fund (FHARX): 0.47%
Fidelity Freedom Blend 2045 Fund (FHAQX): 0.47%
Fidelity Freedom Blend 2050 Fund (FHAPX): 0.47%
Fidelity Freedom Blend 2055 Fund (FHAOX): 0.47%
Fidelity Freedom Blend 2060 Fund (FHANX): 0.47%
Fidelity Freedom Blend 2065 Fund (FFBSX): 0.47%
Fidelity Freedom Blend 2070 Fund (FRBYX): 0.47%

We cover an example of how this plays out with the Fidelity Freedom Blend 2065 Fund (FFBSX).

Fidelity Freedom Blend 2065 Fund (FFBSX)

Fidelity Freedom Blend 2065 Fund (FFBSX) holds index funds including the Fidelity Series Large Cap Value Index Fund (FIOOX) and Fidelity Series Blue Chip Growth Index Funds (FSBDX), as well as actively managed funds, such as the emerging-markets fund FEMSX. It currently has a 53/40 blend of U.S. and international stocks, for a total of around 93%—a touch more aggressive than the other two 2065 funds.

As you might expect, expenses for FFBSX's expense ratio of 0.47% falls in between the purely indexed target-date fund and the fully actively managed fund. Performance usually falls in the middle, too. However, currently, it has returned 9.2% annually on average over the past five years, which is only a hair better than the indexed FFIJX but still about 50 basis points behind the actively managed FFSFX.

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Fidelity Sustainable Target Date Funds

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In 2023, Fidelity launched its Fidelity Sustainable Target Date lineup, which like the Freedom funds, includes a product specific to every five years, as well as an income fund.

Fidelity Sustainable Target Date Retirement Fund (FSUDX): 0.41% expense ratio, or $4.10 annually for every $1,000 invested
Fidelity Sustainable Target Date 2010 Fund (FSUYX): 0.41%
Fidelity Sustainable Target Date 2015 Fund (FSVNX): 0.42%
Fidelity Sustainable Target Date 2020 Fund (FSWDX): 0.43%
Fidelity Sustainable Target Date 2025 Fund (FSWOX): 0.44%
Fidelity Sustainable Target Date 2030 Fund (FSXAX): 0.46%
Fidelity Sustainable Target Date 2035 Fund (FSXKX): 0.47%
Fidelity Sustainable Target Date 2040 Fund (FSXVX): 0.48%
Fidelity Sustainable Target Date 2045 Fund (FSYHX): 0.49%
Fidelity Sustainable Target Date 2050 Fund (FSYWX): 0.49%
Fidelity Sustainable Target Date 2055 Fund (FSZHX): 0.49%
Fidelity Sustainable Target Date 2060 Fund (FSZSX): 0.49%
Fidelity Sustainable Target Date 2065 Fund (FTGPX): 0.49%
Fidelity Sustainable Target Date 2070 Fund (FRCQX): 0.49%

In addition to leading investors down the proper glidepath to retirement, these funds also try to invest in assets with positive environmental, social, and governance (ESG) characteristics. It can do so by investing in:

Actively managed funds that buy securities of issuers that are believed to have good or improving sustainability or ESG characteristics
Index funds that track an ESG index
Funds that don’t necessarily have a principal ESG investment strategy, but that have at least 80% of assets in debt securities that the adviser believes have positive ESG characteristics

Like with Fidelity Freedom Blend Funds, Fidelity Sustainable Target Date Funds sport expense ratios falling between their fully passive and fully active brethren. Fidelity Sustainable Target Date 2065 Fund (FTGPX), for instance, charges 0.49% annually.

FTGPX is a bit more aggressive than all of the previously mentioned funds, at a 95/5 split of stocks and bonds. However, given the extremely short time since inception, performance numbers here don't tell us much.

Learn More About These and Other Funds With Morningstar Investor

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Morningstar Investor provides a wealth of information and comparable data points about mutual funds and ETFs—fees, risk, portfolio composition, performance, distributions, and more. Morningstar experts also provide detailed explanations and analysis of many of the funds the site covers.

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How Do Fidelity Freedom Funds Compare to Vanguard Target Retirement Funds?

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As a general rule, you're going to get a very similar experience in both Fidelity Freedom funds and Vanguard Target Retirement funds. Both offer low-cost access to an asset allocation model that glides from more aggressive to more conservative as you reach your targeted retirement date.

But there can be differences, and those differences matter.

Let’s compare the Fidelity Freedom Index 2040 Fund (FBIFX) to the Vanguard Target Retirement 2040 Fund (VFORX). Both have rock-bottom expense ratios of 0.12% and 0.08%, respectively. It's close enough that fees alone aren’t going to move the needle much in terms of returns.

The asset allocations are noticeably different, however. FBIFX currently has 48% of assets invested in U.S. stocks and another 31% in international equities—so, 79% invested in stocks. Meanwhile, VFORX is currently invested 43% in U.S. equities and 30% in international equities, for a total stock exposure of 73%.

As another example, let's consider funds that already assume you're in retirement. The Fidelity Freedom Index 2020 Fund Investor Class (FPIFX) has 42% of its assets invested in stocks, whereas the Vanguard Target Retirement 2020 Fund (VTWNX) weights stocks at about 34%. Also worth noting: FPIFX has a sub-1% weight in the Fidelity Series Commodity Strategy Fund (FCSSX), which means you're getting a little bit of commodities exposure. That's uncommon among the larger target-date series.

The Fidelity target-date funds consistently have more stock exposure than the Vanguard target-date funds of a comparable target date. They're a little more aggressive, and that's neither good nor bad. But it's something you should consider as you choose the right target-date fund for you.

Are Indexed Target-Date Funds Better Than Actively Managed Funds?

This is an eternal debate, and the answer is “it depends.”

Some active managers effectively beat their indexed competition even after the higher fees, trading expenses and tax considerations are taken into account. Most, however, do not. Over the past two decades, there have been only three years—2005, 2007, and 2009—in which a majority of large-cap managers beat the S&P 500. So, as a general rule, it is safe to assume that indexed target-date funds will be your better option over time.

Furthermore, active management can muddle the waters of a target date strategy, particularly if the active manager regularly makes defensive moves, such as going to cash. The percentage of the portfolio you have exposed to stocks is determined by the number of years until the retirement date, and active management can potentially skew your weights outside of the target.

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Why Does a Fund's Expense Ratio Matter So Much?

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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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What Is the Minimum Investment Amount on a Fidelity Fund?

Every Fidelity fund has its own minimum investment amount specific to that fund. But Fidelity has been a trailblazer in making its funds available to beginning investors with ultra-low minimums, and many Fidelity funds have no minimum investment at all.

Part of our criteria in selecting the best Fidelity index funds was accessibility, and every fund selected here has a minimum investment of zero, meaning you can literally start your investment with any dollar amount.

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Disclosure About Allocation Math

* All allocations reported in this article have been adjusted to represent percentage of total exposure, which isn't always 100%.

For instance: FFSFX technically allocates 98% of assets to stocks, then another 8% to bonds. Yes, that adds up to 106%.

Target-date funds sometimes use derivatives such as options and futures to accomplish their investing goals in a way they couldn't by purchasing and selling assets alone. Fidelity currently lists negative 6% of assets in "net other assets," which is a catch-all for receivables, payables, assets that don't fall into the composition categories, and offsets to derivative positions. A significant (1%+) negative number may point to the use of derivatives.

Is this good or bad? It's difficult to say. Use of derivatives can increase risk, but it can also be a more cost-efficient way to replicate parts of an allocation. Also, the implied use of derivatives in Fidelity Freedom Funds is modest.

But the negative number is how we get to 100%. The very rough math for FFSFX: 98% stocks plus 8% bonds plus negative 6% net other assets = 100%. To get the adjusted allocations for stocks and bonds, I divided the figure by 106 and multiplied by 100. So, for FFSFX's stock allocation, 98 / 106 * 100 = ~92%.

Lastly, not all Fidelity Freedom Funds use derivatives. For instance, net other assets in the indexed FFIJX are less than one-tenth of 1%.

Related: 8 High-Quality, High-Yield Dividend Stocks

It’s difficult to resist the charm of high-yield dividend stocks. Their ability to generate outsized amounts of cash makes them the stuff of dreams for those living on a fixed income—as well as for any investors who simply want a little performance ballast during periods of rough stock-price returns.

But we prefer quantity and quality. For instance, our favorite high-yield dividend stocks deliver much sweeter yields than the average stock, show more signs of fundamental quality than most, and have the confidence of Wall Street's analyst community.

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.

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7 High-Yield Dividend ETFs Paying Up to 8.5%

Kyle Woodley — Tue, 16 Jun 26 07:30:35 -0400

Interested in earning a high income stream from your investments? Well, while you can occasionally get a little something for nothing, it's rare to get a lot without some sort of trade-off. Said differently: The higher the yield you seek, the higher risk you're generally required to take.

However, like with most other investments, owning an investment fund can help you tamp down some of that risk. And that brings us to high-yield dividend exchange-traded funds (ETFs).

High-yield dividend ETFs predominantly invest in assets that produce a higher-than-average amount of dividend income. They do so by targeting specific corners of the U.S. stock market or equities in different parts of the world, or in some cases, they even use a few special market mechanisms to squeeze more juice from the dividend fruit.

Importantly: By spreading out their assets across dozens, hundreds, even thousands of different investments, they reduce the risk of any single security's collapse deep-sixing your portfolio.

Let me shine a light on a group of high-yield dividend ETFs that pay between 3.5% and 11% annually, which is roughly three to nine times better than the broader market.

Editor's Note: This article's tabular data is up-to-date as of June 12, 2026.

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Why Invest in Dividend Stocks via ETFs?

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Dividend stocks certainly are common enough, but they’re also not created equally. Some companies only pay nominal dividends that are just a penny or two per share, with no prospect for dividend growth anytime soon. Others may offer generous but unsustainable dividend payouts that might be eliminated altogether in the future.

You could tether your fate to that one company's specific strengths and weaknesses. Or you could hitch your wagon to a dividend ETF, which may own that stock ... but only as a small percentage of a much larger collection of other dividend payers. Sure, you won't enjoy the same level of gains if that stock suddenly takes off, but you also won't endure the hardship of that stock going into the toilet.

Plus, finding the best stocks capable of consistently paying dividends and enjoying significant future dividend growth can be a daunting task, even for seasoned investors. So why not try to gain exposure to dividend-paying stocks via a single, diversified holding that’s tasked with finding great companies for you?

That’s what you get in a dividend ETF.

How Were These High-Yield Dividend ETFs Selected?

Let's start with a few ground rules.

First, these are dividend ETFs. In other words, this list is limited to funds that own stocks; bond funds don't apply.

Next is the yield floor. There's no universal definition of "high yield"; much like beauty, a high dividend is in the eye of the beholder. But given that it's a list of high-dividend ETFs, I have to set the floor somewhere, and that somewhere is 3.5%. That ensures you'll earn well more than double (and in most cases, many times more) what you'd collect by investing in an S&P 500 index fund.

Lastly, as a quality check, I've only included dividend ETFs that have earned a Morningstar Medalist rating—Morningstar's forward-looking analytical view of the fund—of at least Bronze. A quick explanation of why that matters, per Morningstar:

"For actively managed funds, the top three ratings of Gold, Silver, and Bronze all indicate that our analysts expect the rated investment vehicle to produce positive alpha relative to its Morningstar Category index over the long term, meaning a period of at least five years. For passive strategies, the same ratings indicate that we expect the fund to deliver alpha relative to its Morningstar Category index that is above the lesser of the category median or zero over the long term."

Importantly, a Medalist rating doesn't mean Morningstar is necessarily bullish on the underlying asset class or categorization. It's merely an expression of confidence in the fund compared to its peers.

From the remaining universe of ETFs to choose from, I picked ETFs from a variety of sectors, geographies, and strategies. I also selected funds that have reasonable expense ratios—given their specialties, many of these cost more than a bland broad-market ETF, but they're fair or low for their category.

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An Important Note About Dividend ETFs' Distributions

One last thing to know before diving into any dividend ETF: Their distributions tend to reflect the cash dividend payments of their underlying holdings.

What you're getting from an ETF in a quarter is more or less your share of all the dividends that all of the holdings made within that quarter. But sometimes, individual components don't always pay within each given quarter (even if they pay quarterly). Also, they occasionally increase regular dividends, make special payouts, or cut or even suspend regular dividends.

As a result, ETFs can have "lumpy" distributions that change from one quarter to the next.

Here's an example: In a 12-month period, the SPDR S&P 500 ETF Trust (SPY)—the largest ETF by assets on the planet, and thus one of the most commonly owned—paid out quarterly dividends of $1.80, $1.99, $1.83, and $1.76 per share. That's a 13% difference between the smallest and largest payouts, and some years, it's much more.

If you've not yet reached retirement, this inconsistency probably won't matter to you at all. But it could be problematic—or at the least, worth planning around—if you are in retirement and heavily depend on dividend income to pay your regular bills. So especially if you're in the latter boat, when you research dividend funds, I highly suggest not just looking at yield, but at distribution history, too.

Best High-Dividend ETF #1: First Trust Morningstar Dividend Leaders Index Fund

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Assets under management: $7.5 billion
Dividend yield: 3.7%
Expense ratio: 0.43%, or 4.30 per year on every $1,000 invested
Morningstar Medalist rating: Bronze

When it comes to long-term performance, U.S. stocks have historically been king. The same tends to go with dividend-growth stocks—American dividend growers are pretty prolific, so much so that the qualifications to be a Dividend Aristocrat here require more years of uninterrupted dividend growth than similar international groupings.

But it is really, really difficult to find highly-rated broad baskets of generous U.S. payers.

The First Trust Morningstar Dividend Leaders Index Fund (FDL) is one of these rare gems. It's an index fund that starts with a universe of U.S. stocks that pay qualified dividends, which are given preferential tax treatment. This includes most dividend stocks you can think of, but backs out a few categories such as real estate investment trusts (REITs).

From there, companies must have positive five-year indicated dividend-per-share growth, and their one-year estimated earnings per share (EPS) divided by indicated dividend per share must be less than or equal to 1. The stocks that remain are ranked by their indicated yield, and as many as the top 100 are included in the index. Lastly, stocks are weighted by the dollar value of their indicated dividends.

The current result of that screening process is a bundle of 85 stocks that's concentrated in many of the sectors you'd expect: energy, healthcare, and consumer staples are tops right now. Financial services also make up a meaningful double-digit weight. Top holdings are no-brainer high yielders such as Exxon Mobil (XOM), Chevron (CVX), and Verizon (VZ).

Concentration risk can be an issue here thanks to the dividend weighting. Right now, for instance, Exxon, Chevron and Verizon alone account for almost a quarter of the fund's assets.

Still, you're earning more than three times the S&P 500's yield. So if you're looking to extract high yield from American blue-chip stocks, FDL is one of the best high-yield dividend ETFs to buy.

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Best High-Dividend ETF #2: Franklin International Low Volatility High Dividend ETF

Assets under management: $4.9 billion
Dividend yield: 3.7%
Expense ratio: 0.40%, or $4.00 per year on every $1,000 invested
Morningstar Medalist rating: Bronze

Any group of favorably rated high-yield dividend ETFs is bound to include at least a couple international stock funds. Large, established dividend payers abroad—especially in developed countries—have for years tended to pay more than their U.S. counterparts, in part because the long-term outperformance of U.S. stocks has depressed yields.

And one of the best such funds—Franklin International Low Volatility High Dividend ETF (LVHI)—is of the low-volatility persuasion. For the uninitiated, low- and minimum-volatility ETFs are designed to wiggle less than the market, so the idea here is that when stocks lunge southward, low- and min-vol funds won’t decline as much—and might even produce some gains.

Franklin's fund is designed to provide a portfolio of high-yielding dividend stocks that demonstrate low price and profit volatility. Its underlying index starts with a screen to identify dividend-paying companies that can pay "relatively high sustainable dividend yields," then it grades yields based on price and earnings volatility.

LVHI also puts various limits on the portfolio to eliminate overconcentration risk—for instance, no stock can make up more than 2.5% of the index at quarterly rebalancing, no sector can make up more than 25%, and REITs, which we’ll get to in a bit, can’t exceed 15%. Also, no geographic region will exceed 50% of assets, and no single country will exceed 15%. To further tamp down on volatility, LVHI hedges against currency fluctuations.

Franklin International Low Volatility High Dividend currently owns about 185 stocks from about 20 developed nations, including Canada (16%), Japan (15%), and the U.K. (14%). Most of the portfolio (~90%) is large-cap in nature, including top holdings such as Canadian Natural Resources (CNQ), British integrated oil major Shell (SHEL), and Japanese conglomerate Mitsubishi.

These large international names throw off a yield of almost 4%, and that's actually much lower than it was a few months ago thanks to recent gains in the fund. But it also dishes out much higher returns (and much lower risk) compared to the ETF's category average. All of this makes LVHI not just a great holding for anytime, but also one of the best ETFs for bear markets. Indeed, its losses during 2025's near-bear drop were less than half the broader market's.

Income investors should note that LVHI, like many international dividend funds, has "lumpy" dividends, as foreign companies often pay just semiannually or even annually. For instance: Its four most recent quarterly dividend payments ranged from 16.0¢ to 81.4¢!

Best High-Dividend ETF #3: iShares International Select Dividend ETF

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Assets under management: $8.6 billion
Dividend yield: 4.4%
Expense ratio: 0.50%, or $5.00 per year on every $1,000 invested
Morningstar Medalist rating: Silver

The iShares International Select Dividend ETF (IDV) is a more straightforward basket of overseas stocks. It's another index fund—one that doesn't care about volatility, just relatively high payments.

IDV's 100-stock portfolio is a roughly 70/25/5 blend of large-, mid-, and small-cap stocks from across the developed world, predominantly Europe. The U.K., France, Spain, and Italy all enjoy double-digit weights at the moment. There's precious little emerging-market exposure; that's South Korea, which one could argue is a developed market but nonetheless still finds itself in some emerging indexes.

While the portfolio does have quite a few multinationals that are well-known here in the States, the top weights are reserved for the likes of French integrated giant TotalEnergies (TTE), Italian utility Enel (ENLAY), and Spanish telecommunications firm Telefónica (TEF). Collectively, this portfolio puts out a yield well north of 4% at the moment.

The 0.5% annual fee isn't exactly low in a bubble, but it's within the cheapest quintile across its Morningstar category (Foreign Large Value), so you're getting a relatively cheap fund.

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Best High-Dividend ETF #4: Vanguard Real Estate ETF

Assets under management: $82.77 million
SEC yield: 5.1%*
Expense ratio: 0.59%, or $5.90 per year on every $1,000 invested
Morningstar Medalist rating: Bronze

Ever since REITs became their own sector in 2016, they've typically been among the highest-yielding S&P 500 sectors.

Unlike most companies that more or less choose to pay out dividends, REITs are compelled to—by law. REITs were created by Congress in 1960 to spur real estate investing. They're given favorable tax treatment … but in exchange, they're required to pay out at least 90% of their taxable income to shareholders, in the form of dividends.

You could own a handful of individual REITs if you'd like, or you can load up on the sector via REIT ETFs.

The biggest name in that game is the Vanguard Real Estate ETF (VNQ). This Vanguard ETF tracks a broad index of REITs covering a variety of industries: office buildings, apartments, data centers, warehouses, senior living facilities, even driving ranges. It too is market cap-weighted. At the moment, top holdings in this 145-REIT portfolio include medical facility and senior housing company Welltower (WELL), logistics REIT Prologis (PLD), datacenter landlord Equinix (EQIX), and telecommunications infrastructure firm American Tower (AMT).

"The fund beat the category average by 28 basis points annualized over the five years through the end of December 2025," Morningstar Associate Analyst Brian Paoli said about this Gold-rated fund. "Real estate stocks are more sensitive to interest rate changes, and this volatile period had interest rate hikes in 2022 and 2023 and rate cuts in 2024 and 2025. The fund proved its ability to perform well against its peers through these different market conditions."

* Vanguard fund assets are spread across multiple share classes, including mutual funds and ETFs alike. Assets listed for VNQ is for the ETF share class only.

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Best High-Dividend ETF #5: InfraCap MLP ETF

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Assets under management: $446.35 million
Dividend yield: 11.4%
Expense ratio: 1.72%*, or $17.20 per year on every $1,000 invested
Morningstar Medalist rating: Silver

Master limited partnerships aren’t a type of energy company—they’re an overall business structure that’s applicable to numerous industries. They’re considered “pass-through entities” because income isn’t taxed at the corporate level—it’s “passed through” to owners and “unitholders” (the MLP equivalent of shareholders) via “distributions” (the MLP equivalent of dividends).

However, many publicly traded MLPs are energy-related. These companies are typically involved in energy infrastructure—that means pipelines, storage, terminals, and other assets involved in the transportation and holding of oil, gas, and other energy commodities. They also happen to be among the market's higher yielders; while they don't necessarily have a mandate for distributions the way REITs do, they often distribute most if not all of their available cash flows.

The InfraCap MLP ETF (MLP) is an actively managed ETF that owns a small grouping of MLPs. Managers Jay Hatfield and Andrew Meleney have put together a portfolio of just around 30 infrastructure names, currently concentrated in six stocks: Energy Transfer LP (ETF), Plains All American Pipeline LP (PAA), Sunoco LP (SUN), MPLX LP (MPLX), Enterprise Products Partners LP (EPD), and Western Midstream Partners LP (WES) currently account for 83% of the fund's assets.

Importantly: MLP distributions are primarily made up of tax-deferred return of capital, with the remainder typically considered ordinary income. MLPs even require an additional form—the K-1—come tax time. However, InfraCap's fund is structured as a C corporation, and instead issues a Form 1099-DIV, which allows investors to avoid the more complex K-1, simplifying tax reporting.

AMZA is also a rarity in that it's a monthly dividend payer (most equity dividend ETFs pay quarterly).

* AMZA's management fee is 0.95%. Additional fees are typically attributed to "income tax expenses,” which are an estimate of the potential tax expense (or benefit) that would occur if the fund recognized any unrealized gains or losses in the portfolio. This is common among funds that hold MLPs. This can vary widely from year to year and even day to day.

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Best High-Dividend ETF #6: Fidelity Preferred Securities & Income ETF

Assets under management: $82.77 million
SEC yield: 5.1%*
Expense ratio: 0.59%, or $5.90 per year on every $1,000 invested
Morningstar Medalist rating: Bronze

If someone is talking about "stock," 999 times out of a thousand, they're talking about "common stock." If you want to buy shares of Apple (AAPL), you'd look up "AAPL" in your brokerage account and buy AAPL shares. That's Apple's common stock.

But that's not the only kind of stock you can buy.

Preferred stocks are a "hybrid" security that has some characteristics you find in common stock, as well as some you find in bonds. For instance, preferred stocks trade on an exchange, represent ownership in a company, and typically pay qualified dividends (which enjoy long-term capital gains tax rates). However, preferred stocks typically don't have voting rights, tend to trade around a par value, and distribute a fixed level of income—all qualities of bonds.

Why the name "preferred"? Because their dividends have preference over common-stock dividends. If a company wants to cut its dividends, for instance, it must do so to the common-stock dividends before it does so to the preferreds. Also, many preferreds are also "cumulative," meaning that if a dividend payment is missed, it must be paid before the company can start paying common shareholders again.

In short: Preferreds tend to act more like bonds than stocks. They’re far less volatile than stocks—they rarely have explosive upside, but they also rarely have explosive downside. That makes them defensive in nature—doubly so when you consider they offer much higher yields than your average stock.

Everyday investors have a difficult time investing in individual preferred stocks because, compared to commons, information and analysis about specific preferred shares is hard to come by. So, much like bonds, it often makes more sense to own them via ETF. And preferred stock ETFs like the Fidelity Preferred Securities and Income ETF (FPFD) are among the best-yielding high-dividend ETFs you can find.

FPFD is a collection of 334 preferred stocks, a little more than 60% of which have investment-grade ratings from the major debt rating agencies. Most of the remainder is rated in the highest tier of non-investment-grade ("junk"). Like with most preferred-stock funds, FPFD overwhelmingly holds financial-sector preferreds (banks, insurance firms, financial services companies, etc.), though it does own issues from the utility, communication services, and other sectors. Top holdings right now include preferred shares from the likes of Energy Transfer (ET), The Bank of New York Mellon (BK), and AT&T (T).

This Fidelity ETF is relatively young, debuting in 2021, but Morningstar has seen enough to merit a Bronze Medalist rating. While it’s not among the very cheapest preferred ETFs, it still has lower-than-average fees, and it has so far produced better-than-average performance. You also enjoy a yield of more than 5% currently. So if you're looking for high yield but more conservative price action, FPFD is among the best dividend ETFs you can own.

* 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.

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Best High-Dividend ETF #7: JPMorgan Equity Premium Income ETF

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Assets under management: $44.1 billion
Dividend yield: 8.5%
Expense ratio: 0.35%, or $3.50 per year on every $1,000 invested
Morningstar Medalist rating: Gold

While most high-dividend ETFs deliver big income by simply owning high-yield dividend stocks, a few funds go about it from a different angle, using options and other market mechanics to generate yield instead.

Take the JPMorgan Equity Premium Income ETF (JEPI), for instance.

At a glance, JEPI's 124 portfolio holdings wouldn't make you blink an eye. It's a 75/25 split of large- and mid-cap stocks—roughly the same split you'll find in an S&P 500 index tracker. Positions such as Amazon (AMZN), Broadcom (AVGO), and Johnson & Johnson (JNJ) would be found in any ol' large-cap fund. And that fund would likely yield somewhere in the 1%-2% range.

But JEPI delivers a sweet yield of more than 8% right now.

That's because JEPI doesn't merely hold these stocks. It also engages in selling covered calls—a type of options trading that's designed to generate income using stocks you already own. Managers Hamilton Reiner, Raffaele Zingone, Matt Bensen, and Judy Jansen write approximately 2% out-of-the-money call options on the S&P 500 Index. "It's a quarter every week," says Jon Maier, Chief ETF Strategist, Managing Director, JPMorgan Asset Management. "A quarter of the portfolio is rewritten for a month, and then a week later, a month. So it's staggered."

The downside to this strategy: You can limit your upside in your underlying holdings. The upside? You can reduce volatility and reap healthy dividend payments. With JEPI specifically, "the underlying portfolio is managed with lower volatility than the S&P 500. So when you have the option overlay, combined with the underlying lower-volatility portfolio, it provides volatility that's about 60% of the S&P 500 and yields between 7% and 9%," Maier says.

It's rare that an options-trading strategy earns a Morningstar Medalist rating. Morningstar analyst Lan Anh Tran's reason behind JEPI's Gold award? "JPMorgan Equity Premium Income takes a nuanced approach to covered calls that delivers high income while reducing downside risk. This fund’s incremental improvements on a basic covered-call strategy make it a solid option in the derivative income Morningstar Category."

Just understand that the "income" from covered calls isn't the same as the dividend income generated by all of the other funds listed here. Options income is taxed as capital gains—usually the short-term variety, which receives less favorable treatment, as it's taxed at your marginal income rate.

A Note About Dividend Yields

A term you’re going to want to familiarize yourself with is dividend yield.

A dividend yield tells you how much of your investment you can expect to get back in the form of dividends. A stock’s dividend yield, for instance, is calculated on an annualized basis, and expressed as a percentage of share price. Example: If a stock trades for $50 and pays 25 cents per quarter, that’s $1.00 in annual payouts—or 2.0% of the share price. So its dividend yield is 2.0%.

But a fund’s dividend yield is calculated a little differently. It’s much more difficult to estimate future payouts for an ETF or mutual fund because they own groups of many different stocks paying on changing cycles.

The fairest way to measure yield in dividend ETFs and mutual funds is to calculate the distributions over the last calendar year. Dividends might change for these funds going forward, but a trailing 12-month look is the most faithful way to calculate yield.

What Is Yield on Cost?

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When you look up an ETF’s information, the dividend yield listed is based on the past year’s worth of dividend payments and the current ETF share price.

That yield is often very different than the one current ETF shareholders enjoy. That yield is called “yield on cost,” which is the payout based on what you said, at the moment you invested.”

Let’s say you buy an ETF at $100, and it pays $1 per share annually. It yields 1.0% when you buy it ($1 / $100 x 100 = 1.0%).

In a year, that ETF has doubled to $200 per share, but the dividends it pays also doubled, to $2 per share. If you look up its information, its dividend is still 1.0% ($2 / $200 x 100 = 1.0%).

That’s not your yield on cost, however. You’re still receiving that higher dividend of $2 per share. But your cost basis is still the original $100 you bought the ETF share at. So now, your yield on cost has doubled, to 2.0% ($2 / $100 * 100 = 2.0%)!

How Do Dividend ETFs Pay Investors?

When you own an ETF, you own parts of shares of various dividend stocks with different payout schedules. However, you don’t get paid when those stocks pay out—you get paid based on the ETF’s payout schedule.

Dividend ETFs pay their investors the same way as dividend stocks do, with deposits appearing on your brokerage statement on a regular cycle. Some funds—like the Global X SuperDividend ETF (SDIV)—pay you on a monthly cycle. But the majority, including the other six dividend ETFs on this list, all pay on a quarterly schedule, which is similar to most U.S. dividend stocks.

Why Does a Fund's Expense Ratio Matter So Much?

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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.

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Related: 15 Stocks You Can Buy and Hold Forever

As even novice investors probably know, funds—whether they're mutual funds or exchange-traded funds (ETFs)—are the simplest and easiest ways to invest in the stock market. But the best long-term stocks also offer many investors a way to stay "invested" intellectually—by following companies they believe in. They also provide investors with the potential for outperformance.

So if you're looking for a starting point for your own portfolio, look no further. Check out our list of the best long-term stocks for buy-and-hold investors.

Related: 10 Dividend Stocks That Pay Us Each and Every Month

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8 Best Vanguard Funds for a 401(k)

Kyle Woodley — Mon, 15 Jun 26 08:30:58 -0400

Vanguard is one of the foremost names in investing for numerous reasons, but one of its lasting legacies will be just how inexpensive they've made it to save for retirement. Indeed, Vanguard funds are among the most fee-friendly options for your 401(k) ... or anywhere else you're building a nest egg, for that matter.

Under visionary founder Jack Bogle, Vanguard created the concept of the index fund—a product that by its nature allows for lower costs. Thirty years later, expenses have plummeted lower on funds across the industry, but Vanguard remains one of the most economical providers and a favorite in most types of retirement plans. That includes your 401(k).

You're likely to find a wealth of Vanguard options in your 401(k) and other retirement plans. And given that they're typically competitive on both price and performance, they should be among the first funds you look at.

I want to shine a light on the best Vanguard funds for a 401(k) plan. These funds have been selected for a number of reasons, including their size, strategy, and potential for showing up in 401(k)s, though your plan might hold all, some, or none of these. However, they've also been selected for their tax-inefficiency, as the tax-deferred nature of a 401(k) allows you to enjoy the fund's performance without the year-to-year tax consequences.

This last part also makes these funds ideal for holding in other tax-advantaged accounts, such as individual retirement accounts (IRAs) and health savings accounts (HSAs).

Editor's Note: Tabular data appearing in this article is up-to-date as of June 11, 2026.

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What Should You Want in a Retirement Fund?

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When you invest your retirement savings in an account like a 401(k), you'll want to keep a few things in mind.

Costs are first and foremost. Let's say you pay $5 in expenses for every $100 you have invested in a mutual fund. That's $5 that can't grow and compound for you over time. So if all else is equal, the lower the cost, the better. Yes, occasionally, a higher-priced fund will prove its worth, but we don't have to worry about that here. The annual expenses charged by the Vanguard retirement funds you'll find in a 401(k) will typically sit near or at the bottom of their category.
Income matters, too. You probably want your retirement portfolio to produce at least some 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. How much income your account should produce depends on your own circumstances. For instance, older investors tend to be more concerned with income while younger investors focus more on growth.
Don't forget taxes. A taxable account (like 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 401(k)s, 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, aka "turnover," won’t be taxed).
Diversification matters (in more than one way). You've probably heard that your portfolio should be "diversified," which means holding a variety of investments, whether that's holding multiple assets (stocks, bonds, alternative investments), but that could also mean holding, say, stocks from different countries, or stocks from different sectors. And investment funds, which can own any number of stocks, bonds, or other holdings all at once, can help you achieve that diversification. Also, every fund has its own level of built-in diversification. Some funds hold dozens of stocks while others hold thousands. Some funds invest heavily in their biggest stocks while others spread their assets out more evenly. So always consider how diversified a fund really is, as well as whether that level of diversification suits your needs.

Why Vanguard Mutual Funds?

Vanguard Group is one of the largest asset managers in the world at more than $12 trillion in assets under management (AUM) currently.

Again, one of the primary drivers of that success is Vanguard's dirt-cheap expenses. The average asset-weighted expense ratio for U.S. mutual funds and ETFs is 0.44%, or $4.40 annually for every $1,000 invested. Vanguard's average, across 400-plus funds, is a scant 0.06%, or a mere 60¢ annually per $1,000 invested. That's an astoundingly low number—one that means even when a Vanguard fund isn't the absolute cheapest in its category, it's still going to be one of your most cost-effective options.

Vanguard isn't sitting still, either. That average expense ratio was 0.08% in 2024, then declined to 0.07% in 2025 after Vanguard cut expenses on 168 share classes across 87 funds. Its drop to 0.06% occurred in early 2026 when the company announced it would slash fees on another 84 share classes across 53 funds. All told, Vanguard estimates that's $600 million in savings for investors, which the firm claims is its "largest-ever two-year combined cost reduction."

Vanguard also 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. But it's not only the best Vanguard retirement funds that benefit. 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.

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The Best Vanguard Retirement Funds for Your 401(k)

With all that out of the way, let's dig into some of the best Vanguard retirement funds to hold in a 401(k) to consider diving into this year.

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

Importantly, 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.

1. Vanguard Short-Term Treasury Index Fund Admiral Shares

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Style: Short-term U.S. Treasury bond
Management: Index
Assets under management: $33.9 billion*
SEC yield: 4.0%**
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 your federal income tax rate—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 IRAs.

Yields on short-maturity bonds rocketed between 2022 and 2024, when the yield curve inverted (inversion is when short-term rates are higher than long-term rates). The curve is no longer inverted, but short-term bonds still offer relatively high yields for relatively low risk. Thus, it may make 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 90 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 very low duration of just 1.9 years. And in return, you currently receive a yield north of 4%. That combination of low risk and competitive income makes Vanguard Short-Term Treasury Index Fund one of the very best Vanguard retirement funds you can own in an 401(k).

This mutual fund, like many Vanguard index funds, is also available as an ETF: the Vanguard Short-Term Treasury ETF (VGSH, 0.03% expense ratio), which trades around $60 per share currently.

* 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.

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2. Vanguard Total Bond Market Index Fund Admiral Shares

Style: Intermediate-term core bond
Management: Index
Assets under management: $394.4 billion
SEC yield: 4.5%
Expense ratio: 0.04%, or 40¢ per year for every $1,000 invested
Morningstar Portfolio Risk Score: 16 (Conservative)

While bond funds play an important role in lowering volatility and providing regular income, they don't need to be as conservative as a short-term Treasury fund.

Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX), for instance, holds longer-dated bonds but remains one of the very best Vanguard retirement funds because of its high-quality portfolio, competitive yield, and rock-bottom fees and expenses.

A share of VBTLX plugs you into a massive portfolio of nearly 11,400 bonds. About half of assets are Treasury or agency debt backed by the U.S. government. A quarter is invested in corporate bonds, and another 20% is used to own government mortgage-backed securities (MBSes). The remaining sliver is spread across foreign bonds, commercial mortgage-backed securities (CMBSes), asset-backed securities (ABSes), and other debt.

Risk is higher than Vanguard's short-term government-bond 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 5.7 years, a percentage-point increase in market interest rates would theoretically send the fund 5.7% lower in the short term.

On the flip side, you're rewarded with a higher yield and more potential upside should the Fed cut rates. And with an expense ratio of just 0.04%, Vanguard Total Bond Market Index Funds is all but free to own.

Also note that VBTLX is available in ETF form as the Vanguard Total Bond Market ETF (BND). It charges 0.03% annually and goes for around $75 per share as I write this.

* 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.

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3. Vanguard Balanced Index Fund Admiral Shares

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Style: Moderate allocation
Management: Index
Assets under management: $64.1 billion
Dividend yield: 2.0%
Expense ratio: 0.07%, or 70¢ per year for every $1,000 invested
Morningstar Portfolio Risk Score: 40 (Moderate)

Most of the funds that you and I own, and that we talk about, are single-asset funds: stock funds, bonds funds, and so on. And we mix and match these funds to put together a whole portfolio for ourselves.

However, funds like Vanguard Balanced Index Fund Admiral Shares (VBIAX)—referred to as "balanced" or "allocation" funds—are a whole portfolio unto themselves, giving us virtually everything we need in a single product. And Vanguard Balanced Index Fund specifically is a "moderate allocation" fund that invests roughly 60% of its assets in stocks, and the other 40% in bonds.

The stock "sleeve" is a massive 3,100 stocks wide. Large-cap stocks* account for the majority (70%) of assets, while mid-caps make up 20% and smalls are responsible for the remaining 10%. Top holdings are similar to what you'd get in a large-cap equity fund: Nvidia (NVDA), Apple (AAPL), Google parent Alphabet (GOOG, GOOGL). It's heavily tilted toward the technology sector, though it also has significant weights in financials, healthcare, communication, and industrials.

The bond portfolio is extremely broad, too, at more than 10,000 debt issues. The allocation is extremely similar to VBTLX; half of the fund's bond assets are invested in U.S. Treasuries or agency debt, 25% is in corporates, 20% is in government MBSes, and the rest is sprinkled across several debt types.

Balanced funds aren't without their weaknesses. For instance, many of the most popular such funds have little to no international exposure (in stocks and bonds alike); that's the case with VBIAX, so if you do want that exposure, you'd have to add it via additional individual securities or funds. Also, you have to want the specific balance the fund offers—a 60/40 fund, for instance, won't deviate much from that blend. So if Vanguard Balanced Index Fund Admiral Shares is too conservative (or aggressive) for you, you'd either have to find a different fund to act as your core, or augment your portfolio with additional exposure where you need it.

VBIAX has a moderate amount of turnover, plus it generates both dividend and interest income. So it's one of the best Vanguard funds for 401(k)s and other tax-advantaged accounts, but it will definitely have tax consequences in a traditional brokerage account.

* 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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4. Vanguard Target Retirement Funds

Style: Target-date
Management: Active
Expense ratio: 0.08%, or 80¢ per year for every $1,000 invested
Morningstar Portfolio Risk Score: 20-62 (Conservative to Aggressive)

The only way in which allocation funds fall short of truly being a self-contained portfolio is that their mix of assets always remains the same. That's great if that's the particular allocation you need at a given moment in your life. But one of the greatest challenges in retirement planning is getting the asset allocation right: that is, having an asset class mix that is appropriate for an investor at your age and stage of life. An ideal portfolio for a 20-year-old is likely going to be very different from that of a 40-year-old, and both those portfolios will be different from what's ideal for a 60-year-old.

This is where Vanguard Target Retirement Funds can really add value.

Target-date funds (TDFs)—also called life-cycle funds—are basically allocation funds that change their asset allocation over time. TDFs start out invested heavily in stocks, but as they approach their target retirement date, they slowly reduce their stock exposure and replace it with bond exposure, following a glide path along the way.

The target retirement dates are intended to be estimates; they don't have to be super precise. Generally, most mutual fund families will create target-date funds in five-year increments (say, 2030, 2035, 2040, etc.).

And given the hyper-specific focus on retirement, target-date funds tend to be a mainstay of 401(k) plans.

Vanguard Target Retirement Funds hold varying blends of both U.S. and international stocks of various sizes, as well as U.S. and international bonds. Their target dates currently span from 2020 through 2070; the series also includes Vanguard Target Retirement Income Fund (VTINX), which is designed for investors who are in retirement.

This TDF lineup is unsurprisingly dirt-cheap, at just 0.08% annually, and the entire series earns a respectable Silver Medalist rating from Morningstar.

5. Vanguard Developed Markets Index Fund Admiral Shares

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Style: International large-cap stock
Management: Index
Assets under management: $317.3 billion
Dividend yield: 3.6%
Expense ratio: 0.05%, or 50¢ per year for every $1,000 invested
Morningstar Portfolio Risk Score: 70 (Aggressive)

U.S. markets have long been among the most productive in the world, and if you believe in the American economy's ability to keep growing, that should remain the case. Still, America's stock markets do catch the occasional cold, and that's why most experts will tell you it's worth having at least some exposure to international stocks.

You can do that via funds such as the Vanguard Developed Markets Index Fund Admiral Shares (VTMGX).

VTMGX owns shares in nearly 3,900 companies from "developed markets" outside the U.S. Developed markets can best be described as mature nations that have advanced economies, well-regulated capital markets, and robust infrastructure. They don't provide the same level of growth as their counterparts, "emerging markets," but they're generally considered more stable.

This index fund predominantly owns large-cap stocks, which make up roughly 80% of assets. Mid-caps account for another 15%, while the remainder is invested in smalls. Geographically speaking, European and Pacific nations make up the bulk of the portfolio, led by Japan (21%) and the U.K. (12%), though Canada is also well represented at 11%. Top holdings include multinationals such as Dutch semiconductor firm ASML Holding (ASML), Korean tech conglomerate Samsung Electronics, and British bank HSBC Holdings (HSBC).

As is common with developed-country funds, VTMGX's yield is far greater than U.S. blue-chip funds, at more than 3% currently. That's a high level of dividend income that, for tax purposes, is best suited to the confines of a tax-advantaged account like a 401(k).

VTMGX is also available in ETF form as the Vanguard FTSE Developed Markets ETF (VEA). It charges 0.03% and trades around $70 per share.

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6. Vanguard 500 Index Fund Admiral Shares

Style: U.S. large-cap stock
Management: Index
Assets under management: $1.7 trillion
Dividend yield: 1.0%
Expense ratio: 0.04%, or 40¢ per year for every $1,000 invested
Morningstar Portfolio Risk Score: 71 (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. However, given that a 401(k) is often an investor's primary (and sometimes only) investing account, and given that performance is the ultimate goal, an S&P 500 index fund absolutely belongs in any 401(k).

Why? Well, the S&P 500 is hard to beat. Year-end 2025 data from S&P Dow Jones Indices' SPIVA (S&P Indices versus Active) shows that only 14% of actively managed large-cap funds have managed to beat the S&P 500 over the trailing 10-year period, and that number dips to 10% when looking at the trailing 15 years.

Daniel Sotiroff, Senior Analyst for ETF and Passive Strategies at Morningstar, puts it bluntly: "You can't improve upon [the S&P 500]. You can't outdo it."

So if we can't outdo it, we might as well 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 Nvidia (NVDA), Apple, and Alphabet, 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.

Even among index funds, S&P 500 "trackers" are particularly tax-efficient. Turnover is extremely low given that only a handful of stocks enter or leave the index in any given year. So VFIAX typically makes little to no capital gains distributions. This makes this Vanguard fund an extremely tax-efficient option for regular ol' taxable accounts. But again, if you primarily invest through your 401(k) plan, and your goal is simply to maximize performance, there's no good reason not to hold VFIAX in your 401(k).

VFIAX is Vanguard’s oldest index strategy, and it remains one of the very best Vanguard retirement funds—for 401(k)s or wherever else you can stash it.

If for whatever reason your investment options exclude mutual funds but include ETFs, you can buy it as the Vanguard S&P 500 ETF (VOO). VOO charges 0.03% in annual expenses and trades around $680 per share currently.

7. Vanguard Explorer Fund Investor Shares

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Style: U.S. small-cap growth stock
Management: Active
Assets under management: $22.4 billion
Dividend yield: 0.4%
Expense ratio: 0.39%, or $3.90 per year for every $1,000 invested
Morningstar Portfolio Risk Score: 81 (Very Aggressive)

Retirement savers with a high risk tolerance who want to try to turbocharge their returns might consider Vanguard Explorer Fund Investor Shares (VEXPX), which invests in predominantly American small- and midsized stocks with growth potential.

The actively managed VEXPX owns around 715 stocks with an average market cap of almost $10 billion—near the top of the traditional mid-cap range ($2 billion to $10 billion), but the majority of its holdings fall into the small- ($500 million to $2 billion) and micro-cap ($500 million or less) ranges. Top holdings include the likes of HVAC specialist Comfort Systems USA (FIX) and insurance software company Guidewire Software (GWRE).

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 50%, but you can snuff out that liability by holding VEXPX in a 401(k) or other tax-advantaged account.

8. Vanguard Growth Index Fund Admiral Shares

Style: U.S. large-cap growth stock
Management: Index
Assets under management: $393.8 billion
Dividend yield: 0.4%
Expense ratio: 0.05%, or 50¢ per year for every $1,000 invested
Morningstar Portfolio Risk Score: 84 (Very Aggressive)

You don't have to invest in small companies to seek out better returns, of course. Those with a healthy risk appetite can simply gravitate toward growth stocks in the large-cap space.

A growth stock is generally viewed as a company that is improving sales and profits with each passing year—typically at a faster clip than the industry average. This should, in theory, result in faster stock price appreciation as other shareholders get wise to this success and decide to buy in themselves.

Like with small caps, the upside can be nice, but the train can come to a halt awfully quickly once expectations start to outpace the company's actual results, leading to an abrupt, sharp drop in share prices. If that one stock is a significant portion of your portfolio, that could mean crippling losses. But you can mitigate that risk by owning bunches of growth stocks within a mutual fund like the Vanguard Growth Index Fund Admiral Shares (VIGAX).

VIGAX tracks an index of large-cap companies that exhibit various growth traits, including better-than-average historical growth in sales and earnings, as well as better-than-average expected short- and long-term growth in earnings.

The fund holds 150 predominantly U.S. growth stocks. As should be no surprise, tech stocks such as Nvidia, Apple, and Broadcom (AVGO) account for the majority (53%) of assets. Communication services companies like Facebook parent Meta Platforms (META) and Google parent Alphabet (GOOGL) account for 18%, while consumer discretionary stocks, such as Amazon.com (AMZN) and Home Depot (HD), represent another 12%. The remaining assets are spread among the other eight market sectors, with many receiving less than 2% of assets.

VIGAX's ETF share class is the Vanguard Growth ETF (VUG), which costs 0.03% annually and trades around $85 per share after a recent share split.

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What Is the Minimum Investment Amount on Vanguard Mutual Funds?

Vanguard funds are known for being shareholder-friendly. It 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.

There is one hitch. Many of Vanguard's cheapest funds in terms of fees have initial investment minimums of around $3,000—and some can be even more.

But if you're investing through a 401(k), don't sweat it.

Funds don't have minimum investment requirements when you buy them through a 401(k) plan. When you invest in a 401(k), you decide what percentage of your total contribution you want to allocate to each fund, and every time contributions are taken from your paycheck, the appropriate amount is parceled out.

However, if you're considering investing in a Vanguard fund outside of a 401(k), note that many 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 $500 per share.

What Are Index Funds?

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There are two kinds of funds: actively managed funds and index funds.

With an actively managed fund, one or more managers are in charge of selecting all of the fund's holdings. They'll likely have a specific strategy to adhere to, and they'll be tasked with beating a benchmark index, but they'll be given a lot of discretion about how to achieve that. These managers will identify opportunities, conduct research, and ultimately buy and sell a fund's stocks, bonds, commodities, and so on.

An index fund, on the other hand, is effectively run by algorithm. The fund will attempt to track an index, which is just a group of assets that are selected by a series of rules. The S&P 500 and Dow Jones Industrial Average? Those are indexes with their own selection rules. Index funds that track these indexes will generally hold the same stocks, in the same proportions, giving you equal exposure and performance (minus fees) to those indexes.

If you guessed that it's more expensive to pay a conference room full of fund managers than it is a computer that tracks an index, you'd be right. That's why actively managed funds tend to cost much more in fees than index funds.

And that's why ETFs are generally cheaper. Most (but not all) mutual funds are actively managed, while most (but not all) ETFs are index funds.

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What Types of Funds Are Available in 401(k) Plans?

Virtually every 401(k) plan is limited to mutual funds. While a handful of plans might offer exchange-traded funds (ETFs), they're typically limited to mutual funds—and a handful, at that. Rather than a self-directed account, where you have your pick of virtually the entire mutual fund universe, 401(k)s only let you invest in, say, 10, 15, or 20 mutual funds, each of which cover a specific investing style.

Would it be nice to invest in ETFs, which typically offer lower costs? Sure. But mutual funds have certain qualities more befitting a 401(k).

For one, mutual funds don't trade all day on an exchange, which discourages long-term investors from panic-selling during a particularly bad day in the market. They also allow for fractional share ownership, which is important given that 401(k) plan investors are typically allocating a fixed amount of money to their account every paycheck.

What Is a Mutual Fund?

A mutual fund is an investment company that pools money from many investors to buy stocks, bonds or other securities. The investors get the benefits of professional management and certain economies of scale. A pool of potentially millions or even billions of dollars is large enough to diversify and might have access to investments that would be impractical for an individual investor to own.

Here's an example: An investor wanting to mimic the S&P 500 Index (an index made up of 500 large, U.S.-listed companies) would generally have a hard time buying and managing a portfolio of 500 individual stocks, especially in the exact proportions of the S&P 500 Index. Another example: An investor wanting a diversified bond portfolio might have a hard time building one when individual bond issues can have minimum purchase sizes of thousands (or tens of thousands!) of dollars.

Equity funds or bond funds will generally be a far more practical solution.

To invest in a mutual fund, you'll need to open an account with the fund sponsor or open a brokerage account with a broker that has a selling agreement in place with the fund sponsor. As a general rule, most large, popular mutual funds will be available at most brokers, so if you open a traditional investment account (like an IRA or brokerage), you'll have access to most of the mutual funds you'd ever want to invest in.

Why Does a Fund's Expense Ratio Matter So Much?

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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.

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Related: The 10 Best Dividend ETFs You Can Buy Now

We love exchange-traded funds (ETFs) because they can provide one-click access to hundreds, even thousands of stocks, while charging often minuscule fees.

One way to put that low-cost diversification to work? Collecting dividends. But trying to choose from literally hundreds of income-producing funds could take up a lot more time than you have. So let us help you narrow the field—check out our list of 10 top dividend ETFs.

Related: 10 Dividend Stocks That Pay You Each and Every Month

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LifePath: Target-Date Funds for ETF Investors

Kyle Woodley — Thu, 04 Jun 26 09:45:42 -0400

We frequently write about target-date funds (TDFs), which are funds managed not just to hold a certain allocation of assets (usually stocks and bonds), but to change the allocations over time to best accommodate investors of certain ages, as they age. Few products take a load off investors' shoulders than a fund you can very literally buy and hold forever without adding or reducing to meet your needs.

TDFs have one significant shortcoming: The overwhelming majority of target-date fund series are available in mutual fund form only. That's great if you have a 401(k), or an individual retirement account (IRA) that allows for mutual fund investing. But not everyone does—workplace plans, while common, aren't available to all Americans, and some low-cost brokerage and retirement-account providers only allow investors to own exchange-traded funds (ETFs) and stocks.

But we have good news: If you're limited to just ETFs, you still have an option—and it's a pretty good one.

Read on as we discuss BlackRock's exchange-traded TDF series: iShares LifePath Target-Date ETFs.

Editor's Note: Tabular data presented in this article is up-to-date as of June 1, 2026.

What to Know About iShares' LifePath Target-Date ETFs

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iShares LifePath Target-Date ETFs invest in a global portfolio of both stock and bond ETFs. ("Global" is a specific term in investing that means international countries and the U.S. "International" means other countries but not the U.S.) Each product starts its life with a riskier, more growth-oriented profile, but over time, it tapers off and becomes more conservative and protection-minded.

According to iShares' model, the typical target-date ETF will begin with 99% stock exposure at the "start of the career"—effectively, 40 years until the target date—then reduce to 87% stocks by halfway through the cycle, and pare down to just 40% stocks by the time you hit retirement.

You'll remain invested in equities through retirement, providing added upside potential retirees need to continue growing their nest egg as they start drawing from it.

So, for instance, if you started investing at age 25, and plan on retiring in 2065, you would invest in a 2065 ETF, which would start at 99% stocks and 1% bonds. By the time you're 45, the ETF will have shifted to 87% stocks and 13% bonds. And by the time you retire, the ETF will have reduced its stock exposure to just 40%, with the remaining 60% in bonds.

iShares launched its LifePath Target-Date ETF line in 2023 with 10 funds—nine actual target-date funds, as well as a 10th ETF meant to be held in retirement.

Here's what the lineup looks like today:

iShares LifePath Retirement ETF (IRTR), 0.08% expense ratio
iShares LifePath Target Date 2030 (ITBD), 0.09% expense ratio
iShares LifePath Target Date 2035 (ITDC), 0.10% expense ratio
iShares LifePath Target Date 2040 (ITDD), 0.11% expense ratio
iShares LifePath Target Date 2045 (ITDE), 0.11% expense ratio
iShares LifePath Target Date 2050 (ITDF), 0.11% expense ratio
iShares LifePath Target Date 2055 (ITDG), 0.12% expense ratio
iShares LifePath Target Date 2060 (ITDH), 0.12% expense ratio
iShares LifePath Target Date 2065 (ITDI), 0.12% expense ratio
iShares LifePath Target Date 2070 (ITDJ), 0.12% expense ratio

The retirement ETF currently has an overall conservative (but aggressive relative to other similar funds) portfolio that's 57% invested in bonds and 43% invested in stocks.

We'll note, as an aside, that iShares' literature shows that by the time you retire, the funds' stock/bond blend should be 40/60, so the retirement fund is currently a little more aggressively positioned than what the company otherwise suggests. However, during previous updates, IRTR was closer to that 40/60 mix, so this may very well just be temporary.

Something else worth noting: There was a 2025 ETF—iShares LifePath Target Date 2025 (ITBA)—but it has been folded into IRTR. This is a common mechanism in target-date series, and it's a fate that will befall each of the other LifePath ETFs once they reach their target retirement date.

Expenses on these funds range between 0.08% and 0.12%, which means you'll pay between $8 and $12 annually on a $10,000 portfolio—lower than your average target-date mutual fund. (The fees vary based on the underlying expenses of the ETFs each target-date fund holds.) Additionally, the ETF wrapper tends to be much more tax-efficient than a mutual fund wrapper—not necessarily a concern for those with tax-advantaged accounts like IRAs and Roth IRAs, but helpful for those who only invest through a taxable brokerage account.

Another perk? Because it's an ETF, there's no required minimum initial investment. Whereas mutual fund TDFs might require several thousands of dollars to make your first purchase, you can get into LifePath ETFs for the price of a single share (or much less for those with brokerages that allow fractional shares). For instance, right now, iShares LifePath Target Date 2035 ETF shares trade for $37 per share.

Holdings of these target-date funds include broad iShares ETFs such as the iShares Russell 1000 ETF (IWB), iShares US Treasury Bond ETF (GOVT), and iShares Core MSCI Emerging Markets ETF (IEMG).

iShares points out that the ETFs' asset allocation is virtually identical to the iShares LifePath mutual target-date funds. However, there are some differences between what underlying ETFs are available for the ETF target-date funds to hold, and what underlying mutual funds are available for the target-date mutual funds to hold.

Another Run at Target-Date ETFs

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These LifePath products are the only target-date ETFs on the market.

But they're not the first.

Todd Rosenbluth, Head of Research at VettaFi, noted on a conference call with BlackRock that "this has existed and it doesn't exist anymore because there wasn't demand," referring to BlackRock's 2014 closure of its previous target-date ETF line.

Asked what was different now, BlackRock responded that demographics have changed since then, and that the divergence in people who do and do not have access to 401(k) plans has grown. They also cited advancement in ETFs—the previous target-date ETFs were a different structure that mimicked an index, while the new target-date ETF line is actively managed.

"With these, we're implementing new research every 18 months or so," BlackRock says.

Who Are These Funds For?

As we mentioned earlier, iShares' new target-date funds will allow anyone who doesn't have a 401(k), or who has an IRA that doesn't permit mutual fund investing, to own a low-cost target-date strategy.

The funds, while actively managed, are still inexpensive (even by ETF standards). They're sophisticated, yet simple and effective tools that make sense for everyone, from beginners to pros, who understand the value of both diversification and automation.

Among other demographics, this could help younger generations who are both taking an interest in investing (and have more access to the markets) earlier than ever before. While investors in Robinhood and other new investor apps are often derided for their short-term-ism, these new funds provide an outlet for those who do believe in building wealth over time and want a steady hand to guide their longer-term investments.

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Vanguard Target-Date Funds: Our Guide to These Low-Cost Retirement Tools

Kyle Woodley — Thu, 04 Jun 26 08:30:36 -0400

Vanguard hasn't just built its reputation on the quality and cost-efficiency of its index funds—it has built two of its most retirement-focused product series around them, too.

Vanguard Target Retirement Funds and Vanguard LifeStrategy Funds are two groups of funds that allow investors to build their portfolios, should they wish, around a single product. These so-called "funds of funds" hold both stocks and bonds in varying proportions, and they do so by owning a mix of Vanguard's dirt-cheap index funds.

The result? Immediate diversification across not just a sliver of the stock or bond market, but across both assets broadly, and for a relative song, no less.

Today, I want to introduce you to Vanguard's target-date funds—the Vanguard Target Retirement series—as well as another Vanguard line of retirement mutual funds. I'll start with a quick intro to TDFs, then help you better understand these Vanguard retirement products.

Editor’s note: Tabular data presented in this article is up-to-date as of June 1, 2026.

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What Is an Allocation Fund?

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Most investment funds will own a single asset, usually stocks or bonds, but sometimes other categories such as commodities. An allocation fund (or balanced fund) allocates money to multiple assets: typically stocks, bonds, and cash. (Cash is often included in the bond category.)

An allocation fund will typically try to maintain a certain balance of stocks and bonds throughout its life. Morningstar breaks allocation funds into five categories depending on their exposure to equities:

Conservative: 15% to 30%
Moderately Conservative: 30% to 50%
Moderate: 50% to 70%
Moderately Aggressive: 70% to 85%
Aggressive: 85%-plus

An allocation fund is in theory a great way to get all the stock- and bond-market exposure you need with just one fund.

But there's an inherent problem: The right blend of stocks and bonds for a person who's, say, 30 years old, is much different than the ideal mix for someone who's in their 60s. You could, in theory, move your money into different funds over time, but that could have detrimental tax and cost-basis effects.

Target-date funds solve for this problem.

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What Is a Target-Date Fund (TDF)?

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Target-date funds are a type of allocation fund that has become popular in retirement planning over the past two decades. They go by different names, interchangeably called several things, including:

lifecycle funds
age-based funds
dynamic-risk funds

The core concept is pretty simple: Target-date funds invest in a more aggressive portfolio of mostly equity funds to start, then gradually shift to a more conservative strategy, owning predominantly bond funds, as they approach a target date.

When you start investing, your target retirement date is really just going to be an estimate; you don't know what the world will throw you over the next few decades, so there's no need to be precise.

They're almost predominantly found as mutual funds, though iShares has a series of target-date ETFs. Fund families usually create target-date funds in five-year increments (say, 2025, 2030, 2035, etc.). The math behind picking one is simple enough.

An Example of Target-Date Funds

Let's say you turned 45 years old in 2025, and you expect to work until age 70. Your expected retirement date would be in the year 2050. So, investing in a target-date fund with a target retirement date of 2050 would be the most logical move.

What if your expected retirement age changes? No problem! Target-date funds are normal mutual funds and can be bought or sold as your needs change.

The target-date fund's allocation to equities will generally never go to zero. Retirees need growth, too, so you'll almost certainly have at least a little exposure to the stock market. The beauty of the target-date fund is that it changes your asset allocation to match your risk tolerance as you age—and it does it automatically without requiring you to actually do anything.

What Is Asset Allocation?

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A lot of investors (and particularly young investors) dream of making a killing picking stocks. And that's fantastic. Stock picking is stimulating and, if done well, can add some zeros to your net worth!

When push comes to shove, however, your asset allocation strategy is far more important than individual stock picking when it comes to meeting your financial goals. Asset allocation sits at the core of target-date funds and, really, at the core of all financial planning.

But what exactly is asset allocation?

stocks (or stock mutual funds)
fixed-income investments (bonds or bond funds)
cash
alternative assets such as gold, commodities, or real estate

You arrange the parts so that the overall portfolio has a risk and return profile that makes sense for you. And (importantly!) you rebalance the portfolio when the weights to each asset start to divert from your plan.

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An Example of Asset Allocation

We'll start by assuming your ideal asset allocation is 60% in equities and 40% in fixed income.

Let's say the stock market crashes. Your stock weighting has suddenly dropped to just 40%, and your fixed-income investments have jumped to 60% of your portfolio's worth. You need to rebalance your portfolio to get back to 60% stocks/40% bonds. You would do that by selling off some of the fixed-income investments and buying some stock.

Now, let's say instead that the stock market shoots higher, and you find yourself allocated 70% to stocks and 50% to fixed-income investments. If you wanted to rebalance back to 60/40, you would sell some of your stocks and buy new fixed-income investments.

The idea here is to constantly reduce risk and smooth out your returns by buying low and selling high.

Asset allocation within a target-date fund takes it a step further. Apart from regular rebalancing due to market moves, the target-date fund's asset allocation decisions involve gradually reducing the risk (buying fewer and less risky stocks, and buying more bonds) as the fund gets closer to its target retirement date and its final asset allocation.

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Vanguard's Retirement Funds

Vanguard has two sets of retirement funds:

Vanguard Target Retirement Funds, a set of target-date funds along with an income fund for investors who are already in retirement
Vanguard LifeStrategy Funds, a set of balanced funds with fixed strategies designed for investors more actively managing their own retirement portfolios

Vanguard Target Retirement Funds

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Vanguard's Target Retirement Funds are actively managed funds that are designed to guide people into and through retirement. "But you said they were built upon index funds?" They are—the managers own a handful of Vanguard index funds, in varying amounts, to get their exposure to different styles of stocks and bonds.

Since its founding in 1976, Vanguard mutual funds and ETFs have arguably done more to lower fees and to improve the overall investing experience for clients than any other company in history. This is the company that invented the low-expense-ratio index fund, and we continue to reap the rewards of that innovation today.

Vanguard's Target Retirement Funds generally allow for very low minimums of just $1,000 (compared to $3,000 for most of its other funds) and expense ratios of just 0.08% (which is about a fifth of the cost of a comparable fund from other providers).

These are stellar products that earn Morningstar's highest Medalist rating of Gold. (Morningstar's "Star" rating is a backward-looking rating, whereas Medalist ratings are a forward-looking analytical view of a fund.)

"As more target-date series tweak their approaches in reaction to market events, Vanguard Target Retirement stands out for its steadfast dedication to a straightforward, broadly diversified, and low-cost retirement solution, one that is a direct reflection of Vanguard's deep-rooted investment philosophy," Morningstar Senior Principal Jason Kephart says.

Here's a quick look at all of the Vanguard Target Retirement Funds:

Fund	Ticker	Expense Ratio*
Vanguard Target Retirement Income Fund	VTINX	0.08%
Vanguard Target Retirement 2020 Fund	VTWNX	0.08%
Vanguard Target Retirement 2025 Fund	VTTVX	0.08%
Vanguard Target Retirement 2030 Fund	VTHRX	0.08%
Vanguard Target Retirement 2035 Fund	VTTHX	0.08%
Vanguard Target Retirement 2040 Fund	VFORX	0.08%
Vanguard Target Retirement 2045 Fund	VTIVX	0.08%
Vanguard Target Retirement 2050 Fund	VFIFX	0.08%
Vanguard Target Retirement 2055 Fund	VFFVX	0.08%
Vanguard Target Retirement 2060 Fund	VTTSX	0.08%
Vanguard Target Retirement 2065 Fund	VLXVX	0.08%
Vanguard Target Retirement 2070 Fund	VSVNX	0.08%
* Represents "acquired fund fees and expenses," which are the fees and expenses of the underlying funds.

I won't break down every fund on this list, as the changes are small from one to the next. But I'll review a handful that are in very different stages of their asset allocation glidepath to give you a decent sampling.

Vanguard Target Retirement 2030 Fund (VTHRX)

I'll start with the Vanguard Target Retirement 2030 Fund (VTHRX). Given that the target date is just a few years away, this fund is intended for someone who's very close to retirement. That said, VTHRX still has a healthy exposure to stocks, allocating nearly 60% of its portfolio to equities, and the remaining 40% to bonds and cash.

Again, Vanguard TDFs only own Vanguard index mutual funds to get the necessary stock-and-bond exposure. Right now, Vanguard Target Retirement 2030's largest holdings are the Vanguard Total Stock Market Index Fund Institutional Plus Shares (VSMPX, 35% of assets) and Vanguard Total Bond Market II Index Fund Investor Shares (VTBIX, 28%).

This brings up an important point about target-date funds in general: Vanguard's concept of what constitutes an appropriate portfolio for a person your age might or might not line up with your own preferences. You should always "look under the hood" to make sure you're comfortable with the level of equity exposure.

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Vanguard Target Retirement 2040 Fund (VFORX)

Next up is the Vanguard Target Retirement 2040 Fund (VFORX), which is designed for someone with about 15 years left until retirement, or roughly around 50 right now.

The 2040 fund is more aggressively allocated. Almost 75% of assets are invested in equities, and the rest is in bonds and cash. Like with VTHRX, the fund leans on VSMPX—which accounts for 44% of assets right now—to provide the bulk of its stock exposure. But VFORX also has a healthy 30% of assets invested in Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) for the foreign-equity portion of the portfolio.

Vanguard Target Retirement 2070 Fund (VLXVX)

For younger investors, let's move all the way out to the Vanguard Target Retirement 2070 Fund (VLXVX).

This fund is designed for a person looking to retire in 45 years, putting them in their early 20s today. As you might expect, it's aggressive. VLXVX invests 90% of its assets in stocks, with the Vanguard Total Stock Market Index Fund again leading the way at 53%, followed by the Vanguard Total International Stock Index Fund at 37%.

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Vanguard Target Retirement Income Fund

You'll notice that the Vanguard Target Retirement Income Fund (VTINX) is the only entry without a year attached to its name.

Like the other Target Retirement Funds, VTINX is a balanced fund (read: stocks and bonds)—currently, it offers a 30/70 split of stocks and bonds. However, unlike the target-date funds, VTINX doesn't change its allocation to meet a particular age's needs. Instead, it's a conservative fund designed for investors already in retirement who want to largely generate income with a little potential for capital appreciation.

Vanguard LifeStrategy Funds

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Target-date funds are based on the simple but powerful premise that, all else equal, your asset allocation should glide from more aggressive to more conservative over time. As a result, target-date funds gradually lighten up on stocks and go heavier into bonds as they reach their target retirement date and final asset allocation.

But it's not always that simple, and age is not the only variable that matters.

A proper financial plan also considers things like sources of income from pensions or Social Security, other investments you might own, any planned inheritance, the overall health and attractiveness of both stocks and bonds, and your personal attitude and feelings toward risk.

For most investors most of the time, a target-date fund is a great tool. But given all of these additional factors, it may or may not be the best tool for you.

And that's where Vanguard's LifeStrategy Funds come into play. If you are willing and able to do a more comprehensive financial plan, the LifeStrategy Funds give you an off-the-shelf professionally managed asset mix that is set to your target and doesn't glide more conservatively over time.

Vanguard currently offers four LifeStrategy Funds, all of which are the beneficiaries of recent fee reductions that have brought their annual expenses down to just 0.10% annually:

Fund	Ticker	Expense Ratio*
Vanguard LifeStrategy Income Fund	VASIX	0.10%
Vanguard LifeStrategy Conservative Growth Fund	VSCGX	0.10%
Vanguard LifeStrategy Moderate Growth Fund	VSMGX	0.10%
Vanguard LifeStrategy Growth Fund	VASGX	0.10%
* Represents "acquired fund fees and expenses," which are the fees and expenses of the underlying funds.

The LifeStrategy Income Fund (VASIX) is allocated 20% to stocks and 80% to bonds and is designed for a conservative investor with a three- to five-year horizon. The emphasis is heavily on income as opposed to growth.
The LifeStrategy Conservative Growth Fund (VSCGX) is slightly more aggressive and has a targeted allocation of 40% stocks and 60% bonds. The time horizon is expected to be five years or more.
The LifeStrategy Moderate Growth Fund (VSMGX) is Vanguard's version of the classic 60/40 portfolio with a targeted allocation of 60% stocks and 40% bonds. The time horizon is expected to be five years or more.
The LifeStrategy Growth Fund (VASGX) is the most aggressive allocation and has a targeted allocation of 80% stocks and 20% bonds. The time horizon is expected to be five years or more.

There is one point to consider here regarding taxes.

If you hold a more aggressive LifeStrategy fund for years, then opt to trade it in for a more conservative option, you might get zapped with a large tax bill due to years of capital gains. In a target-date fund, that process will be more gradual—you'll pay capital gains taxes due to the internal selling of the target-date fund as it gradually sells stock funds and buys bond funds—but you will generally spread the pain over several tax years, and only receive a big tax bill if you actually sell out of the target-date fund.

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Learn More About These and Other Funds With Morningstar Investor

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If you're buying a fund you plan on holding for years (if not forever), you want to know you're making the right selection. And Morningstar Investor can help you do that.

Do I Have to Buy the Vanguard Target Retirement Fund That Most Closely Matches My Age or Retirement Date?

Absolutely not. Age and time to retirement are important factors to consider when building an asset allocation, and Vanguard target-date funds are designed to make the process as easy and pain-free as possible. The idea is to make your portfolio appropriate for "a person your age."

But age and time to retirement are by no means the only factors to consider. You might be more inclined to take risk than a typical person your age because you have other sources of income, expect to receive an inheritance or any number of other factors. You might be less inclined to take risk because you know you have major expenses, such as a wedding or educational expenses, on the horizon. And let's not forget the market itself. If stocks are more attractively priced that bonds (or vice versa), you might feel it prudent to have a higher or lower allocation to stocks or bonds than your age alone would dictate.

Target-date funds are a fantastic tool, but you can absolutely tweak the way you use them.

How Often Should I Revisit My Vanguard Target Retirement Funds?

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The main selling point of target-date funds is that you don't have to actively manage them. They are designed to glide you towards an appropriate allocation as you age.

That said, your personal situation can change over time, and that may mean that the specific Vanguard Target Retirement fund you've chosen is no longer the best fit. Perhaps you took retirement early, or decided to postpone it. Perhaps you recently experienced a major bear market and want to use the opportunity to buy a larger allocation to stocks on the cheap.

You should review your target-date funds after any major financial event in your life. But doing at least a casual review once a year is also a good idea.

Chances are good that you won't ultimately need to make changes. These things are designed to be buy-and-hold investments, after all. But doing an annual review forces you to take stock of your financial life and might help you to adjust your savings goals as you age.

Should I Invest in Vanguard Target Retirement Funds in My IRA or in My Taxable Brokerage Account?

Vanguard Target Retirement Funds are perfectly suitable for both individual retirement accounts (IRAs) and taxable brokerage accounts. Where you choose to hold yours may be affected by what other assets you own and how those assets are taxed. As a general rule, it makes sense to hold the least tax-efficient investments in a tax-deferred account like an IRA and the most tax-efficient holdings in a taxable account.

As an example, a stock or mutual fund you plan to buy and hold for years or even decades will generate minimal taxable gains, so holding it in a taxable account won't hurt you (at least until you ultimately sell). But bonds tend to throw off a lot of taxable income, so holding them in an IRA will generally be preferable.

Target-date funds are generally pretty tax efficient, in that there is rarely a lot of short-term capital gains. So, you should do an inventory of your investments and rank them by tax efficiency to determine which ones you should put in your IRA first.

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.

And again: You only need $1,000 to start investing in Vanguard Target Retirement Funds.

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Why Does a Fund's Expense Ratio Matter So Much?

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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.

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Related: 7 Mega-Yielding Funds You've Never Heard Of

You've assuredly heard of mutual funds and exchange-traded funds (ETFs). But how much do you know about closed-end funds (CEFs)?

If the answer is "not much," don't worry—they get a fraction of the attention of those other investment funds. But you should also learn more about them. That's because CEFs have a host of enticing characteristics, including that they frequently pay mammoth yields. Check out our list of the best CEFs t0 buy, which pay between 5% and 15% right now.

Related: The 10 Best Dividend ETFs You Can Buy Right Now

We love exchange-traded funds (ETFs) because they can provide one-click access to hundreds, even thousands of stocks, while charging often minuscule fees.

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8 Highly Rated Dividend Stocks Paying 6.2%-15.7%

Kyle Woodley — Thu, 04 Jun 26 07:30:34 -0400

It's hard to resist the charm of high-yield dividend stocks. Their ability to generate outsized amounts of cash makes them the stuff of dreams for those living on a fixed income—as well as for any investors who simply want a little performance ballast during periods of rough stock-price returns.

But if you simply target the fattest dividend yields and call it a day, you're in for a rude awakening.

There's a reason risk is so often mentioned alongside reward. A stock offering several times more yield than the market average might very well be the undiscovered can't-miss stock pick of the year … or it might be flashing a signal that many investors have passed it up for a reason. And sure, a very high yield can help make up for some underperformance in the stock price—but only if the dividend continues to be paid. Some high-dividend stocks have unsustainable payouts that are just an earnings miss or economic downturn away from collapse.

I'm not saying you should run screaming from any stock that offers an outsized payday. I'm just saying you shouldn't buy them on yield alone. Quality matters, too.

Today, I'll examine a group of high-yield dividend stocks that are showing more signs of fundamental quality than most. Not only do they deliver much sweeter yields than your average stock, but they also have the confidence of Wall Street's analyst community.

Editor's Note: Tabular data presented in this article is up-to-date as of June 2, 2026.

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Dividend Yields (And Dividend Safety)

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Dividend yield is a simple calculation: annual dividend / price x 100. But this humble calculator crunch can mean a world of difference for investors, especially those reliant on income.

Let's say you have a $1 million nest egg heading into retirement. If your portfolio yields 3%, you'll collect $30,000 in dividend and interest income each year. If it yields 6%, though, you'll collect $60,000—a dramatically higher number that would wildly alter your retirement calculus.

But dividend yields can be deceiving. You see, a company can get a very high annual dividend yield in two very different ways: the dividend growing very rapidly, or the share price falling very quickly. Here's an example:

Alpha Corp., which trades for $100 per share, pays a 50¢-per-share quarterly dividend, or $2 across the whole year. It yields 2.0%. In a month, however, it yields 4.0%. Here are two ways that could have happened:

Alpha Corp. doubled its dividend to $1.00 per share quarterly, good for a $4-per-share annual dividend. The share price stays the same. ($4 / $100 x 100 = 4.0%)
Alpha Corp. kept its dividend at 50¢ quarterly ($2 annually), but its share price plunged in half to $50 per share. ($2 / $50 x 100 = 4.0%)

Understand that a company's stock can plunge even if its financials are perfectly healthy; markets aren't always rational. But very broadly speaking, if you're comparing a company that just doubled its dividend to another company whose shares have been cut in half, you'd expect the former's dividend health to be better.

That's why you should always be mindful of dividend safety, but especially when it comes to high-yield dividend stocks. That's because oftentimes, the dividend is a more significant contributor to returns than price, so any danger to the dividend could undermine your investment thesis.

So, that's your goal: Determine whether the high-dividend stocks you buy are financially stable and can generate substantial profits and cash, which is how the dividend gets paid. Among other things, you'll want to look at payout ratio, which determines what percentage of a company's profits, distributable cash flow, and other financial metrics (depending on the type of stock) are being used to finance the dividend. Generally speaking, the lower the payout ratio, the more sustainable the payout.

How Does Dividend Growth Work?

Of course, yield is normally a function of what we know now—not how a business might change in the future. Many companies exhibit dividend growth over time.

There’s no universal rule about how companies might raise or reduce their payments, but generally dividend stocks tie these profit sharing plans to earnings growth.

In other words, if a company is making more profits, then they have more cash to spread around to shareholders. And if they hit a serious snag, there’s a chance dividends could be cut or eliminated to shore up finances.

What Is Yield on Cost?

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When you look up a stock’s information, the dividend yield listed is based on the most recent dividend and the current stock price.

That yield is often actually different than the one current shareholders enjoy. That yield is called “yield on cost,” which is the payout based on what you paid, at the moment you invested.

Let’s say you buy a stock at $100, and it pays $1 per share. It yields 1.0% when you buy it ($1 / $100 x 100 = 1.0%).

In a year, that stock has doubled to $200 per share, and it also doubled its dividend to $2 per share. If you look up its information, its dividend is still 1.0% ($2 / $200 x 100 = 1.0%).

That’s not your yield on cost, however. You’re still receiving that higher dividend of $2 per share. But your cost basis is still the original $100 you bought the share at. So now, your yield on cost has doubled, to 2.0% ($2 / $100 * 100 = 2.0%)!

8 High-Yield Stocks That Wall Street Analysts Love

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Today, I'm going to look at several high-dividend stocks yielding at least 5%—a level that's more than four times what the S&P 500 offers currently, and that's well above most traditional high-dividend ETFs. And most of these stocks pay much, much more than 5% … in fact, their average yield now sits at 10.5%.

Every stock on this list also has a favorable view from Wall Street's analyst community. The consensus analyst rating, courtesy of S&P Global Market Intelligence, is the average of all known analyst ratings of the stock, boiled down to a numerical system where …

Less than 1.5 = Strong Buy
1.5-2.5 = Buy
2.5-3.5 = Hold
3.5-4.5 = Sell
More than 4.5 = Strong Sell

In short, the lower the number, the better the overall consensus view on the stock. In the case of this list, I've included only stocks that have received a 2 or lower—in other words, clear-cut Buys in the analysts' eyes.

Importantly: These are the best dividend stocks among companies that pay pretty high yields, but that doesn't make any pick here a no-brainer slam dunk. They all have a blemish or two—whether it's significant stock weakness of late, interest-rate risk, tight dividend coverage, or something else—but to the pros, at least, their high yields, relative value, and/or growth potential make the risk worth taking. So if you're going to jump into high-yield investing, just make sure you do so with your eyes wide open.

Stocks are listed in reverse order of dividend yield, from the lowest-paying stock to the highest.

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8. Alpine Income Property Trust

Industry: Net-lease REIT
Market capitalization: $319.4 million
Dividend yield: 6.2%
Consensus analyst rating: 1.45 (Strong Buy)

Alpine Income Property Trust (PINE) is a real estate investment trust (REIT) that owns a portfolio of 125 predominantly single-tenant "net-lease" properties in 31 states. Its tenants include retailers, pharmacies, grocery stores and more—tenants include Lowe's (LOW), Dick's Sporting Goods (DKS), Walmart (WMT), and Best Buy (BBY).

Net-lease arrangements are different from traditional leases. They typically require tenants to be responsible for taxes, insurance, and maintenance—thus, all rent is "net" of those expenses. As a result, net-lease REITs' results tend to be a little more regular and predictable compared to traditional REITs.

It also has a portfolio of mortgage originations, which it can use to bolster its income, but it's a higher-risk, lower-quality business.

"[Alpine Income Property Trust has] a favorable portfolio composition relative to peers in terms of both retail real estate and investment-grade tenant exposure," B. Riley Securities analyst John Massocca writes. "A more dovish interest-rate environment should be a positive given the REIT's current floating-rate exposure and near-term refinancing needs. Improvements in the cost of debt capital could also help offset the impact of expected high-yield loan investments maturing in the next few years."

Massocca, who reiterated his Buy call after the company's Street-beating earnings report in May, is one of nine Buys on the stock, versus two Holds and no Sells.

PINE has been dutifully raising its dividend since coming public in 2019. The most recent hike, in February 2026, put the distribution at 30¢ per share, which annualizes to a yield of more than 6% at current prices.

There's naturally higher risk just given Alpine's small size relative to most of the other names on this list, but its yield and growing business put it among the best high-yield dividend stocks to buy now.

7. Amcor

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Industry: Packaging and containers
Market capitalization: $17.7 billion
Dividend yield: 6.8%
Consensus analyst rating: 1.75 (Buy)

Amcor (AMCR) produces flexible and rigid packaging products for a wide variety of industries. Its rigid packaging is used on any number of grocery-store items, including soft drinks, water, sports drinks, sauces, spreads, even personal-care items, while its flexible packaging is used in the food-and-beverage, medical, and pharmaceutical industries, among others. (Thus, while Amcor is considered a consumer discretionary name, it's truly closer to being a consumer-industrial hybrid.)

Amcor grew by leaps and bounds in April 2025 when it completed its acquisition of Berry Global. The combined company now boasts more than 400 facilities and 75,000 employees, with a reach of over 40 countries. And while mergers and acquisitions (M&A) can cause at least short-term turbulence, Amcor seems to be handling the transition well. Indeed, during its first-quarter earnings report, it upgraded the synergies it expects from the deal.

"We believe the company has multiple avenues at its disposal to drive more pronounced volume growth, EBITDA, and free cash flow [following the Berry] acquisition, which we view as a transformational transaction," says Truist Managing Director Michael Roxland, one of eight Buys (compared to four Holds and no Sells). "Volumes should improve by at least 100bps through a combination of cross-selling, new geographies, and do-it-yourself. Further, EBITDA and FCF growth will be driven by better volumes as well as cost synergies, which we believe have upside."

Amcor isn't just a high dividend yielder; it's a longtime dividend grower, too.

The company boasts more than four decades of uninterrupted annual hikes to its cash distribution, putting it among the ranks of the S&P 500 Dividend Aristocrats. AMCR marked 42 years with the announcement of a 2% raise, to 65¢ per share, in November 2025. (Note: The dividend amount here has been adjusted for a 1-for-5 reverse stock split, also announced in November, that was completed in mid-January 2026. At the time of the announcement, the increase was listed as a 2% raise to 13¢ per share.)

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6. Energy Transfer LP

Industry: Energy midstream
Market capitalization: $66.7 billion
Distribution yield: 6.9%*
Consensus analyst rating: 1.43 (Strong Buy)

Energy Transfer LP (ET) is one of the continent's largest midstream energy firms. The Dallas-based MLP's assets include roughly 140,000 miles of energy pipelines and other infrastructure across 44 states, and it's responsible for transporting and storing crude oil, natural gas, NGLs, and refined products. Its additional assets include Lake Charles LNG Company; incentive distribution rights from, and a 15% stake in, Sunoco LP (SUN); and a 32% stake in USA Compression Partners LP (USAC).

"We continue to favor ET's dominant energy infrastructure footprint and believe the partnership is well positioned to grow over the last several years," say Stifel analysts Selman Akyol and Timothy O'Toole, who rate Energy Transfer's units at Buy. "While capital expenditures will likely remain elevated in the near-term, we believe ET can maintain an attractive financial position and continue to modestly grow its distribution. We believe investors will be well served by owning ET as demand for U.S. energy increases around the globe."

UBS analyst Manav Gupta (Buy) adds that Energy Transfer is well-positioned to meet growing demand for natural gas to generate electricity for data centers. "ET has a head start, and at this point, it has more third-party customers signed up to supply nat gas to power data centers than their peers," he says. "We see this momentum continuing and expect existing orders to be upsized as ET signs new customers in the next 12-24 months."

This promise has 19 of ET's 21 covering analysts in the Buy camp. The two dissenters call ET a Hold.

As for the distribution? For those who don't remember, Energy Transfer chopped its payout in half in 2020 during the depths of COVID. However, it started a quarterly distribution growth streak in 2022—one that has persisted even after it surpassed post-COVID distribution levels in late 2023.

Energy Transfer says it's committed to growing the distribution even more going forward, though it's taking an understandably cautious approach, targeting 3% to 5% annual growth. Distribution coverage is plenty adequate; estimates for distributable cash flow are just a little less than twice what it needs to afford its payout.

You'll probably notice that I've been using some unfamiliar terminology. That's because ET is a master limited partnership (MLP), which trades like a stock but is internally organized differently. It also uses a few different terms. For instance, shares are "units," and it pays a dividend-esque "distribution" that can be something of a hassle from a taxation standpoint, especially for novices.

* Distribution yield is calculated by annualizing the most recent distribution and dividing by unit price. Distributions are like dividends, but they are treated as tax-deferred returns of capital and require different tax paperwork.

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5. CTO Realty Growth

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Industry: Retail and mixed-use REIT
Market capitalization: $686.1 million
Dividend yield: 7.5%
Consensus analyst rating: 1.00 (Strong Buy)

CTO Realty Growth (CTO) is a retail-oriented REIT that holds a tight portfolio of 21 properties spanning 5.5 million square feet across seven Southeast and Southwest states. It also owns a roughly 15% interest in the aforementioned Alpine Income Property Trust.

It divides its portfolio into three types of properties: grocery-anchored retail, retail "power centers," and retail-focused lifestyle and mixed-used properties. Its properties are also located in and near affluent areas—the portfolio average household income within five miles is $140,000—many of which are benefitting from booming population growth.

The company has actually existed in one form or another since 1902, and it has been paying dividends for more than half a century. But it really put the pedal down on dividend payments when it converted into a REIT in early 2021. The company paid 12¢ per share across 2019; in 2025, it paid $1.52.

The stock has largely responded, delivering a total return (price plus dividends) of 115% since Feb. 1, 2021, versus less than 40% gains for the REIT benchmark.

The few analysts who cover CTO Realty Growth see more good times ahead. Indeed, they're unanimously bullish—all six call the stock a Buy. Thus, while CTO shares don't have have the largest dividend on this list, it's easily the best-rated of our high-yield dividend stocks.

The dividend is in good shape, too. CTO recently provided full-year 2026 AFFO guidance of $2.11-$2.16 per share, which would easily cover the company's $1.52 in annual dividends.

4. Rithm Capital

Industry: Mortgage REIT and alternative asset management
Market capitalization: $5.1 billion
Dividend yield: 10.9%
Consensus analyst rating: 1.40 (Strong Buy)

Most REITs that you read about tend to be "equity REITs," which deal in physical real estate. Specifically, they own (and sometimes operate or manage) properties, whether that's apartments, office buildings, hotels, warehouses, you name it.

But "mortgage REITs" deal in paper real estate. That typically takes the form of residential and/or commercial mortgages, as well as mortgage-backed securities (MBSes). An mREIT will borrow money at short-term interest rates. It will take that money and buy mortgages, MBSes, and/or other mortgage-related securities. It will then earn income from the interest generated by these products—and use much of this profit to pay dividends to its shareholders. In fact, mREITs tend to have higher dividend yields than their traditional real estate cousins.

Rithm Capital (RITM) is technically a mortgage REIT, though it looks much different than the other mREITs that appear later in this list. This "hybrid" mREIT has numerous businesses, including alternative asset management. RITM invests in residential mortgages loans, consumer loans, single-family rentals, mortgage servicing rights (MSRs), residential transitional loans, secured lending and structured products, and commercial real estate.

Ever since the 2020 financing crisis, the company has transformed its business model, growing its mortgage servicing business while also acquiring a variety of debt-related investment opportunities. It continues to be acquisitive, too, completing deals to acquire an alternative asset manager (Crestline Management) and an owner-operator of Class A properties (Paramount Group) in December 2025.

"We believe RITM remains a best-in-class REIT that has diversified its revenue streams and has consistently delivered strong earnings comfortably above its dividend," say Keefe, Bruyette & Woods analysts, who rate the stock at Outperform. "We think the company provides an attractive combination of strong current returns and upside optionality for its valuation to re-rate up as it continues to grow as an alternative asset manager."

The pros love the new-look RITM. Currently, every one of the nine analysts covering the stock call it a Buy. More recently, a dip in shares has some of those analysts excited about the value proposition.

"We believe that the market is lumping alternative managers together and ignoring RITM other business lines," writes Argus Research analyst Kevin Heal (Buy). "It continues to grow its mortgage servicing business, refine its mortgage recapture process with recent partnerships while also taking advantage of new debt-related investment opportunities."

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3. Ellington Financial

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Industry: Mortgage REIT
Market capitalization: $1.7 billion
Dividend yield: 11.5%
Consensus analyst rating: 1.75 (Buy)

Ellington Financial (EFC) is a another mREIT that deals in not only residential and commercial mortgage loans and MBSes, but also consumer loans, asset-backed securities (ABSes) backed by consumer loans, collateralized loan obligations (CLOs), even debt and equity investments in loan origination companies.

Ellington stands out not only for its sky-high yield, but also its status as a monthly dividend stock. That's right: Ellington doesn't pay on a quarterly basis, but each and every month.

EFC's monthly dividend was actually reduced just a few months after its 2024 merger with Arlington Asset Investment Corp., from 15¢ monthly to 13¢, as it worked to absorb Arlington and as a 2022 acquisition, Longbridge Financial, attempted to return to profitability.

Good news on the latter front: Longbridge, a reverse mortgage business, has indeed returned to the black and actually looks attractive as some Baby Boomers choose to remain in their existing homes during retirement.

"We continue to believe a premium to book is warranted given the stable book value, growing mortgage banking businesses (Longbridge and Non-QM [LendSure]), and recent returns that have comfortably covered the dividend," write Keefe, Bruyette & Woods analysts Bose George and Frankie Labetti (Outperform). "Management noted Longbridge is driving profitability both through its ownership stake and through the steady flow of high-quality loans. We continue to expect strong performance from Longbridge and growth in its credit portfolio over time."

"Our thesis remains intact," B. Riley Securities analyst Timothy D'Agostino (Buy) wrote after the company's most recent earnings report. D'Agostino cites three pillars: "1) EFC's reverse mortgage originator, Longbridge, as well as EFC's other differentiated origination platforms; 2) a dynamic platform allowing EFC to shift capital allocation based on the market environment; 3) continued increased long-term financing, [which] should improve the liability side of the balance sheet."

Those represent two of the company's seven Buy calls. EFC's lone remaining rating is a Hold.

2. Trinity Capital

Industry: BDC
Market capitalization: $1.5 billion
Dividend yield: 11.9%
Consensus analyst rating: 1.78 (Buy)

Trinity Capital (TRIN) belongs to another high-yielding acronym industry: business development companies (BDCs).

Fun fact: Congress is actually responsible for the creation of real estate investment trusts, which were brought to life in 1960 with a mandate to return at least 90% of their taxable income back to shareholders as dividends (in exchange for favorable tax treatment). Well, 20 years later, in the hopes of spurring investment in smaller businesses, Congress went back to the same playbook and created BDCs—with the same dividend mandate.

Trinity is an alternative asset manager that focuses on five specific business verticals: technology lending, equipment financing, life sciences, asset-based lending, and sponsor finance.

Loans make up the majority (77%) of the portfolio by investment type, floating-rate loans make up a large (82%) and growing percentage of that part of the debt portfolio. Another 15% is made up of equipment financings, and the rest is equity and warrants. Its roughly 200 portfolio companies include the likes of launch service and spacecraft component provider Rocket Lab (RKLB), non-alcoholic craft brewer Athletic Brewing, and arthroplasty-focused medical device firm Shoulder Innovations.

B. Riley Securities analyst Sean-Paul Adams has a Buy rating on shares, citing the company’s investment-grade rating from Moody’s, SBIC fund approval, record origination levels and increased equipment finance vertical demand.

"TRIN's strong yield, originations momentum, and platform expansion provide meaningful near-term upside potential, in our view, with trends in Sponsor Finance volumes having a minimal impact on net origination growth," he says. "Software exposure is under 10% of the portfolio, selectively underwritten only where the SaaS borrower has a defensible AI moat, insulating TRIN from sector software anxiety."

Adams is one of seven Buy-equivalent ratings on the stock, opposed by just one Hold and one Sell.

Trinity’s sky-high dividend yield (currently almost 12%) is blunted a little bit by a lack of payout growth. The company came public in early 2021, and raised its dividend on a quarterly basis through the end of 2023, but it has kept that distribution level ever since.

That said, Trinity started 2026 by joining the ranks of monthly dividend stocks, so investors will be getting paid much more frequently now. That, as well as the mammoth payout and high ratings from analysts, are more than enough to put Trinity among the best high-yield dividend stocks to buy now.

1. Dynex Capital

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Industry: Mortgage REIT
Market capitalization: $2.8 billion
Dividend yield: 15.7%
Consensus analyst rating: 1.83 (Buy)

Dynex Capital (DX) is the longest-tenured mREIT, founded in 1987. And it's explicitly an "agency" mREIT, which means it deals in mortgages and MBSes from government agencies such as Freddie Mac and Fannie Mae. In fact, its portfolio is 97% agency residential MBSes (RMBSes), and most of the remainder is agency commercial MBSes (CMBSes).

Keefe, Bruyette and Woods, whose analysts rate Dynex at Outperform, was broadly bullish on agency MBS sectors heading into 2026. Agency MBS spreads tightened in the back half of 2025, but KBW believed spreads would benefit from a steeper yield curve as the Federal Reserve cut rates. The year hasn't played out that way so far, but KBW still remains upbeat about DX.

"We still believe a modestly steepened yield curve and stable rate environment is a generally constructive backdrop for financials," KBW wrote recently. "We ... remain fairly constructive on agency MBS REITs and remain [outperform] on [Annaly Capital Management, NLY] and DX."

KBW is just one of a handful of analyst outfits that cover Dynex, which is typical for the mREIT industry. Still, among these few pros, the bulls are the majority—DX has four Buys versus two Holds and no Sells.

Dynex pays a monthly dividend, and a generous one at that—well more than 15% as I write this. However, mortgage REITs tend to have shakier dividend histories than traditional stocks and even equity REITs, and DX is no exception. Its dividend was hacked away by 85% between 2012 and 2020, to 13¢ per share monthly. But things are looking up recently: The company finally raised its dividend in mid-2024, to 15¢, then again in February 2025, to 17¢.

Still, that payout history is an important reminder that double-digit yields are hardly risk-free.

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Do All Companies Pay Dividends?

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Not all companies pay dividends. Some companies choose not to, while other companies cannot afford to.

As you can tell by this list, the best dividend stocks are normally slow-and-steady companies that have consistent operations. While it might be possible for a small software company or biotech firm to double its share price overnight, these companies rarely pay dividends because they don’t have much in the way of profits—and what they do have, they want to spend on other things, like research and development to continue growing.

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How Often Do Companies Pay Dividends?

The cycle of paying dividends is always different depending on the company. While it’s generally true that most U.S. corporations opt to pay their shareholders a dividend once per quarter, the dates aren’t fixed.

Specifically, one company might pay you on a January-April-July-October payment cycle while another opts for February-May-August-November.

Complicating things further, some companies pay dividends twice a year, some pay once a year, and some even pay “special” unscheduled dividends.

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What Should Income Investors Look for in a Dividend Stock?

There are a host of things to consider when looking for the best dividend stocks.

First, and foremost, you should make sure you understand the underlying business and its strategy; just because a company pays a dividend doesn’t mean it can’t crash and burn.

If you generally like what you see, then you should consider the quality of the dividends including the history of payouts and the payout ratio as a portion of total earnings.

Then, you should consider the quantity of that dividend and the potential for future growth in payouts.

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Related: The Best Dividend ETFs You Can Buy Right Now

We love exchange-traded funds (ETFs) because they can provide one-click access to hundreds, even thousands of stocks, while charging often minuscule fees.

Related: 10 Great Fidelity ETFs for Investors Who Want Something Different

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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Schwab Target-Date Funds: 26 Funds That Do It All for You

Charles Lewis Sizemore, CFA — Thu, 04 Jun 26 08:00:29 -0400

Target-date funds (TDFs) are a staple of retirement planning, and Schwab is one of the best providers of this basic investment need ... for several reasons.

Most of the funds you hold will require you to do something with them over time. If you own a bunch of stock funds in your 30s, for instance, you'll likely need to sell off some shares as you age and increasingly position yourself in bond funds instead. But TDFs effectively do this work for you, altering their portfolios over time to meet the needs of their shareholders based on the fund's target retirement date.

All TDFs do this, but Schwab target-date funds stand out for a few reasons:

Their target-date funds are more cost effective than most.
Like most Schwab funds, you can begin purchasing shares for as little as $1.
Schwab boast two target-date series, giving retirement savers more than one option.

Today, I'll introduce you to Schwab's 26 target-date funds, which are split between two different series. I'll also provide you with some basic information about how TDFs work.

Editor's Note: Tabular data is up-to-date as of June 1, 2026.

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What Is a Target-Date Fund?

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Most people are familiar with funds that hold either nothing but stocks or nothing but bonds. They're the most common type of fund by far.

However, there are also "balanced" or "allocation" funds that hold a blend of both stocks and bonds—say, 60% equities and 40% debt.

Target-date funds (also known as "lifecycle funds," "age-based funds," or "dynamic-risk funds") take the ball and keep running. These funds adjust that blend of stocks and bonds over time to accommodate investors' needs as they approach a target retirement date. Fund families usually create target-date funds in five-year increments (say, 2025, 2030, 2035, etc.).

As you can imagine, they're an incredibly popular product among retirement planners. But you should know that TDFs are predominantly found as mutual funds; in fact, iShares boasts the only series of target-date ETFs.

The math behind picking a target-date fund is simple enough.

Target-Date Funds Example

Let's say you turned 45 years old in 2025, and that you expect to work until age 70. Your expected retirement date would be in the year 2050. So, investing in a target-date fund with a target retirement date of 2050 would make sense.

Does your age fall in between five-year increments? That's OK! Let's say your retirement date would be in 2053. You could choose either a 2050 fund or a 2055 fund, or own shares in both.

What if your expected retirement age changes? No problem! Target-date funds are normal mutual funds and can be bought or sold as your needs change.

The target-date fund's allocation to stocks will generally never go to zero. Retirees need growth too, and most should maintain at least a little exposure to the stock market. The beauty of the target-date fund is that it changes your asset allocation to match your risk tolerance as you age—and it does it automatically without requiring you to actually do anything.

What Is Asset Allocation?

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If we're all being honest with one another for just a moment, we'd probably all admit to ourselves that stock picking is the most exciting part of investing. It's stimulating, it feels good to pick right, and if you do it well, you can add some zeros to your net worth.

But when push comes to shove, your asset allocation strategy—while an absolute yawner—is far more important than individual stock picking when it comes to meeting your financial goals. Asset allocation sits at the core of target-date funds and, really, at the core of all financial planning.

So ... what exactly is asset allocation?

Equities/stocks (or stock mutual funds)
Fixed-income investments (bonds/debt or bond funds)
Cash
Alternative assets such as gold, commodities, or real estate

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Asset Allocation Example

Let's say your ideal asset allocation had you 65% allocated to stocks and 35% allocated to fixed income.

First, let's say the stock market crashes. Your stock weighting has suddenly dropped to just 55%, and your fixed-income investments have jumped to 45% of your portfolio's worth! You need to rebalance your portfolio to get back to 65/35. You would do that by selling off some of the fixed-income investments and buying some stock.

Now, let's say instead that the stock market shoots higher, and you find yourself allocated 75% to stocks and 25% to fixed-income investments. If you wanted to rebalance back to 65/35, you would sell some of your stocks and buy new fixed-income investments.

The idea here is to constantly reduce risk and smooth out your returns by buying low and selling high.

A Look at Schwab Target-Date Funds

Charles Schwab became a household name by offering basic and affordable brokerage services to ordinary people. Schwab was the first real mass-market discount broker and a major trailblazer in lowering trading costs for investors. Today, it remains a giant among stock apps.

Schwab has applied that same focus on the client to its suite of low-cost mutual funds and ETFs, which have amassed an impressive $1 trillion-plus in assets under management (AUM). And Schwab target-date funds are an integral part of those offerings.

Schwab breaks its TDFs into two categories:

Schwab Target Funds
Schwab Target Index Funds

I'll introduce you to each line and go through a few examples of each.

Schwab Target Fund Series

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Schwab Target Funds provide investors with varying mixtures of stocks and bonds, not by owning individual securities, but by holding mostly Schwab mutual funds, with the occasional outside fund.

Schwab manages the asset allocation. Each fund starts out with a high percentage of assets in stocks, and that gradually declines over time as the fund buys more bonds. (As a general rule, then, the farther out the target date, the greater the exposure to equities.)

It makes sense: When a retiree is far from retirement, they're more concerned with growing their money, and they have plenty of time to make up losses suffered in volatile markets. But when a retiree gets closer to retirement, their needs shift to preserving the wealth they've accumulated and generating income from their investments for their post-salary years.

Schwab Target Funds currently range in five-year increments from 2010 to 2070, with new iterations added over time. Here's a quick look at the lineup and their costs, many of which have been recently lowered.

Schwab Target 2010 Fund (SWBRX): 0.25%
Schwab Target 2015 Fund (SWGRX): 0.27%
Schwab Target 2020 Fund (SWCRX): 0.28%
Schwab Target 2025 Fund (SWHRX): 0.29%
Schwab Target 2030 Fund (SWDRX): 0.38%
Schwab Target 2035 Fund (SWIRX): 0.44%
Schwab Target 2040 Fund (SWERX): 0.48%
Schwab Target 2045 Fund (SWMRX): 0.52%
Schwab Target 2050 Fund (SWNRX): 0.54%
Schwab Target 2055 Fund (SWORX): 0.56%
Schwab Target 2060 Fund (SWPRX): 0.57%
Schwab Target 2065 Fund (SWQRX): 0.58%
Schwab Target 2070 Fund (SWRRX): 0.58%

Let's compare a handful of the funds.

Schwab Target 2030 Fund (SWDRX)

The Schwab Target 2030 Fund (SWDRX) is currently allocated in such a way that Schwab feels is appropriate for investors who are just a few years away from retirement.

SWDRX currently invests in a roughly 55/45 blend of stocks and bonds.* Bond exposure is provided through several funds, most prominently the Schwab U.S. Aggregate Bond Index Fund (SWAGX), which accounts for a greater slice of the fund's overall assets (17%) than any other fund. This and other debt holdings provide the bulk of the TDF's income.

The equity "sleeve" is most concentrated in domestic large-cap companies, which are expected to provide the bulk of capital appreciation. The Schwab S&P 500 Index Fund (SWPPX) is the biggest stock-focused holding and second-largest holding overall, at 16% of assets.

A portfolio that's split roughly 55% equities/45% debt is fairly aggressive for a person who's close to retirement, at least compared to historic norms. The old financial planning rule of thumb was that your allocation to stocks should be roughly 100 minus your age. So, assuming you're around 60 now, a 40% allocation to stocks would be "about right." By the time you retire, by that logic, you'd want closer to 35%.

Of course, rules of thumb are not ironclad laws. Some financial planners recommend a more aggressive 120 minus your age as their standard, for instance. In that event, you'd want a 55% allocation to stocks, which would put SWDRX right in the sweet spot.

* Technically, it's 55% stocks, 42% bonds, and 3% cash. For simplicity's sake, I'm going to simply lump cash (usually a very small portion of assets) in with bonds as I discuss these funds.

Schwab Target 2050 Fund (SWNRX)

The Schwab Target 2050 Fund (SWNRX) would be appropriate for a person in mid-career, somewhere in their early to mid-40s.

As you might expect, this target-date fund is more aggressive, at 89% stocks and 11% bonds. Among other noteworthy features, SWNRX's portfolio invests almost a third of its assets in (predominantly developed-market) foreign equities, which tend to lag their American counterparts in growth but offer more dividend income. It gets a good chunk of this exposure from Schwab International Opportunities Fund (SWMIX), which is its second largest stock-fund holding at 13%.

No. 1, of course, is the Schwab S&P 500 Index Fund at nearly 20%.

Again, a roughly 90/10 split between stocks and bonds is a bit aggressive at this age. That's not necessarily a dealbreaker, of course. Looking back, over a 20- to 30-year window, that level of aggression has generally paid off. Just make sure you're comfortable with a feisty allocation, especially if you've already managed to amass a sizable nest egg that doesn't necessarily require high aggression to reach your retirement "number."

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Schwab Target 2070 Fund (SWRRX)

Finally, let's take a look at the series' newest member: Schwab Target 2070 Fund (SWRRX).

This is designed for that recent college graduate looking to kickstart their retirement savings. The allocation is as aggressive as you'd expect, with 97% of the fund's assets dedicated to in stocks. Apart from the expectedly high allocation to the Schwab S&P 500 Index Fund (~20%), SWRRX also has a hefty 35% weight to developed and emerging markets.

Target-date funds rarely hold sector-specific products, like a utility-stock fund or a financial-stock fund. However, Schwab's TDF line includes exposure to real estate investment trusts (REITs) via the Schwab Global Real Estate Fund (SWASX). SWRRX specifically allocates about 5% of its assets to the fund, which is greater than you'll see in Schwab Target Funds that are closer to their target date.

A worker just starting their career will generally not have a lot of money to invest. So, averaging into an aggressive target-date fund like this is generally appropriate. With four decades or more until retirement, you can afford to take risk, as you have plenty of time to make up losses. And given the modest sums you're likely investing to get started, you're not putting a substantial nest egg at risk.

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Schwab Target Index Funds

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The difference between Schwab Target Funds and Schwab Target Index Funds isn't quite what it seems. Both series of target-date funds are actively managed—that is, human managers determine the blend of holdings in each and every one of these mutual funds.

However, Schwab Target Funds hold a mix of actively managed and index mutual funds (index funds try to replicate a rules-based index, like the S&P 500). But Schwab Target Index Funds get all of their stock and bond exposure exclusively from index exchange-traded funds (ETFs).

If you value low cost above all else, Schwab Target Index Funds are the better option. Because they invest solely in low-cost Schwab ETFs, these target-date funds have some of the lowest expense ratios in the business, at just 0.08%.

Schwab Target 2010 Index Fund (SWYAX): 0.08%
Schwab Target 2015 Index Fund (SWYBX): 0.08%
Schwab Target 2020 Index Fund (SWYLX): 0.08%
Schwab Target 2025 Index Fund (SWYDX): 0.08%
Schwab Target 2030 Index Fund (SWYEX): 0.08%
Schwab Target 2035 Index Fund (SWYFX): 0.08%
Schwab Target 2040 Index Fund (SWYGX): 0.08%
Schwab Target 2045 Index Fund (SWYHX): 0.08%
Schwab Target 2050 Index Fund (SWYMX): 0.08%
Schwab Target 2055 Index Fund (SWYJX): 0.08%
Schwab Target 2060 Index Fund (SWYNX): 0.08%
Schwab Target 2065 Index Fund (SWYOX): 0.08%
Schwab Target 2070 Index Fund (SWYPX): 0.08%

Let's take a look at the three Schwab Target Index Funds that match the retirement dates of the Schwab Target Funds above.

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Schwab Target 2030 Index Fund (SWYEX)

The Schwab Target 2030 Index Fund (SWYEX) is allocated similarly to the Schwab Target 2030 Fund, splitting its assets roughly 55/45 between stocks and bonds.

It gets the lion's share of its debt exposure (36%) via the Schwab U.S. Aggregate Bond ETF (SCHZ); another 35% is allocated to the Schwab U.S. Large Cap ETF (SCHX). SWYDX also holds funds focused on international equities, short-term Treasuries, Treasury Inflation-Protected Securities (TIPS), real estate investment trusts, and small-cap stocks, among other strategies.

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Schwab Target 2050 Index Fund (SWYMX)

The Schwab Target 2050 Index Fund (SWYMX) is more aggressive than SWYEX, and on par with its actively managed 2050 counterpart SWNRX, by allocating 89% of assets to stocks and 11% to bonds. The Schwab U.S. Large Cap ETF accounts for nearly half of the portfolio's weight by itself.

A large allocation to large caps also means a large allocation to technology stocks, which make up a full quarter of the portfolio. That's not necessarily a bad thing, of course, as U.S. tech has been a major engine of growth over the past 20 years. But tech shares are also notoriously volatile and occasionally get the short end of the stick, as they did for a stretch during 2025's almost-bear market, as well as for 2026's early innings.

Schwab Target 2070 Index Fund (SWYPX)

Finally, let's look at the Schwab Target 2070 Index Fund (SWYPX).

SWYPX is unsurprisingly loaded with equities: At a 97% allocation to stocks, this is about as aggressive as a target-date fund can get.

Just like in the Schwab Target 2070 Fund, SWYPX allocates a massive portion of assets (52% currently) to a U.S. large-cap stock fund (SCHX, in this case). It also has a healthy helping of developed- and emerging-markets stocks, at nearly a third of assets.

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How Do Schwab Target-Date Funds Compare to Those From Fidelity, Vanguard, and Others?

As a general rule, your experience with Schwab Target Funds is going to be very similar to what you would get in target-date mutual funds managed by other fund sponsors like Fidelity or Vanguard. Most offer low-cost access to an asset allocation model that glides from more aggressive to more conservative as you reach your targeted retirement date.

But there can be differences, and those differences matter.

Let's compare the Schwab Target 2040 Index Fund (SWYGX) to the Vanguard Target Retirement 2040 Fund (VFORX) and Fidelity Freedom Index 2040 Fund (FBIFX). All have rock-bottom expense ratios of 0.08%, 0.08%, and 0.12%, respectively. That's close enough that fees alone aren't going to move the needle much in terms of returns.

But the asset allocations can be noticeably different.

SWYGX: 76% stocks (53% U.S. stocks, 23% foreign stocks), 24% in fixed income and cash
VFORX: 74% stocks (43% in U.S. stocks, 31% foreign stocks), 26% in fixed income and cash
FBIFX: 80% stocks (47% U.S. stocks, 33% foreign stocks), 20% in fixed income and cash

In this example, Schwab's target-date fund is less aggressive than the Fidelity target-date fund but more aggressive than the Vanguard target-date fund. That's neither good nor bad. But you should measure the relative aggressiveness against your own investment objectives when choosing among the target-date funds.

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Should I Always Buy the Target-Date Fund That Corresponds Most Closely to My Estimated Retirement Year?

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In a word, no. Or at least not necessarily.

Target-date mutual funds are designed to make the asset allocation process simple. And they do. But this simplicity is made possible by making assumptions about your investment objectives and risk tolerance based on only one real factor: your age.

You might be significantly more aggressive or conservative than your age would suggest for any number of reasons. Perhaps you have a guaranteed inheritance that gives you the flexibility to be more aggressive. Or perhaps you have immediate cash needs or a sick family member that requires you to be more conservative.

As a very general rule, target-date mutual funds give you a great starting point. But you should always consider your overall financial situation and use the target funds in that context.

Are Indexed Target-Date Funds Better Than Actively Managed Funds?

This is an eternal debate, and the answer is: "It depends."

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Related: 15 Stocks You Can Buy and Hold Forever

So if you're looking for a starting point for your own portfolio, look no further. Check out our list of the best long-term stocks for buy-and-hold investors.

Related: 7 Best Vanguard Dividend Funds Right Now

What's better than a smart, sound dividend income strategy? How about a smart, sound dividend income strategy with very little money coming out of your pocket?

If that sounds good to you, you need look no farther than low-cost pioneer Vanguard, which offers up a number of payout-oriented products. Find out what you need to know in our list of seven top-notch Vanguard dividend funds.

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These 7 Fidelity Funds Are a Perfect Fit for Beginners

Charles Lewis Sizemore, CFA — Wed, 03 Jun 26 08:30:02 -0400

Getting started as an investor can be overwhelming. After all, there are more than 7,000 mutual funds to choose from. So sometimes it helps to start simply, by looking at one or two fund families that have built a reputation for quality.

To us, that includes looking at Fidelity—and more specifically, low-cost Fidelity index funds that can serve as the building blocks of a starter portfolio.

Warren Buffett himself has repeatedly said that index funds are the best option for most investors. And Fidelity is one of the leading managers of index funds with some of the absolute lowest fees in the business.

The question becomes: How do you go about deciding which Fidelity mutual funds or exchange-traded funds to buy? Well, we're here to help with that.

Read on as we explore the best Fidelity index funds for the beginning investor. These funds span a number of investing strategies, meaning there should be at least one fund here for everyone—and most investors should see several suitable options for building a starter portfolio. Better still? Unlike many other mutual funds that require hundreds if not thousands of dollars to get started, you can buy these Fidelity funds for as little as $1.

And for those who are very new to the game, we'll also introduce you to index investing as well as Fidelity itself. then we'll finish things off by answering a few frequently asked questions.

Editor's Note: Tabular data presented in this article is up-to-date as of June 1, 2026.

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What Is an Index Fund?

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If you want to understand index funds, it helps to understand actively managed funds first.

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. Once upon a time, this is how all mutual funds were run.

Index funds, which came into being about 50 years ago, 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.

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's heaviest weights go to tech stocks Nvidia (NVDA, ~8%), Apple (AAPL, ~6%), and Microsoft (MSFT, ~5%). So an index fund mimicking the S&P 500 should have 8% of its assets invested in NVDA, another 6% in AAPL, and 5% in MSFT.

An active manager, on the other hand, doesn't have those constraints. Their research might lead them to allocate the same 6% to AAPL, but 15% to NVDA and none to MSFT. It's up to the manager's discretion.

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.

Index investing generally comes with much lower costs in terms of management fees and trading expenses. It's also more tax efficient, and performance 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.

Why Fidelity?

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Fidelity is a leader in investment funds—both mutual funds and exchange-traded funds (ETFs).

Today, this premier mutual fund company has a whopping $18 trillion in assets under administration. That's in large part because it has adapted with the times. The company rose to fame on the backs of its star active managers, such as Peter Lynch, the long-time manager of the Fidelity Magellan Fund (FMAGX) who averaged an incredible 29.2% per year between 1977 and 1990. But over the past three decades, Fidelity has evolved into a leader in low-cost index funds and even broke new ground by offering zero-fee index funds via its Fidelity ZERO line.

Apart from its mutual fund management business, Fidelity also operates one of the biggest brokerage houses in the United States. It's also the largest record keeper of 401(k) plans, and one of the largest providers of 403(b) plans for nonprofit organizations. Fidelity provides roughly 27,000 companies with defined-contribution and defined-benefit plans.

Today, we’re going to take a look at the very best Fidelity index funds for the everyday investor. They run the spectrum in terms of styles and strategies, but all of the best Fidelity index funds share one thing in common: They're extremely cost-efficient ways for investors to quickly diversify.

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7 Great Fidelity Index Funds for Beginners

I'm not trying to call out the seven absolute best Fidelity index funds in existence, nor am I trying to create a comprehensive portfolio.

Instead, I'm presenting a list of Fidelity index funds that can act as a starting point for beginner investors, or as a "most used" list for investors who want to rebuild part of their core. These funds cover all the major bases, providing exposure to U.S. stocks, developed- and emerging-market equities, and government and corporate bonds. Put differently: This list represents most of what the average investor needs in a basic portfolio.

So without further ado, let's look at the best Fidelity index funds for beginners.

Best Large-Cap Index Fund: Fidelity 500 Index Fund

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Style: U.S. large-cap stock
Assets under management: $832.2 billion
Dividend yield: 1.0%
Expense ratio: 0.015%, or $15¢ per year for every $1,000 invested
Minimum initial investment: None

Yes, I'm starting with an S&P 500 index fund. Boring? Yes. Overdone? Perhaps. But if a fund provider has an S&P 500 index product, I will virtually always start a list of that provider's best products with that S&P 500 fund.

Why? Because even professional mutual fund managers—literal experts who are paid to try to beat the large-cap* index—consistently struggle to get over the benchmark. According to S&P Dow Jones Indices data from the end of 2025, only 14% of all actively managed large-cap funds were able to out-return the S&P 500 over the trailing 10-year period. That number drops to just 10% over the trailing 15 years.

"The S&P 500 is so hard to beat," says Daniel Sotiroff, Senior Analyst for ETF and Passive Strategies at Morningstar. "I know guys that rate active managers in all these categories, and even they’re like, 'I'm not buying actively managed large blend; I'm just indexing,' because it’s so brutally tough to beat a dirt-cheap index fund in the large blend category."

If the pros can't beat it, that's a pretty good indication that we should just join it—which we can do by investing in a simple S&P 500 Index fund like the Fidelity 500 Index Fund (FXAIX).

FXAIX exposes you to all the market sectors, though not equally. As I mentioned earlier, the biggest chunk of the fund's assets (roughly a third) is invested in tech stocks like Nvidia and Apple. Some sectors, like utilities and real estate, only account for about 2% to 3% each.

Still, if you believe in the American growth story, then buying a basket of America's biggest and most recognized companies only makes sense. Even Warren Buffett himself (considered by many to be the greatest investor in history) has said on multiple occasions that most investors, most of the time, should simply invest in an S&P 500 index fund and let it run.

A few other considerations?

The Fidelity 500 Index Fund has a razor-thin expense ratio of 0.015%. That's virtually impossible to beat. It's even cheaper than S&P 500 ETFs. No wonder, then, that FXAIX has attracted an incredible $832 billion in assets under management.

Also, S&P 500 index funds' turnover (the percentage of a fund's holdings that are bought and sold in a given year) tends to be low, at just a couple percent in any given year. Why does it matter? Because mutual funds have to distribute net capital gains from trading back to shareholders; those gains are taxable, with long-term gains taxable at more favorable capital gains rates, and short-term gains taxable at even worse ordinary income tax rates.

In short: Low turnover makes S&P 500 funds an extraordinarily tax-efficient way to invest. So, if you find yourself with limited IRA or 401(k) funds available to invest, don't worry—you can stuff a fund like FXAIX into your taxable brokerage account, too.

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Best Small-Cap Index Fund: Fidelity ZERO Extended Market Index Fund

Style: U.S. mid- and small-cap stock
Assets under management: $2.5 billion
Dividend yield: 1.1%
Expense ratio: None
Minimum initial investment: None

You'll pay low fees on virtually any Fidelity fund you own. But with a select few, you'll actually pay no fees.

Yes, you read that right. The Fidelity ZERO Extended Market Index Fund (FZIPX) plugs investors into a broad universe of U.S. mid- and small-cap stocks, and it does so with an expense ratio of 0%.

That's nothing. Nada. Draw a circle with your finger. FZIPX charges that much in fees.

Large-cap stocks are often relied upon to generate not just capital gains, but also some level of stability and dividend income. However, investors who want to generate outperformance often try to allocate some of their portfolio to smaller firms. Generally speaking, small- and mid-cap companies have more growth potential than larger firms. And as these stocks become noticed by institutional investors and fund managers, or begin qualifying for certain indexes, they can begin to enjoy large-scale investments that drive their prices even higher.

But smaller stocks tend to be more volatile. That's because their underlying companies might be dependent on just one or two products or services, which means a single disruption (be it the economy, a competitor, what have you) could have massive financial consequences. They also have less access to capital than their larger peers, so they're less likely to get a lifeline should they suffer from broader economic headwinds.

We can defray some of that risk by investing in hundreds or even thousands of mid- and small-cap stocks via funds like the FZIPX.

Fidelity ZERO Extended Market Index Fund tracks the Fidelity U.S. Extended Investable Market Index, designed to reflect the performance of U.S. mid- and small-cap stocks. In this case, Fidelity defines that as the largest 2,500 U.S. companies by market capitalization excluding the largest 500. It's float-adjusted market cap-weighted, so the larger the company (based on its publicly available shares), the more assets FZPIX dedicates to holding it. To further keep costs down, the fund uses statistical sampling to replicate the returns of the index.

As of right now, only one of Fidelity ZERO Extended Market's 2,000 or so holdings has a weight of more than 1%. That diversification means the fund's overall performance isn't beholden to a select few names. By the way: That one stock is SanDisk (SNDK), which has been disappearing from mid-cap stock funds after a big run sent its worth to more than $250 billion, so we should expect it to leave FZIPX soon, further evening out the asset distribution.

While mid- and small-cap stocks historically deliver more growth than their larger peers, they've significantly lagged since 2022. The good news? They've started to outperform again in 2026. And FZIPX allows people to capture that growth for the absolutely unbeatable price of free.

There is one condition to the zero fees in the ZERO line of funds, however: They're only available in Fidelity brokerage accounts. That might not be a problem, as Fidelity brokerage accounts are generally well regarded and competitive with the other major online brokers. But if you do not already have a Fidelity account, you'd need to open one.

Can't access FZIPX? That's OK. The Fidelity Small Cap Index Fund (FSSNX) is a respectable fund I've highlighted in other articles.

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Best Total Market Fund: Fidelity Zero Total Market Index Fund

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Style: U.S. all-cap stock
Assets under management: $38.6 billion
Dividend yield: 0.9%
Expense ratio: None
Minimum initial investment: None

If you're looking to tailor your portfolio, you can use large-cap funds like FXAIX and small-cap funds like FZIPX to adjust your allocations to different-sized stocks. However, if you want to take it easy, a "total" stock market index fund will provide investors with one-stop access to large, medium, and even small companies.

There are plenty of total-market funds out there. However, Fidelity Zero Total Market Index Fund (FZROX) is a rarity in that it provides broad exposure to the entire universe of U.S. stocks for absolutely zero expenses and no investment minimum.

FZROX tracks the Fidelity U.S. Total Investable Market Index, which is a float-adjusted market cap-weighted index designed to reflect the performance of the full U.S. equity market (in other words, large-, mid-, and small-cap stocks). Admittedly, "total" is a bit exaggerative; to keep costs down, the fund will use statistical sampling techniques to replicate the returns of the index without necessarily having to own every underlying stock.

Still, at nearly 2,700 stocks currently, FZROX is as close to owning "the market" as you'd realistically need to get. he fund holds virtually every public U.S. company you've ever heard of—and likely thousands you haven't. Just understand that the cap weighting means you're still getting very heavy exposure to large caps, and less to mid- and small caps.

If you don't have a Fidelity brokerage account, the Fidelity Total Market Index Fund (FSKAX) charges a thin 0.015% in annual expenses and also has zero minimum initial investment.

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Best International Fund: Fidelity ZERO International Index Fund

Style: International large-cap stock
Assets under management: $11.6 billion
Dividend yield: 2.3%
Expense ratio: None
Minimum initial investment: None

America isn't the only game in town.

Yes, the U.S. is the world's premier idea factory and the engine that makes the global economy go. But there are hundreds or even thousands of quality companies in other developed markets (established, slower-growing) and emerging markets (less stable but faster-growing) outside America's shores.

And while U.S. stocks have bested their peers over the past decade, there are long stretches when foreign stocks outperform, such as between 2000 and 2008. More recently, while U.S. equities performed admirably in 2025, international stocks simply crushed it.

So if you are an American investor, it makes sense to keep the bulk of your investments in American companies. But it also makes sense to diversify and allocate at least a small portion of your funds into non-U.S. stocks.

For exposure to developed and emerging markets, the Fidelity ZERO International Index Fund (FZILX) is a solid option. Like its sisters in the Fidelity ZERO funds family, the fund offers zero expenses and no minimum investment. The fund tracks the Fidelity Global ex U.S. Index, a float-adjusted market capitalization-weighted index designed to reflect the performance of non-U.S. large- and mid-cap stocks. At the moment, that's a basket of more than 2,230 stocks with significant holdings in companies domiciled in Japan, the U.K., Canada, and China, among other countries.

If you don't have a Fidelity brokerage account, the Fidelity International Index Fund (FSPSX) charges just 0.035% in annual fees and has no minimum to invest.

Best Sector Fund: Fidelity Real Estate Index Fund

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Style: Sector (Real estate)
Assets under management: $2.9 billion
Dividend yield: 2.8%
Expense ratio: 0.07%, or 70¢ per year for every $1,000 invested
Minimum initial investment: None

Real estate is one of the world’s oldest asset classes and a preferred store of value for the world's wealthy since the dawn of civilization. Having a portion of your assets dedicated to real estate investments only makes sense, and Fidelity makes it easy via the Fidelity Real Estate Index Fund (FSRNX).

This Fidelity index fund tracks the performance of the MSCI US IMI Real Estate 25/25 Index, which results in a collection of about 155 real estate investment trusts (REITs).

REITs are a special class of company that owns and sometimes operates real estate. They enjoy special tax considerations in exchange for distributing at least 90% of their taxable income to shareholders as dividends. The index has certain limits in place—no holding can exceed 25% of the index's assets, and all holdings that are weighted above 5% cannot collectively exceed 25% of the index's assets—that keep the fund diversified and prevents it from being concentrated in a small number of mega-cap REITs.

Real estate has traditionally been a good inflation hedge, as many commercial leases have automatic rent increases tied to inflation. So, if inflation lasts longer than we hope or expect, having a little money in real estate will likely pay off nicely.

If you prefer the convenience and liquidity of an ETF, Fidelity offers the Fidelity MSCI Real Estate ETF (FREL). FREL tracks a different index, but one that still holds REITs, and it charges a skinflint 0.084% in annual expenses.

Best ESG Fund: Fidelity U.S. Sustainability Index Fund

Style: U.S. large-cap stock
Assets under management: $5.9 billion
Dividend yield: 1.0%
Expense ratio: 0.11%, or $1.10 per year for every $1,000 invested
Minimum initial investment: None

While it's not as popular among older generations, younger investors passionately believe in ethical investing. They want to do well by doing good, allocating their capital to companies that meet their environmental, social and governance (ESG) standards.

Every investor's definition of "ethical" will be a little different, so no mutual fund will ever be perfect. But if you're looking for a single solution that should get you close, the Fidelity U.S. Sustainability Index Fund (FITLX) is a good option.

This Fidelity fund tracks the performance of the MSCI USA ESG Index, which represents the performance of stocks of large- to mid-cap U.S. companies with high environmental, social, and governance performance relative to their sector peers, as rated by MSCI ESG Research. As a practical matter, this means excluding companies in the tobacco, firearms, adult entertainment industries as well as many energy companies deemed to be heavy polluters. FITLX will also exclude companies with a history of bad labor relations or poor corporate governance.

Past that, though, FITLX and its 260 holdings are going to look a lot like your standard large-cap fund, including top holdings such as Nvidia, Microsoft, Eli Lilly (LLY), and Visa (V).

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Best Bond Fund: Fidelity U.S. Bond Index Fund (FXNAX)

Style: Intermediate core bond
Assets under management: $69.0 billion
SEC yield: 4.4%*
Expense ratio: 0.025%, or 25¢ per year for every $1,000 invested
Minimum initial investment: None

As 2022 taught us, no one should have 100% of their investable capital in stocks. Stocks can be wildly volatile. Having a portion of your capital in safe short-term bond funds can lower your overall portfolio volatility.

Bond funds are pretty diverse. You can leverage short-term bonds to collect a little yield while shielding your investments. You can try to collect a high income from corporate "junk" or emerging-market debt. You can even skirt federal tax on the income from municipal bonds.

But if you're just looking for blanket bond exposure, it's difficult to beat the Fidelity U.S. Bond Index Fund (FXNAX).

This Fidelity index fund tracks the performance of the Bloomberg U.S. Aggregate Bond Index (or "the Agg"), a premier debt index. You could consider it the S&P 500 of bond indexes.

FXNAX owns more than 10,300 different investment-grade bonds across a variety of issuers and maturities. U.S. Treasuries are tops at 45% of assets, followed by investment-grade corporate bonds and pass-through mortgage-backed securities (MBSes) at another 25% or so each. The remaining sliver of assets is sprinkled around other government-related debt, U.S. agency bonds, and commercial mortgage-backed securities (CMBSes), among other issues. Maturities run the gamut, from more than 20 years to less than one year, though the average remaining maturity is about 8 years.

In short, these are moderately-dated bonds, and ratings agencies have determined investors have a high chance of receiving their money back from them. (Hence “investment-grade.”)

One bond-fund metric to look at is duration, which is a measurement of risk. FXNAX currently has a duration of 5.8 years, which implies that if interest rates grew by 1 percentage point, the fund should suffer modest short-term capital losses of about 5.8%. (And vice versa: A 1-point hike should mean a gain of about 5.8%.) That's a moderate amount of risk, and you're getting a nice yield of more than 4% in return.

* 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.

What Are Fidelity Zero Funds?

Fidelity ZERO Funds are a line of zero-minimum, zero-expense index funds launched by Fidelity in 2018. Currently, there are four Fidelity ZERO funds:

Fidelity Zero International Index Fund (FZILX)
Fidelity Zero Total Market Index Fund (FZROX)
Fidelity Zero Extended Market Index (FZIPX)
Fidelity Zero Large Cap Index Fund (FNILX)

The ZERO funds are true to their name: Investors literally pay nothing in management fees. But there are conditions. The Fidelity ZERO funds are only available in Fidelity brokerage accounts. That might not be a problem, as Fidelity brokerage accounts are generally well regarded and competitive with the other major online brokers. But if you do not already have a Fidelity account, you'd need to open one.

Fidelity ZERO Funds are, strictly speaking, index funds. But they are based on customized indexes that Fidelity has created in-house. The typical large-cap index fund tracks the S&P 500 or another recognized index, but they have to pay licensing fees to the index creator. Fidelity avoids the licensing fees by creating their own indexes, which allows them to pay the savings on in the form of zero fees.

The Fidelity indexes tend to be very similar to popular indexes such as the S&P 500, but they are not the same. So, if tracking a specific index is a priority for you, you should take that under advisement.

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Should You Use An Active or Passive Fund Strategy?

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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.

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Mutual Funds vs. ETFs

Mutual funds and ETFs are similar vehicles that have a few key differences. But also confusing the conversation is that many people use the term "index funds" interchangeably with "exchange-traded funds (ETFs)," and "actively managed funds" with "mutual funds."

While there's a lot of overlap, they're not the same thing. So, we'll tackle the differences between mutual funds and ETFs, and explain why people are so quick to automatically equate them to index or actively managed products.

Mutual Funds

When you invest in a mutual fund, you (or your broker) actually send money to the fund company, which in turn uses the cash to buy stocks or other investments. When you want to sell, the fund company will sell off a tiny piece of the securities the mutual fund owns and send you the proceeds. Money generally enters or exits the fund once per day.

Mutual funds are the traditional vehicles of choice for 401(k) plans or other situations when an investor is dollar-cost averaging, which means investing in regular installments. If you have a specific dollar amount to invest each month, whether it's $100 or $10,000, a mutual fund will generally be able to accommodate you easier than an exchange-traded fund.

But the key here is that you don't need a specific amount based on the price of a share. Once you meet the minimum initial investment (a certain dollar amount you must invest when you first buy the fund), you can generally invest just about any amount.

The thing is, most mutual funds are actively managed, which is why people conflate "mutual funds" and "actively managed funds." But there are numerous index mutual funds.

The best Fidelity mutual funds tend to be some of the cheapest in the business in terms of fees, many of them indexed. And there are Fidelity index funds for virtually every stock market index you can imagine.

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Exchange-Traded Funds (ETFs)

ETFs are quite similar to mutual funds, but their differences are significant ... and make them superior in certain situations.

Like traditional index mutual funds, an ETF will hold a basket of stocks, bonds and other securities. These can be broad and benchmarked to a major index like the S&P 500, or they can be exceptionally narrow and focus on a specific sector or even a specific trading strategy. For the most part, anything that can be held in an exchange-traded fund can also be held in a mutual fund.

However, unlike mutual funds, ETFs trade on major exchanges—such as the New York Stock Exchange or Nasdaq—like a stock. If you want to buy shares, you don't send the manager money; you just buy shares from another investor on the open market.

The need to buy shares can be problematic when dollar-cost averaging. As an example, let's say you have exactly $100 to invest, but the shares of the ETF trade for $65. You can only buy one share, and you're stuck with $35 in cash uninvested.

Why Should You Consider ETFs Instead?

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But ETFs have their own advantages. For one, they have intraday liquidity—that is, if you want to buy or sell in the middle of the trading day (or multiple times throughout the trading day), you can.

The second advantage is tax efficiency. In a traditional mutual fund, redemptions by investors can generate selling by the manager that creates taxable capital gains for the remaining investors who didn't sell. This doesn't happen with ETFs, as the manager isn't forced to buy or sell anything when an investor sells their shares.

Like we said, many investors use "ETF" and "index fund" interchangeably. That's because most exchange-traded funds are index funds—but not all. Some are actively managed.

As is the case with index funds provided by Fidelity, their ETFs tend to have some of the lowest costs in the business.

Related: The 9 Best ETFs for Beginners

Why Does a Fund's Expense Ratio Matter So Much?

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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.

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What Is the Minimum Investment Amount on a Fidelity Fund?

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Investment advisory services offered through NewEdge Advisors, a registered investment advisor.

Related: 7 Little-Known Funds Yielding up to 15.2%

You've assuredly heard of mutual funds and exchange-traded funds (ETFs). But how much do you know about closed-end funds (CEFs)?

Related: 10 Dividend Stocks That Pay Us Each and Every Month

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15 Stocks You Might Never Have to Sell

Jeff Reeves — Wed, 03 Jun 26 07:30:33 -0400

Stocks are a winning proposition, historically speaking. You just need a little patience sometimes.

No one's forcing you to invest in stocks. You can invest in just about anything else, in fact—shoes, artwork, properties, you name it—and years down the road, someone might want to buy that pair of Nikes or that Matisse for more than you paid. But the easiest case one can make is for investing in stocks, which are both ridiculously simple to buy and have generated spectacular returns over the long haul.

Just consider a half-century's worth of data showing how stocks have performed compared to a few other popular investment assets.

Asset	Average Annual Return, 1976-2025
S&P 500 Index (Stocks)	8.04%
Baa-Rated Corporate Bonds	4.78%
Gold	3.39%
10-Year Treasury Bonds	2.45%
Real Estate	1.52%
Source: NYU Stern School of Business

Stock investors who plunked a mere $1,000 in the S&P 500 at the start of 1976, and didn't contribute another cent, would still have been sitting on $47,778 as of the end of 2025. That compares to just $9,325 for corporate bonds, $5,295 for gold, just $3,354 for 10-year Treasuries, and a mere $2,126 for real estate.

Yes, past performance has no bearing on future returns. But by their very nature, stocks have the potential for higher returns than many other assets, now and in the future—and the longer you hold, the more compounding can do the wealth-building work for you!

If you're looking for a starting point for your own portfolio, look no further. Today, we're going to show you our recently updated list of "forever stocks." These are some of the best long-term stocks you can buy and hold for literally decades down the road, and possibly even pass on to your heirs. They have collectively outperformed the market by a substantial amount in both medium- and long-term time frames, and they just got done beating the S&P 500 for full-year 2025.

Editor's Note: Tabular data presented in this article is up-to-date as of June 1, 2026.

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Disclaimer: This article does not constitute individualized investment advice. Securities, funds, and/or other investments appear for your consideration and not as personalized investment recommendations. Act at your own discretion.

Why You Should Invest in the Stock Market

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Stock represents a piece of ownership in a company. It allows you to profit from a company's success—most commonly, when the price of your shares goes up, but in many cases, also from cash distributions (dividends) the company makes to shareholders. And the case for owning them is clear:

Stocks have higher rates of returns than just about any other asset class.
They can be held in numerous types of investment accounts.
They're easier to understand than many other types of investments.

If you ask us, investment funds—whether they're mutual funds, exchange-traded funds (ETFs), or closed-end funds (CEFs)—are the simplest and easiest ways to invest in the stock market.

But individual stocks play an important role, too. The best long-term stocks offer investors a way to stay intellectually "invested"—by compelling people to stay up-to-date on companies they believe in. Plus, they provide investors with the potential to outperform those funds.

Bottom line: Whether you hold stock funds or individual equities, stocks (as an asset class) are among the best long-term investments you can make.

Growth Stocks or Value Stocks?

Growth stocks are generally considered to be companies that are expanding sales (and often profits) at a faster-than-average clip. Typically, growth companies have either an attractive product they are bringing to new markets or a steady drumbeat of new items they can sell to existing customers to open up new revenue streams.

Technology companies are typically the most common example of growth stocks, as they bring new gadgets to market that are better or faster than previous products.

Value stocks, on the other hand, are generally considered to be companies that trade for less than some sort of intrinsic value. They might not be expanding rapidly, but they often have a strong underlying business. Think of a local bank or a utility company that might have trouble doubling in size over the next few years, but doesn't face a lot of competition or disruption to its business model. These companies are still capable of some growth—but Wall Street sometimes undervalues these firms, and their prices can improve once other investors catch on to their true value.

You can find the best long-term stocks hiding out in both camps. Reliable growth can result in significant gains over many years; alternatively, a rock-solid value stock will most commonly weather any market disruptions much better than a company that relies on enterprise spending trends or consumer confidence to drive its sales.

What About Dividend Stocks?

Dividend stocks (which commonly are value stocks, but can be growth stocks) are great ways to drive long-term performance of your portfolio. These companies pay a regular flow of their profits directly back to shareholders, meaning you receive some sort of return regardless of the ebb and flow of share prices.

Stocks that can both grow and pay dividends are the ultimate long-term stocks given just how much in additional returns they can generate over the long term.

Here's a look at the return someone could expect if they received just the price returns from the S&P 500 over the past 25 years:

Morningstar

Now look at how much better the return is when you factor in dividends had you had reinvested those dividends back into the S&P 500 (returns illustrated by an S&P 500-tracking ETF; note that expenses are included in performance):

Morningstar

The price return is just above 500%. However, the total return (price plus dividends) is almost 840%!

The best long-term stocks tend to be companies that aren't overly dependent on specific trends in the global economy, and companies that can deliver returns in any environment. Dividend-growth stocks (companies that pay larger dividends over time) tend to check both those boxes, proving they have operations that generate significant profits, and are growing those profits enough to deliver larger paydays to shareholders each year.

What's a Diversified Portfolio?

The best long-term stocks are part of an investment strategy that prioritizes stability and risk management over risky short-term bets that might pay off—or leave you in tears.

There are plenty of investment strategies that, after the fact, look wise simply because they worked out. But your personal financial situation matters. Ask yourself this: Would you bet $10,000 on a 50/50 chance of either doubling that money or losing every penny instantly?

If your answer is "no," then there are certain strategies you should never consider in your toolkit, and others you should stick with even if it means your returns are not as dramatic.

One low-risk strategy that many investors deploy is the notion of a diversified portfolio that spreads your risk around in multiple vehicles. The easiest way to do that is through mutual funds and ETFs, which hold dozens if not hundreds or even thousands of stocks, bonds, and other assets. And you can keep your costs down by purchasing index funds—mutual funds or ETFs managed not by humans, but effectively a rules-based algorithm.

However, you can also look beyond the typical offerings out there and build your own diversified portfolio by hand-picking a basket of long-term stocks.

If you want more control or customization in your portfolio, there's nothing wrong with picking individual stocks—in fact, it often makes sense to put a few individual stocks alongside the mutual funds and/or ETFs in your portfolio. Just make sure you're doing your research to ensure you have the best stocks available, and that you are keeping an eye on diversification.

15 Top Stocks for Long-Term Buy-and-Holders

If you're looking beyond mutual funds and ETFs to build your own portfolio of the best stocks to hold for a long, long time, it's crucial to both understand your personal investing goals as well as to do your own homework before buying (and selling!) an individual company's shares.

That includes looking at stocks for specific strengths, like their market share or their annual earnings trends compared with their peers, as well as how a given stock performs against the broader market at large.

There's no one-size-fits-all approach to anything on Wall Street, so you should always look at the latest numbers and do your own personal analysis before making any trades. But to get you started, here is our updated list of standout companies that are among the best long-term stocks to buy based on share performance, earnings trends, staying power, and other factors.

Stocks are listed by dividend yield, from lowest to highest. The two names added to this list are the lowest- and highest-yielding companies, and thus can be found at the beginning and end, respectively.

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15. Alphabet

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Sector: Communication services
Market cap: $4.6 trillion
Dividend yield: 0.2%

Alphabet (GOOG, GOOGL) is a multitrillion-dollar digital advertising powerhouse that not only provides the go-to search engine for most Americans, but also the infrastructure to serve display ads across all manner of content.

"We believe Alphabet is one of the best plays on several macro trends in the economy, including the shift to digital advertising, both for direct response and for brands; increased consumption of video; rise of cloud computing, in addition to several long-term initiatives including self-driving cars (Waymo)," says Truist Managing Director Youssef Squali. "Despite leaning more heavily into AI investments, recent cost-cutting initiatives have significantly improved margins for the company."

Another sign of expert confidence? In late 2025, Berkshire Hathaway (BRK.B) disclosed a $4.3 billion stake in Alphabet, then tacked on another $2.7 billion in shares during the first quarter, putting it within the holding company's top 10 positions.

"We believe the move validates GOOG's strong fundamentals and provides Berkshire exposure to a leading AI provider through Google Cloud and Gemini expansion," CFRA analyst Angelo Zino says. "The endorsement likely bodes well from an investor confidence perspective. We think Berkshire likely finds more comfort investing in GOOG over other tech plays given the high free cash flow potential of its core business."

Alphabet's revenues have grown every year for a quarter-century, but the company isn't resting on its laurels. Google is integrating its AI-powered assistant, Gemini, into its core services, including its ubiquitous search engine—and importantly, it's figuring out how to reduce costs of running queries. Meanwhile, its Google Cloud services continue to expand at a rapid clip, and it has doubled down on cybersecurity with a $32 billion deal to buy Wiz.

GOOGL even initiated a dividend in April 2024, and it has improved upon it twice since then. Sure, it's just a 22¢ payout that translates into a sub-1% yield. But Alphabet is a cash-generation machine, which bodes well for future payout growth … and every dividend has to start somewhere.

Editor's note: GOOGL is the ticker for the company's Class A shares, which have voting rights. Alphabet's Class C shares, with the ticker GOOG, are also available to regular investors but have no voting rights.

14. Nvidia

Sector: Technology
Market capitalization: $5.4 trillion
Dividend yield: 0.5%

It looks increasingly likely that artificial intelligence (AI) will stick around as a critical technological trend for some time. What exactly that looks like, and exactly how long that lasts, is anyone's guess. But at least for the foreseeable future, AI matters. And what better way to invest in that trend than chipmaker Nvidia (NVDA), which provides the hardware, networking, and software needed to train and run AI models.

Nvidia believes AI infrastructure can become a $3 trillion to $4 trillion opportunity over the next half-decade. If so, few companies are better poised to capture profits from that growth opportunity.

But that's not why Nvidia is among our list of stocks you can buy and hold forever. At least, it's not the only reason why.

Nvidia's semiconductors have long powered numerous other technologies, still does today, and—barring a major change in how the company is operated and staffed—will likely continue doing so for years to come. Put differently: Nvidia is much more than just AI. The company made a name for itself through its gaming chips; today, the company's products are also used in robotics, professional visualization, scientific research, self-driving cars, cryptocurrency, and more.

Artificial intelligence is merely the latest (though admittedly the most lucrative) opportunity. It could theoretically be a source of turbulence, too, with many market observers wondering aloud whether AI is in a bubble. For now, though, Wall Street's pros have downplayed that worry.

"NVDA argues that the ground truth dynamics are not bubble-like, because three separate demand drivers are in play: (1) the transition of general purpose compute from CPU to parallel (GPU) compute; (2) the growth of generative AI replacing classic machine learning; (3) the rise of agentic AI," says Truist Managing Director William Stein, who rates the stock at Buy. "There is another argument that we see as even more compelling. We see the telltale sign of a bubble as gear that has been ordered or shipped for which there is no operational or economic value. On its conference call, NVDA noted that its A100 chips, which began shipping six years ago, are all still in the field and are running at 100% utilization. We believe this is the clearest indication that we are not in a bubble ... at least not yet."

Nvidia's top and bottom lines have been in a general growth trend for decades, only really ever stepping back during major economic hurdles like COVID and the Great Recession. It's unlikely that its recent pace of expansion will continue forever—revenues ballooned by 360% between 2023 and 2025, while profits exploded by 400%—but as long as semiconductors power technological progress, NVDA seems likely to thrive.

Also, the technology sector isn't exactly known for its dividends, as most of those businesses tend to pour their cash back into R&D in hopes of growth (and staving off would-be disruptors). So you might be surprised to learn that Nvidia has paid one since November 2012. For a long time, it was a nominal penny per share quarterly that yielded less than a tenth of a percent. But in May 2026, the company unleashed a massive 2,400% increase to the distribution, to 25¢ quarterly. While the yield is still only 0.5%, consider this: An investor who bought the stock at around $29 per share near the start of 2022 is now enjoying a yield of more than 3%.

Meanwhile, Nvidia is a cash-generation machine, which bodes well for future payout growth and higher yields on cost.

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13. Constellation Energy

Sector: Utilities
Market cap: $97.1 billion
Dividend yield: 0.6%

When it comes to the best long-term stocks, the utility sector stands out as a natural place to look.

For starters, utility companies always have "wide moats," which is a way of saying they have significant, established advantages that make it difficult to compete. Utilities are exceedingly capital-intensive businesses that are highly regulated, and thus competition is very difficult to come by—in fact, in many cases, U.S. utilities are de facto regional monopolies. Furthermore, electricity is a necessity for businesses and consumers that sees strong baseline demand even in a rough economic environment. That creates a measure of certainty for the sector, regardless of broader uncertainty or economic cycles.

If you're looking for long-term investments, then, utilities are a natural choice. And in this sector, Constellation Energy (CEG) stands out as one of the larger and better-performing options in the sector.

Constellation is among the largest utility stocks on Wall Street. Based out of Baltimore, it sells natural gas and electricity service, with about 55 gigawatts of generating capacity—enough to power the equivalent of 27 million homes. It also produces a variety of carbon-free energy, including wind, solar, hydroelectric, and nuclear.

One doesn't typically associate utilities with growth. The sector has delivered a total return of just more than 50% since early 2022, when Constellation was spun off of Exelon (EXC). CEG shares have returned 500%, and that's even after factoring in its recent regression into bear-market territory.

Among Wall Street's reasons to remain optimistic is, of all things, the tech sector. In 2024, for instance, Constellation signed a 20-year power purchase agreement with Microsoft (MSFT) that will involve the restart of Three Mile Island Unit 1, as well as the launch of the Crane Clean Energy Center. And in summer 2025, it made a similarly long agreement with Meta Platforms (META) to support the Facebook parent's energy needs.

CEG also boasts the largest fleet of nuclear plants in the U.S., which puts it in a great position amid President Donald Trump's executive orders aiming to jump-start the nuclear industry.

At whatever point the dust settles and CEG isn't quite as "growthy," you can expect the company to be able to foot a healthy dividend. The current yield isn't nearly so generous as other utility stocks out there, but distributions are already triple what they were post-spinoff.

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12. Costco Wholesale

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Sector: Consumer staples
Market cap: $418.9 billion
Dividend yield: 0.6%

Retailers are difficult to rely on as buy-and-hold investments because they tend to be subject to broader spending trends and changing consumer tastes. Not to mention, predominantly brick-and-mortar retailers are anything but a sure thing in this age of e-commerce.

However, warehouse retailer Costco Wholesale (COST) is still worth a look as a long-term holding, since its unique model sidesteps most of these concerns.

For starters, the chain operates about 925 warehouses worldwide, with about two-thirds here in the U.S. It appeals to bargain shoppers and the staples it sells typically have low margins, but it also has a regular membership fee that generates a ton of baseline cash every year. Costco boasts about 145 million paying cardholders—and at a recently raised $65 per household (and even pricier business memberships), that creates a tremendous foundation for this retailer.

What's more, the company's customers are true believers in its value-conscious offerings, and there's a veritable cult of followers behind Costco's Kirkland Signature store brand. And if times get tough, even more customers might end up walking through the warehouse looking to save on their groceries and household goods as they pass over Costco's competitors.

Oppenheimer is among numerous analysts who favor Costco, citing a boatload of factors, including a "unique and improving consumer value proposition, open-ended worldwide growth prospects, leading competitive position poised to continue to drive share gains, consistent track record of shareholder returns, strong management team, and potential for sustainable top- and bottom-line delivery even against a more competitive retail backdrop."

A low-cost approach might not set the world on fire, but providing affordable offerings to loyal customers is a pretty consistent business model.

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11. Eli Lilly

Sector: Health care
Market cap: $963.8 billion
Dividend yield: 0.6%

If you're building a wish list of long-term stocks to buy and hold, Eli Lilly (LLY) certainly belongs—if not to buy the stock itself, then at least as an illustration of what you should be looking for. That's because pharmaceuticals are a portfolio mainstay—hundreds of millions of people worldwide rely on pharma firms' treatments, and countless investors lean on these stocks as a source of both growth and income.

Eli Lilly was founded nearly 150 years ago in Indianapolis, by Col. Eli Lilly—a Union Army veteran! It gained fame for introducing the world's first commercial insulin roughly a century ago, and while its product lineup has certainly broadened since then, it remains a leader in diabetic treatment.

Lilly's lineup includes cancer treatments Verzenio and Erbitux, as well as autoimmune injectable Taltz and migraine prevention drug Emgality. And its diabetes lineup includes well-known drugs such as Trulicity, Jardiance, and Humalog. But leading the way forward are two products—Mounjaro and Zepbound—that belong to a rising class of drugs: glucagon-like peptide-1 (GLP-1) receptor agonists, which help manage blood sugar levels in people with Type 2 diabetes. While that's certainly reason enough for the drug to exist, it also serves another purpose: being an extremely effective way for patients to battle obesity. Already, these two drugs have become "blockbusters" (drugs that generate more than $1 billion in revenue in a year), and Wall Street analysts only expect demand for these and similar products to rise going forward.

But Lilly isn't stopping there. "The company is also working to develop other products to improve its positioning in the GLP-1 market, including Retatrutide and Orforglipron, both of which are set to have Phase 3 readouts later in 2026," Argus Research analyst Jasper Hellweg says. "Outside of the company’s GLP-1 franchise, Lilly is working to develop an oral small-molecule thyroid hormone receptor beta agonist being for the treatment of metabolic dysfunction-associated steatohepatitis in patients with fibrosis, which, if approved, could reach blockbuster status."

A sub-1% yield might not indicate that Lilly is income-friendly, but that's largely an effect of LLY's share price rising so fast. In fact, management has been pouring increasingly large gobs of its newfound cash into the dividend for years. Most recently, LLY announced a 15% dividend increase, to $1.73 per share, to take effect starting with the March 2026 payout. Not only is that the company's 12th consecutive dividend hike, but it's the eighth straight raise of 15%. (And LLY has paid a dividend since 1972.)

By the way: That cash distribution represents only about a quarter of 2026's expected earnings—an extremely healthy ratio that signals more potential for dividend increases going forward.

While Lilly has long been a productive pharmaceutical stock, it has been launched into a new tier. It is now the biggest pharmaceutical company on U.S. exchanges, and increasingly appears worthy of being called a long-term buy-and-hold stock. If nothing else, it's a representative example of the kinds of companies investors should consider when their holding time is measured in years, and not just a few months.

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10. Microsoft

Sector: Information technology
Market cap: $3.4 trillion
Dividend yield: 0.8%

When it comes to stocks with scale and staying power, Microsoft (MSFT) is another tech giant that immediately springs to mind. The technology firm is synonymous with workplace productivity, with its Windows and Office 365 software products—now bolstered by Microsoft’s Copilot AI chatbot—the gold standard for businesses around the world.

Microsoft isn't without growth plans despite its already impressive scale, however. Its Azure cloud computing business continues to expand at a rapid clip, its remote workplace tools like Teams have now become hardwired into enterprise operations in the wake of the pandemic, demand for its AI services continues to outstrip supply, and its Xbox video game arm is a juggernaut in its own right.

So, a growth stock? Yes. But a defensive stock? Also yes.

"Although not immune to macroeconomic challenges (such as declines in the PC original equipment manufacturers (OEM) market and in digital advertising), Microsoft has about as diversified and strong a set of assets as any company in the technology industry—and may even be seen as a safe haven by investors in uncertain times," says Argus Research analyst Joseph Bonner. "The company is one of a few names with a complete, integrated commercial product set aimed at enterprise efficiency, cloud transformation, collaboration, and business intelligence. It also has a large and loyal customer base, a substantial cash cushion, and a rock-solid balance sheet."

With long-term investing, it's all about trying to find certainty in an uncertain world. And the dominance of Microsoft seems incredibly likely regardless of geopolitics, economic cycles, or anything else. Microsoft is one of the 25 largest corporations in the world as measured by revenue, and it has been among the three largest in market capitalization for years. And despite being tech company with a lot more growth left in the tank, it also offers a modest but rising dividend.

If you want stability and scale in a long-term stock investment, Microsoft is it.

9. Moody's

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Sector: Financials
Market cap: $80.8 billion
Dividend yield: 0.9%

Moody's (MCO) is a global risk management firm that is best known for providing credit ratings. That includes credit scores for individual consumers as well as "official" rankings for major corporations and governments—including the United States, via its rating on U.S. Treasury debts. Additionally, the company offers investor services that includes research and data to arm investors with information to make the best decisions.

"We expect [Moody's] to benefit over the long run from the secular trends of global GDP growth and debt-market disintermediation," Argus Research analyst Kevin Heal says. "Management also has opportunities to develop new products and raise margins, and to expand through targeted acquisitions."

The company's shares have been pressured over worries about AI replacing financial-info services that sell data. "However, we believe that doesn’t apply to companies that have proprietary data," Heal says. "In fact, MCO is integrating agentic AI models to embed its data in client workflows. Management expects further margin improvement as AI initiatives scale in size."

In early 2026, Moody's announced a nearly 10% increase to its payout, to $1.03 per share. Consider that in 2016, it paid just 37¢ per share—meaning over the past decade, MCO has increased its payouts by almost 180%. That's part of a broader long-term trend of growth and success, too, with revenue that has surged from $4.8 billion in fiscal 2019 to $7.7 billion for fiscal 2025.

The structure of the current financial system all but guarantees that consumers and businesses will need to go through Moody's to get their seal of approval for loans. And given the history of revenue expansion and dividend growth in recent years, there's good reason to bank on Moody's delivering in the years ahead.

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8. Linde plc

Sector: Materials
Market cap: $229.8 billion
Dividend yield: 1.3%

Materials stocks don't often make the cut for most lists of long-term investments. It's an extremely cyclical sector whose companies tend to rise and fall based on broad-based economic trends and industrial demand. That said, with a little bit of research and a lot of patience, investors can still find high-quality companies in this space that are positioned to withstand the test of time.

Ireland-based Linde plc (LIN) is one of those stocks.

Linde is the world's largest industrial gas producer, offering oxygen, nitrogen, argon, helium, hydrogen, electronic gases, acetylene, and rare gases. It also produces air separation, synthesis, olefin, and other plants for third-party customers. And it does this across every continent.

While this is certainly a cyclical business, Linde offers some shelter from the economic shocks that many of its businessmates suffer. That's in part because of its diverse offerings, but also because of the industries it supplies, which includes defensive industries such as health care and food/beverage. Most of its contracts are with blue-chip firms, too, and that keeps the cash flowing.

In fact, its business has been so relatively stable that it has—by virtue of its 2018 merger with fellow gas giant Praxair—been able to deliver more than three decades' worth of annual dividend hikes. The most recent, a 7% hike to $1.60 per share quarterly announced in February 2026, was its 33rd consecutive improvement to the distribution. That puts it among the ranks of the Dividend Aristocrats—an elite group of a few dozen dividend payers that have raised their payouts for at least 25 straight years.

So while long-term buy-and-holders might look away from the materials sector, Linde sticks out as a surprisingly stable "forever stock."

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7. FedEx

Sector: Industrials
Market cap: $80.7 billion
Dividend yield: 1.4%

FedEx (FDX) is another cyclical business—one whose shares have slumped several times in the past quarter-century. And yet, it has still been a model of buy-and-hold-worthiness.

Yes, FedEx's logistics business is cyclical, as package volume tends to rise and fall based on broader spending trends. But there's a long-term megatrend lifting this stock that cannot be overlooked. And if you look around the front porches in your neighborhood, you'll probably find proof of this trend yourself via all the boxes lying around.

In the age of Amazon and e-commerce, FedEx is about as safe a bet as you can make. Yes, it's not quite as large as competitor United Parcel Service (UPS), but it's still a massive and valuable part of the global supply chain.

FedEx has paid dividends since 2002, but over the past few years, it has really stepped up its efforts to share the wealth with stockholders. Its cash distribution has jumped by almost 125% since 2021, including a 5% increase announced in mid-2025. Meanwhile, that dividend represents just 30% of 2026's projected earnings, making the payout not just sustainable—but plenty expandable. FDX also spent $3 billion in share repurchases during its fiscal 2025, which ended May 31.

Just more reasons why FDX is among the best long-term stocks to buy and hold.

6. BlackRock

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Sector: Financials
Market cap: $159.0 billion
Dividend yield: 2.2%

BlackRock (BLK) is one of the world's largest asset management firms, boasting more than $14 trillion in assets across its many lines of business. Individual investors know it well for both its BlackRock mutual funds and closed-end funds (CEFs), as well as its iShares exchange-traded funds (ETFs). But it also manages money for institutional clients, including pension plans, foundations, charities, and insurance companies, among others.

With the exception of a few understandable hiccups (COVID, for instance), BlackRock has been in a broader consistent uptrend since the depths of the Great Recession. That has come alongside similar progression in both the company's top and bottom lines.

It's difficult to find any Wall Street pros with something negative to say about BLK. Shares currently enjoy 13 Buy calls versus four Holds and no Sells, and the analysts' consensus for long-term earnings growth sits at a brisk 17% annually.

"We believe that BLK remains well positioned to deliver above-peer organic growth given its unmatched product breadth and distribution footprint (helped by its iShares franchise)," say Keefe, Bruyette & Woods analysts Aidan Hall and Kyle Voigt, who rate BlackRock's stock at Outperform (equivalent of Buy). "Also, its scale and demonstrated ability to generate operating leverage bodes well for future earnings growth and operating leverage. The firm's increasing alternatives presence and growing technology revenue stream add further breadth to what is already a diverse product/solutions offering."

BlackRock has been a fount of dividend growth since the Great Recession, too. In the past decade alone, BLK has managed to average 10% annual dividend growth. While that pace had been slowing in recent years, BlackRock stepped on the pedal in early 2026, announcing a 10% hike to $5.73 per share. And a payout ratio around 40% should keep investors plenty confident in the dividend's health and its ability to keep growing.

5. Bunge Global

Sector: Consumer staples
Market cap: $25.2 billion
Dividend yield: 2.3%

Bunge Global (BG) is a leading agribusiness and food company, operating across the entire agricultural supply chain through its many subsidiaries. All told, its operations span roughly 23,000 employees across more than 300 facilities in over 40 countries.

The U.S.-headquartered but Switzerland-incorporated firm is a leading global oilseed processor and producer of vegetable oils and protein meals. It sources, processes, and distributes grains such as soybeans, wheat, and corn. It produces agricultural products such as fertilizers and sugars. And that's just some of what this ag giant does.

Bunge has been a "patience stock" for years thanks to lower margins on crush (the process that produces soybean oil and protein meal), as well as delays to its proposed mega-acquisition of Canadian grain handling business Viterra. However, investors who have had patience are finally seeing the payoff, with the stock up more than 66% over the past year amid optimism over renewable volume obligation (RVO) and the closing of its Viterra deal.

"We attended BG's Investor Day, at which management updated its mid-cycle EPS [earnings per share] baseline including Viterra to ~$13 (from ~$8.50) and laid out a framework to achieve $15-plus mid-cycle EPS baseline by 2030," says BMO Capital Markets Analyst Andrew Strelzik, who rates the stock at Outperform. "We came away with greater confidence in BG’s multi-year earnings trajectory. We remain constructive as BG is poised to realize an inflection in fundamentals beginning in 2026 from which it can grow, and the multi-year earnings opportunity is not yet fully reflected in shares."

Bunge, meanwhile, can pay investors at least a modest sum for their patience. The 2%-plus yield, on a quarterly dividend of 72¢ per share (announced in May 2026, representing a 3% hike) is about a percentage point better than what you'll get from the S&P 500. That dividend has also grown by a decent 37% over the past five years, and it's as safe as you could want it, with Bunge maintaining a conservative payout ratio of 35% of 2026 profit estimates.

4. International Business Machines

Sector: Technology
Market cap: $299.4 billion
Dividend yield: 2.3%

International Business Machines (IBM) is one of the oldest technology companies in the world, with roots going back to its founding in 1911 as the "Computing-Tabulating-Recording Company."

The business has changed a touch in the century-plus since. A company that once sold record-keeping and measuring systems is now a global giant dealing in enterprise information-technology hardware, software, and services. Its predominant offerings revolve around hybrid cloud (an IT infrastructure meshing public cloud, private cloud, and on-premises equipment), artificial intelligence, and consulting. And its clients and partners are a who's who of the technology world, including Microsoft, Salesforce (CRM), Samsung, Oracle (ORCL), Adobe (ADBE), and more.

IBM hasn't always been on the bleeding edge of technology—it was notoriously slow to pivot from hardware to the cloud. But it's no dinosaur, either. For instance, IBM is viewed as having potential in quantum computing, which itself is a long-awaited accelerant for artificial intelligence. Moreover, it's an entrenched and long-trusted giant that will seemingly always have a place as long as the business world needs new tech.

The company is also growing by acquisition, announcing in late 2025 that it would buy data streaming company Confluent for $11 billion. "IBM historically gets optimal leverage from targets that have challenges penetrating large enterprises and significant potential cost synergies," Stifel analysts say.

IBM is a buy-and-hold-forever stock because of its income history, too. "Big Blue" has paid dividends without interruption for more than a century. And it has also increased that distribution annually for 31 consecutive years (the latest, a modest bump announced in April 2026), giving it Dividend Aristocrat status.

3. Lockheed Martin

Sector: Industrials
Market cap: $119.8 billion
Dividend yield: 2.6%

For better or for worse, defense giant Lockheed Martin (LMT) seems like one of those companies that will always have a sound financial foundation thanks to its focus on military matters and close relations with the U.S. Department of Defense.

Lockheed and its iconic "Skunk Works" developed many of the Cold War-era jets and missile systems that have become synonymous with modern military might. More recently, conflicts like those in Ukraine and Gaza have sparked an increase in spending on its drone and missile defense operations. And it's worth noting that for LMT's clear domestic ties, international sales now make up more than a quarter of revenues, providing much-needed geographic diversification.

The for-profit nature of our military industrial complex might not sit well with some investors. But presuming you have no moral qualms about the kind of business LMT is in, this is definitely a long-term investment to consider because its business isn't driven by consumer spending or even enterprise spending the way tech companies or apparel companies are. Instead, it's driven by long-term contracts—and the long-term need for security amid geopolitical unrest.

This dynamic has helped Lockheed become a powerful dividend payer, too. In October 2025, LMT raised its payout by 4.5%, to $3.45 per share quarterly, marking its 23rd consecutive distribution hike.

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2. Prologis

Sector: Real estate
Market cap: $130.5 billion
Dividend yield: 3.0%

Real estate is often seen as a store of value for many long-term investors, and for good reason. In the words of Mark Twain, "Buy land, they're not making it anymore."

That simple truth makes Prologis (PLD) a great long-term stock to consider because of its portfolio of specialized properties in key markets around the world.

This real estate investment trust (REIT) is a global leader in logistics real estate with a focus on high-barrier, high-growth markets. Indeed, PLD and its warehouses are a key part of the world's supply chain. Prologis owns and/or operates 1.3 billion square feet across 20 countries. Top clients include Amazon and FedEx, making these properties must-have hubs for distribution, but they're just part of a diverse base of more than 6,500 customers largely in business-to-business distribution and retail fulfillment.

With projected revenue growth in the high single digits for 2026 and double digits for 2027, PLD is ramping up operations to become even more dominant in the years ahead. Dividends are now about three times what they were a decade ago; 2025 distributions of $1.01 per share were 5% better than they were in the year prior.

It's hard to imagine any upstart firm acquiring enough property quickly enough to compete with Prologis in the years ahead. And while spending trends wax and wane, the long-term nature of PLD leases with first-class corporations means its finances (and its dividend) are very secure for the foreseeable future.

1. Energy Transfer, LP

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Sector: Energy
Market cap: $66.5 billion
Distribution yield: 7.0%*

It's no easy task to identify energy stocks with staying power in this age of climate change. However, one of the most stable stocks in the space is "midstream" energy company Energy Transfer, LP (ET).

When we think of the energy sector, we often think of companies like Exxon Mobil (XOM), Chevron (CVX), Shell (SHEL), and other companies that are engaged in the exploration and production of oil and natural gas, refining products, and/or selling gasoline and other finished products.

But Energy Transfer is an energy infrastructure company—one that's operated as a master limited partnership (MLP)—that is focused on the capital-intensive nature of building pipelines, terminals, and storage facilities. Specifically, the Dallas-based MLP's assets include roughly 140,000 miles of energy pipelines and other infrastructure across 44 states, and it's responsible for transporting and storing crude oil, natural gas, natural gas liquids (NGLs), and refined products. Its additional assets include Lake Charles LNG Company, a 21% stake in Sunoco LP (SUN), and a 38% stake in USA Compression Partners LP (USAC).

It's not a glamorous business, often compared to a toll road. The Pennsylvania Turnpike cares whether a lot of cars are driving through its booths; it doesn't so much care whether they're Ferraris or Fords. Similarly, ET is concerned with the volume of products going through its infrastructure; the price of those products, not so much.

This makes for a consistent energy business that's capable of fueling a massive distribution*. Indeed, Energy Transfer pays roughly six times the yield on the S&P 500, and it's one of the best-rated high-yield dividend stocks right now. Better still: ET has been growing its payout on a quarterly basis for years!

If you want to make a swing trade on oil prices, ET is not for you. But if you're looking to invest in a low-risk, income-oriented fashion across 2025 and well beyond, this energy infrastructure player might have a place in your portfolio.

* Distribution yield is calculated by annualizing the most recent distribution and dividing by share price. Distributions are like dividends, but they are treated as tax-deferred returns of capital and require different tax paperwork.

Do All Companies Pay Dividends?

Not all companies pay dividends. Some companies choose not to, while other companies cannot afford to.

As you can tell by this list, the best dividend stocks are normally slow-and-steady companies that have consistent operations. While it might be possible for a small software company or biotech firm to double its share price overnight, these companies rarely pay dividends because they don't have much in the way of profits—and what they do have, they want to spend on other things, like research and development to continue growing.

How Often Do Companies Pay Dividends?

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The cycle of paying dividends is always different depending on the company. While it's generally true that most U.S. corporations opt to pay their shareholders a dividend once per quarter, the dates aren't fixed.

Specifically, one company might pay you on a January-April-July-October payment cycle while another opts for February-May-August-November.

Complicating things further, some companies pay dividends twice a year, some pay once a year, and some even pay "special" unscheduled dividends.

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Are Stocks Affected by Interest Rates?

Yes! In multiple ways!

For one, as interest rates rise, the amount of interest paid on newly issued bonds tends to rise. When that happens, bonds (which are fairly stable, reliable investments) start looking more attractive compared to stocks (which have more potential but are riskier investments).

For instance, an investor who owns a bunch of 3% yielding dividend stocks might not look twice at a Treasury bond yielding 1%. But if that same bond started yielding, say, 5%, that's a much more attractive proposition—even if that bond doesn't have the same growth potential.

Also, rising interest rates make it more expensive for companies to fund their growth. Many companies will issue bonds to bring in much-needed dollars to pay for things like new equipment, research, and personnel. The goal: Make enough in profits from that growth that you come out ahead even after not just paying back the loans, but all that interest. But the greater the interest rate a company has to pay on its bond, the more difficult it is to come out ahead.

That's why you'll see, when the Federal Reserve raises its benchmark federal funds rate, stocks of corporations that borrow a lot to grow tend to take it on the chin.

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Related: 7 Best Vanguard Dividend Funds for Low-Cost Income

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5 Tech ETFs That Let You 'Buy the Future'

Kyle Woodley — Wed, 03 Jun 26 08:00:59 -0400

The technology sector has been the stock market's premier source of returns this century. Wall Street believes that will continue to be the case for the foreseeable future for many reasons, among them artificial intelligence and space exploration.

And those who agree might be wise to consider some of the market's best tech stock ETFs.

No matter where you look, you're bound to see growing signs of not just AI, but numerous technologies creeping into every aspect of your life. We've all been carrying smartphones for years—but now, we're in the age of industrial companies hocking smart fridges, retailers using robotics and AI to optimize their supply chains, and utility companies leaning on the "smart grid" to deliver electricity more reliably.

Meanwhile, the red-hot gains of already publicly traded rocket and satellite companies, as well as the looming SpaceX IPO, have the potential to break open whole new markets.

All of that means more money flowing into the technology sector, where companies are producing the hardware, software, and services necessary to power countless tech solutions. And while you could make concentrated bets on one or two stocks, technology exchange-traded funds (ETFs) allow you to leverage the sector's growth without knowing exactly which companies will end up on top of the heap.

Read on as I introduce you to my recently updated list of the market's best tech ETFs.

Editor's Note: Tabular data presented in this article is up-to-date as of June 1, 2026.

Why Invest in the Technology Sector?

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The economy and market are fluid. Its various sectors (which are just groups of similar businesses) have fallen in and out of prominence over time.

Just consider this: The energy sector used to be one of the market's largest sectors, making up a high-teens percentage of the S&P 500 before the Great Recession. Today, it sits around 4%, and that's after its recent big run on the back of surging oil prices.

Today, technology stocks are king of the hill. They've been the market's greatest driver of growth over the past quarter-century or so thanks to the internet, e-commerce, cloud computing, artificial intelligence, and more. These innovations have made technology far more than just the devices in our hands and on our desks—they've turned technology into the backbone of the American economy.

So while sectors come and sectors go, at least for now, no one sees technology's superiority waning anytime soon.

However, while there's a lot to be said about investing in individual technology stocks, tech stock ETFs have their own appeal: namely, diversification. While heaping a large portion of your assets into one or two equities has the potential to disrupt your portfolio should one of those equities collapse, spreading your risk around dozens of stocks inside an ETF ensures that one stock's failure won't crack your nest egg.

The Best Tech Stock ETFs to Buy

What makes a great tech-sector funds? Honestly, that's going to vary from one person to the next. But we can narrow a very large universe of tech ETFs down to a batch that will appeal to most buy-and-hold investors looking for certain criteria.

I start virtually every review of investment funds by booting up Morningstar Investor and running a quality screen I customize for each article. Here's what I looked for in my search for the best technology funds:

Morningstar Medalist rating: Morningstar has two ratings systems—the Star ratings and the Medalist ratings. The latter are a forward-looking analytical view of a fund. Per Morningstar: "For actively managed funds, the top three ratings of Gold, Silver, and Bronze all indicate that our analysts expect the rated investment vehicle to produce positive alpha relative to its Morningstar Category index over the long term, meaning a period of at least five years. For passive strategies, the same ratings indicate that we expect the fund to deliver alpha relative to its Morningstar Category index that is above the lesser of the category median or zero over the long term." We're starting with any ETF that earns at least a Morningstar Medalist rating of Bronze.
Low fees: Every basis point in expenses that a fund charges is money that's coming out of performance. While we obviously want fund companies to be compensated for making a good product, we want to own funds that aren't taking an onerous cut of the returns. All funds here are in the second-lowest or lowest quartile of category funds by expenses—as you'll see, more tactical strategies will tend to be more expensive than broader sector strategies.
Meaningful assets under management: To be included on this list, a tech ETF must have at least $250 million in assets under management (AUM). While I personally love brand-spanking-new funds, established ETFs with high assets are much less likely to close (the number of ETF closures in a given year is typically in the triple digits!), and thus better buys for people who are looking out several years. Higher assets under management also frequently coincide with lower expenses (great for investors generally) and tighter bid/ask spreads (great for swing and day traders).

Out of the more digestible resulting list, I've selected a variety of technology funds that cover a variety of investor wants and needs, from core sector coverage to smart-beta twists to specific technology industries. And because Morningstar's ratings change throughout the year, I frequently update this list to both ensure all of the funds listed here are Medalist-worthy, as well as to highlight funds that have merited inclusion for a while but haven't yet been discussed.

Without further ado, let's check out this list of the best tech ETFs.

1. Vanguard Information Technology ETF

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Assets under management: $124.9 billion*
Dividend yield: 0.4%
Expense ratio: 0.03%, or 90¢ per year on every $1,000 invested
Morningstar Medalist rating: Bronze

If you just want to buy a broad bundle of tech stocks at a reasonable cost, it's hard to do much better than the Vanguard Information Technology ETF (VGT).

The VGT tracks the MSCI US Investable Market Information Technology 25/50 Index, which includes large-, mid- and small-cap companies within the information technology sector. Its assets are allocated to each stock based on the market capitalization of the company's "float," which is just the company's shares available for public trading. Said more simply: The bigger the company, the greater its weight.

On the one hand, you're getting exposure to nearly 320 companies (most of them growth stocks) spanning a variety of technology-sector industries, including semiconductors; systems software; application software; hardware, storage, and peripherals; electronic components; and more.

On the other hand, while that sounds pretty diversified, VGT—and many other broad sector funds, which frequently use market cap weighting systems—still poses some concentration risk. For instance, trillion-dollar behemoths Nvidia (NVDA), Apple (AAPL), and Microsoft (MSFT) account for 18%, 16%, and 10% of the fund's assets, respectively. For a fund that holds hundreds of companies, a lot of the fund's performance (43%!) is reliant on just three names. This weighting system also skews the exposure to different market-cap sizes. VGT allocates almost 80% of its assets to large caps; mid- and small caps split the rest.

If you really want to lean into the benefits of diversification with much more similar exposure across all stocks, you could consider a fund that equally weights its components, such as the Invesco S&P 500 Equal Weight Technology ETF (RSPT), which I've previously called one of the best ETFs for beginners.

However, Vanguard Information Technology ETF is the market's largest tech stock ETF by assets, and it's not for nothing. In addition to having extremely low annual expenses of just 0.09%, its straightforward methodology has largely worked out for it. Indeed, VGT has beaten the pants off RSPT over every significant time frame.

Part of the reason? When its larger components struggle (and it's not because of, say, a bear market), it may be because smaller components in the fund are eating their lunch. So as long as all of VGT's holdings have a larger lunch to share, the ETF should benefit.

* Vanguard fund assets are spread across multiple share classes, including mutual funds and ETFs alike. Assets listed for each fund in this story are for the ETF share class only.

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2. Invesco PHLX Semiconductor ETF

Assets under management: $2.4 billion
Dividend yield: 0.3%
Expense ratio: 0.19%, or $1.90 per year on every $1,000 invested
Morningstar Medalist rating: Bronze

During the California Gold Rush of the 1840s and 1850s, news of found gold in what in just a couple of years would become the 31st state (indeed, the Golden State) triggered an influx of prospectors trying to earn their fortune. However, while many prospectors came away empty-handed, merchants selling mining tools—including picks and shovels—did quite well for themselves. That's because their success didn't depend on getting lucky and finding gold; it just depended on meeting demand.

What does that have to do with technology?

Semiconductors could very well be considered among the "picks and shovels" of the technology sector. If you're a technology provider or adding technological capabilities to any part of your business, your success is far from guaranteed—for every cloud or AI innovation, there's a 3D TV or an iSmell. But it's a pretty sure bet that whatever you're doing, you're going to need semiconductors to do it.

That's not to say that all semiconductor companies are built the same; various "chip" stocks will specialize in different product types. But the thinking goes that instead of trying to strike it rich by picking the right emerging technology, you can just own the semiconductor companies that are supplying the technological gold rush.

The Invesco PHLX Semiconductor ETF (SOXQ) tracks a modified market cap-weighted index of semiconductor companies that are U.S.-listed, but not necessarily U.S.-domiciled. In other words, this tight portfolio of 31 chip stocks covers all the big names not just here at home but around the world—Micron (MU), Broadcom (AVGO), Taiwan Semiconductor (TSM), ASML Holding (ASML), and more.

The weightings aren't as lopsided as they are in VGT, but you're still looking at double- or high-single-digit weightings for Micron, Nvidia, and Broadcom. However, like with Vanguard's fund, any weakness in a few of SOXQ's components could be because other SOXQ holdings are coming into favor.

This simple positioning in tech's "picks and shovels" makes this Invesco semiconductor fund an ideal way to bet on trends such as AI, the cloud, and more.

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3. Defiance Connective Technologies ETF

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Assets under management: $1.1 billion
Dividend yield: 0.4%
Expense ratio: 0.30%, or $3.00 per year on every $1,000 invested
Morningstar Medalist rating: Bronze

When we think of sector funds, we typically think of either broad-basket funds like VGT or industry funds such as SOXQ. But there's a third type—one that's usually not as technically pure, but that can still give you what what you're generally looking for.

I’m talking about "thematic" funds.

Consider the Defiance Connective Technologies ETF (UFOX), a space ETF that looks to invest in "the global space economy and next-generation connectivity powering the AI revolution" by investing in two broad categories of companies:

Satellite communications and space industry: Firms whose products, services or business activity are used in developing or are otherwise instrumental to satcom and the space industry)
Connective technology stocks: Firms that produce hardware, software, or services related to 5G or 6G networks, or other connective technologies

That all might scream “tech stocks” to you, and that’s largely what you get. This roughly 60-stock portfolio includes mainstay technology names like Broadcom, Nvidia, and Cisco Systems (CSCO).

But that's not all you get. Tech accounts for 75% of assets. Another 15% is invested in aerospace and defense firms like Rocket Lab (RKLB) and Planet Labs (LB), while another 7% goes toward the communication services sector. The remaining 3%? Real estate investment trusts (REITs), such as telecommunications infrastructure owner American Tower (AMT) and datacenter property giant Equinix (EQIX).

In other words: UFOX invests a theme that branches out across more than one sector. If you're OK with that, great. If you require pure tech exposure, you might want to consider a true sector or industry fund instead.

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4. iShares U.S. Tech Independence Focused ETF

Assets under management: $833.6 million
Dividend yield: 0.3%
Expense ratio: 0.18%, or $1.80 per year on every $1,000 invested
Morningstar Medalist rating: Gold

Active management gets a bad rap because of its higher costs and (in some categories) broadly inferior performance. But that doesn't mean you should exclude active management as a general rule.

Case in point: The lesser-known iShares U.S. Tech Independence Focused ETF (IETC), which at less than $1 billion in AUM is much smaller than the aforementioned tech ETFs ... but also better-rated. "A sound investment process and strong management team underpin iShares U.S. Tech Independence Fcs ETF's Morningstar Medalist Rating of Gold," says Morningstar, which gives IETC a Gold Medalist rating.

Managers Travis Cooke, Linus Franngard, and Jeff Shen seek "exposure to U.S. tech companies more resilient to geopolitical headwinds and driving U.S. technological independence." The team uses machine learning and big data to create a fairly broad U.S. tech portfolio, but one that could benefit from American reshoring and "friend-shoring."

iShares U.S. Tech Independence Focused ETF currently owns just under 90 stocks. As is common in actively run funds, management is happy to make outsized bets on their highest-conviction holdings. Right now, that includes the likes of Broadcom (13%) and Palantir (PLTR, 8%). Both holdings have more influence than multitrillion-dollar semiconductor giant Nvidia, which isn't nothing (it's the No. 3 holding at just under 8% of IETC's weight), but it's worth noting given that NVDA tends to lead most market cap-weighted index funds.

The ETF is also less rigid from a sector front—while the lion's share of assets are invested in the tech sector, iShares' fund holds tech-esque stocks such as Amazon (AMZN, consumer discretionary) and Google parent Alphabet (GOOGL, communication services).

Morningstar's Medalist ratings might be forward-looking, but the view is pretty nice looking backward, too. iShares U.S. Tech Independence Focused ETF's performance has been commendable since inception in 2018, with the fund beating out its category average over the trailing three- and five-year periods.

5. Alger AI Enablers & Adopters ETF

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Assets under management: $437.3 million
Dividend yield: 1.2%
Expense ratio: 0.55%*, or $5.50 per year on every $1,000 invested
Morningstar Medalist rating: Gold

We can also get actively managed thematic exposure, like what the Alger AI Enablers & Adopters ETF (ALAI) has to offer.

Portfolio Manager Patrick Kelly seeks out companies "focusing on the development, adoption, or utilization of artificial intelligence (AI) technologies) identified through our fundamental research as demonstrating promising growth potential."

It's a broad mandate. He can invest in stocks of all sizes and geographies. He's allowed to buy not only traditional common stock, but even preferred stock. And he can even own private placements that you and I otherwise couldn't own. All that really matters is that "AI can play a material role in potentially driving stock price performance over the next 12 to 36 months."

This AI ETF currently owns 57 stocks, many of which are names you associate with artificial intelligence: Nvidia. Amazon. Alphabet. But if you've been reading carefully, you'll know that while all three of those sound like tech-sector companies, only one of them (Nvidia) is.

Indeed, ALAI is considered a technology fund, but it's more of a technicality than anything—it's majority-tech, but just barely, at 55% of the portfolio. Tech-esque communication services are another 20%, and consumer cyclicals are in the low teens. It also holds companies from an additional five sectors including healthcare and even materials. And it makes sense—the fund's strategy isn't limited to companies that enable artificial technology, but instead also embraces companies that merely use it.

Kelly is only taking one really big swing at the moment (NVDA, 13%), though Amazon, Alphabet, and Taiwan Semiconductor are all 5%-6% weights.

Alger AI Enablers & Adopters has only been around since 2024, so there are no meaningful performance metrics to use for comparison's sake. But Morningstar gives the fund its highest Medalist rating of Gold, and an enormous fee waiver helps make its fee much more competitive with index funds catering to the AI theme. That puts ALAI among some of the best tech ETFs you can own right now.

* 1.68% expense ratio is reduced with a 1.13-percentage-point fee waiver.

Related: The 10 Best Dividend ETFs You Can Buy Right Now

We love exchange-traded funds (ETFs) because they can provide one-click access to hundreds, even thousands of stocks, while charging often minuscule fees.

Related: 9 Best Fidelity ETFs for Investors Who Want Something Different

Investors often look to exchange-traded funds (ETFs) for cheap, passive exposure to basic broader market indexes like the S&P 500.

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The Half-Century Mortgage: Buying a Home You Might Never Actually Own

Kyle Woodley — Fri, 05 Jun 26 08:30:26 -0400

If we told you that Americans are struggling to afford homeownership, we wouldn't be telling you anything new.

Housing prices have risen in perpetuity for decades, and the past few years have been particularly painful for prospective buyers—so much so that the sky-high costs of owning a home make for regular headlines in everyday media.

So it probably goes without saying (though we'll say it anyways) that Americans are in desperate need of ideas that would lower their burden and make housing more accessible to more than just the ultra-rich.

And very recently, a new contender entered the arena:

The 50-year mortgage.

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First-Time Homebuyer Data Gets Uglier

As I just said, there's nothing new about Americans' struggles to find affordable housing, but a pair of recent data points from the National Association of Realtors (NAR) really drive the message home. In early November, the NAR reported that:

The share of first-time homebuyers fell to an all-time low of just 21% of all homebuyers.
The typical age of first-time homebuyers climbed to an all-time high of 40 years.

Put differently? An increasing majority of homebuyers are those who have already purchased at least one home—and thus have an asset they can sell to put toward the purchase of a new home.

Young and the Invested Tip: Selling a home is like selling many other assets in that you'll likely owe capital gains taxes. Here's what you need to know about this kind of tax.

Meanwhile, the minority share of first-time homebuyers is becoming increasingly older, implying that Americans must save for longer than ever before to be able to afford taking the dive into homeownership—and it's doing so pretty rapidly. The median age of first-time buyers, now at 40 years old, was 38 last year, and 33 just five years ago.

The troubling but unsurprising acceleration aligns pretty much perfectly with an explosion in the two most core components of purchasing a home: home prices ...

Federal Reserve Bank of St. Louis

... and mortgage rates:

Federal Reserve Bank of St. Louis

Theoretical fixes typically have to do with America's housing deficit, which hit an all-time high 4.7 million homes in July despite a pick-up in construction.

Recently, President Donald Trump floated a fix that would approach the crisis from a different angle: financing.

Specifically, he proposed a new 50-year mortgage plan.

Of course, that's about as specific as the proposal got.

Truth Social

Source: Truth Social

Adding a whiff of legitimacy was U.S. Director of Federal Housing Bill Pulte, who said on X (formerly Twitter) that "we are indeed working on The 50 year Mortgage - a complete game changer."

Whether this idea will have any legs remains to be seen, but the initial reaction among economists, analysts, and other experts is … well, skeptical.

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Can a 50-Year Mortgage Really Help?

On its face, the logic seems pretty straightforward: Spreading out the same home price over a larger number of monthly payments would reduce the size of those monthly payments.

"From a simple affordability perspective, we estimate that a 50-year mortgage product (with a 50bps higher rate) could lower the monthly payment on a median priced home (~$420K, assuming a 12% down payment) by roughly -$119 or increase an average consumer's buying power by almost $23k, relative to a 30-year mortgage," says a team of UBS analysts led by John Lovallo.

The problem, of course, is you're not just extending the loan principal across 20 more years—you're also stretching out the interest payments.

And as Lovallo and others point out, that small improvement in month-to-month affordability would come at a significant cost.

"Extending the term reduces the monthly cost, but it dramatically increases the amount of interest a borrower pays over time," Jose Pascual, Head of Mortgage & Commercial Banking, PSECU, a Pennsylvania-based credit union. "On a $500,000 loan at current rates, the interest paid on a 50-year mortgage would more than double the overall cost of the loan."

Young and the Invested Tip: Many Baby Boomers are reluctant to sell off their current home for a smaller one. Here are a few of the reasons why.

And again, that's assuming current rates.

"The interest rate would most likely be higher than a 30-year mortgage," says Carolyn Morganbesser, Associate Vice President of Mortgage Originations at Affinity Federal Credit Union, who added that a 50-year mortgage "is not a necessary lending option, but it would depend on the borrower."

Why would interest rates be higher? Well, for one, longer maturities mean lenders are taking on more risk, which they offset by charging a greater rate.

But Lovallo adds that the Dodd-Frank Act would have to be amended to classify 50-year mortgages as qualifying loans. Failure to do so could result in the mortgages carrying even higher interest rates than what the longer maturity alone would demand.

There's also the downside of slower amortization (paying down the loan). Pascual notes that by the time a homeowner could pay off a 30-year mortgage, the borrower of a 50-year loan would have paid down just 26% of their original balance—limited progress that doesn't really benefit the borrower.

And all of that assumes the homebuyer is even still alive to make all of those payments.

"Other potential complicating factors include the fact that the average first-time buyer is 40 years old (overall average buyer is 59) and therefore could be deceased before a 50-year mortgage matures," Lovallo says.

In many ways, the math simply isn't mathing—at least not in a way that provides a net benefit to would-be homebuyers.

"There's nothing wrong with creative repayment structures when they truly improve affordability, but consumers should be careful not to substitute lower payments for long-term financial stability," says Mike Petrakis, CEO of lender PowerPay. "A 50-year mortgage might work for a narrow group of borrowers, but it shouldn't become the default solution for the pressure buyers are feeling in an already competitive housing market."

Never say never, of course—Year 1 of Trump Part 2 has been nothing but proof that we should expect the financially unexpected.

But when even the Treasury is throwing cold water on an idea, we probably shouldn't hold our breath.

"That was one proposal," Joe Lavorgna, a counselor to Treasury Secretary Scott Bessent, said during an appearance on NewsNation's The Hill. "The feedback has been such that probably—and it did not come from Treasury—but probably not an optimal approach."

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.

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11 Best Vanguard Mutual Funds for Thrifty Investors

Kyle Woodley — Tue, 02 Jun 26 08:00:29 -0400

Some things are just meant to be together. Peanut butter and jelly. Spaghetti and meatballs. Vanguard and low fees.

Vanguard's name has become synonymous with thin investment expenses. Indeed, if you're seeking out the best Vanguard funds—which, I don't know why else you'd be reading this article—you almost certainly expect to read about not just great products, but great, cost-effective products.

Vanguard has earned that expectation. The fund provider has built its reputation in large part by innovating a product (the index fund) that could drastically lower fees, but also in part by continuing to find ways to grind all fund expenses, index and actively managed alike, to the bone.

But I'll be real with you: Cheap, by its lonesome, is crap. Investors have funneled trillions of dollars into Vanguard Group because Vanguard's mutual funds and exchange-traded funds (ETFs) charge low expense ratios for high-quality strategies. That potent combination drives outperformance in many Vanguard funds while ensuring investors get to keep more of those returns.

Today, I'm going to explore some of the best Vanguard mutual funds to buy right now—a collection of passive and active products that are built for success without breaking the bank. This group of funds also fills multiple needs, with some serving as core portfolio holdings, and others acting as satellite positions you can use to focus on specific opportunities.

Editor's Note: Tabular data presented in this article is up-to-date as of May 29, 2026.

Why Vanguard?

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Vanguard Group is one of the largest asset managers in the world, currently boasting more than $12 trillion in assets under management (AUM).

Again, one of the primary drivers of that success is Vanguard's dirt-cheap expenses. The average asset-weighted expense ratio for U.S. mutual funds and ETFs is 0.44%, which translates to $4.40 annually for every $1,000 invested. Vanguard's average, across 400-plus funds, is a scant 0.06%, or a mere 60¢ annually per $1,000 invested. That's an astoundingly low number—one that suggests that even when a Vanguard fund isn't the absolute cheapest in its category, it's still going to be one of your most cost-effective options.

That low average fee is baby-fresh, too. Vanguard's average expense ratio was 0.08% in 2024, then declined to 0.07% in 2025 after Vanguard cut expenses on 168 share classes across 87 funds. Its drop to 0.06% occurred in early 2026 when the company announced it would slash fees on another 84 share classes across 53 funds. All told, Vanguard estimates that's $600 million in savings for investors, which the firm claims is its "largest-ever two-year combined cost reduction."

Much of Vanguard's success on the fee-fighting front can be chalked up to founder Jack Bogle, who created the first index mutual fund and helped proliferate this fund type. Now, low-cost index funds can be found the world over, bringing costs down for millions of investors—even those who don't buy Vanguard's products.

But Bogle, too, was responsible for more than just cheap investing. His investment philosophies helped shape Vanguard into the titan it is today, and sparked a group (the Bogleheads) who energetically follow in his footsteps.

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How Were the Best Vanguard Mutual Funds Selected?

Vanguard currently boasts more than 300 mutual funds—not exactly the easiest number to whittle down to a handful.

So, as I normally do, I've started by booting up Morningstar Investor and running a quality screen that I customize for every search. In this case, I began by including only Vanguard mutual funds that have earned the top Morningstar Medalist rating of Gold. Unlike Morningstar's Star ratings, which are based upon past performance, Morningstar Medalist ratings are a forward-looking analytical view of a fund. Per Morningstar:

As I've written in other Young and the Invested articles, a Medalist rating doesn't mean Morningstar is necessarily bullish on the underlying asset class or categorization. It's merely an expression of confidence in the fund compared to its peers.

Also, because one of the primary draws of Vanguard funds is low fees, I am only considering funds whose expense ratios are well below their category average. Honestly, this didn't do much to narrow the list, as most Vanguard mutual funds are … well, you get the point. So, from the remaining universe of several dozen Vanguard funds, I selected a range of products that fit various portfolio goals, are directed by respected fund managers (active) or productive benchmark indexes (passive), and have good to great track records.

Lastly, all Vanguard funds listed here have a $3,000 minimum initial investment. If that's too high for you, read on anyways, as many of these products have ETF-class shares you can purchase for the price of one share.

* All Vanguard funds on this list had Gold Medalist ratings as of their selection. Funds will remain on the list as long as they maintain a minimum of Silver. Funds that fall below that threshold will be replaced.

1. Vanguard 500 Index Fund Admiral Shares

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Style: U.S. large-cap stock
Management: Index
Assets under management: $1.6 trillion*
Dividend yield: 1.1%
Expense ratio: 0.04%, or 40¢ per year for every $1,000 invested

The Vanguard 500 Index Fund Admiral Shares (VFIAX) is the very first index fund, but it still stands up to scrutiny today. Indeed, it enjoys top billing among Vanguard's best mutual funds.

VFIAX tracks the S&P 500—a collection of 500 of America's largest companies that have met certain size, liquidity, and earnings criteria. This index, which has been around since the 1950s, is considered a reflection of the U.S. economy. But it also serves as the benchmark for many large-cap fund managers, and most of those managers simply can't beat that benchmark on a consistent basis, particularly after fees. According to year-end 2025 data from S&P Dow Jones Indices' SPIVA (S&P Indices versus Active), only 14% of actively managed large-cap funds have beaten the S&P 500 over the trailing 10-year period, and that number shrinks to 10% when looking at the trailing 15 years.

And if the pros can't beat it, we might as well just join it.

The S&P 500 isn't a perfect representation of the U.S. economy, however, nor is our economy perfectly balanced among sectors. The index 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. Consider this: Technology companies—including top holdings Nvidia (NVDA), Apple (AAPL), and Microsoft (MSFT)—make up a third of VFIAX's assets. Conversely, energy, real estate, materials, and utilities are weighted at less than 3% apiece.

More broadly, VFIAX is mostly made up of large-cap stocks** whose market caps are measured in tens or hundreds of billions, or even 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. Because of this diversity of holdings, the S&P 500 also offers a modest level of dividend income. The yield might not seem like much, but reinvested over time, the S&P 500's dividends have made up roughly 35% to 50% of the index's returns over the very long term (depending on the time period and study you're looking at).

Turnover—how much the fund tends to buy and sell holdings—is extremely low, too. Turnover generates capital gains that the fund must distribute to shareholders, and these distributions are subject to capital gains taxes if the fund is held in a taxable account. However, index funds typically trade less than actively managed funds in the first place, and the S&P 500 is extremely stable, only churning out about 3% to 4% of its holdings every year. This makes VFIAX and other S&P 500 trackers exceedingly tax-efficient, and thus optimal for taxable brokerage accounts. (Of course, there's nothing wrong with holding them in tax-advantaged retirement accounts, either.)

I'll also note that, like many Vanguard mutual funds, VFIAX also trades as an ETF: the Vanguard S&P 500 ETF (VOO, 0.03% expense ratio), which currently trades at around $695 per share.

* 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.

2. Vanguard Dividend Growth Fund Investor Shares

Style: U.S. large-cap dividend-growth stock
Management: Active
Assets under management: $36.8 billion
Dividend yield: 1.5%
Expense ratio: 0.20%, or $2.00 per year for every $1,000 invested

It'd be understandable to assume all dividend funds prioritize yield. Income is what sets dividend stocks apart from their non-paying brethren, and dividend yield is generally one of the first metrics people look at when evaluating these companies.

But that's not the case. Some dividend funds are centered around other characteristics.

Consider a Vanguard dividend fund that delivers a pretty shrugworthy yield right now: the Vanguard Dividend Growth Investor Shares (VDIGX). 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-growth stocks tend to be high-quality companies; only firms with strong financials and excellent cash flows can afford to keep paying shareholders more every year. So, in a way, dividend growth acts like a quality screen, of sorts, ensuring you're owning a higher grade of stock.

Portfolio Manager Peter Fisher has a tight holding set of 50 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. VDIGX holds not only Dividend Aristocrats (companies that have raised their dividends annually for at least 25 consecutive years), but even a few Dividend Kings (50 years) such as Procter & Gamble (PG) and Colgate-Palmolive (CL).

Turnover is currently a moderate 40%, which implies that in any given year, it cycles out 40 of every 100 holdings. Vanguard Dividend Growth does make capital-gains distributions, then, and they were particularly outsized in 2024 and 2025. So while you might be OK holding VDIGX in taxable accounts in most years, it's likely a better fit for tax-advantaged accounts such as IRAs and 401(k)s.

It's worth noting that Morningstar recently downgraded the fund from Gold to Silver, so I'll be keeping a closer eye on it. The demotion has come amid a difficult three-year period for VDIGX, which included—but started before—a change in leadership from longtime manager Donald Kilbride to Fisher. Here's what Morningstar Senior Analyst Todd Trubey says in a note titled "Still very good, but not elite":

"Over these past three difficult years for the approach, the U.S. large-cap market environment has been unusual. It became highly concentrated and narrow, with massive rallies and brief, sharp downturns. Fisher's steadiness at the helm should help this strategy in the long run, but the recent struggles somewhat weaken our conviction in the strategy."

As I mentioned above, all funds on this list started 2026 with Gold ratings and will remain on the list through the year unless they're downgraded to Bronze or below. But I'll also mention that Vanguard does have another Gold-rated dividend-growth fund: Vanguard Dividend Appreciation Index Fund Admiral Shares (VDADX).

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3. Vanguard High Dividend Yield Index Fund Admiral Shares

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Style: U.S. large-cap dividend stock
Management: Index
Assets under management: $94.6 billion
Dividend yield: 2.2%
Expense ratio: 0.08%, or 80¢ per year for every $1,000 invested

If you're more interested in securing a higher yield now, the Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX) is going to be one of the best Vanguard funds you can find.

As the name implies, Vanguard High Dividend Yield Index is focused on delivering more income. It does so through a list of 560 total components that are picked based on their current income potential—not hopes of bigger future paydays. (However, many VHYAX holdings grow their dividends, too.)

That means this Vanguard index fund excludes companies like Apple that pay dividends but offer only modest yield, and instead is biased toward companies such as JPMorgan Chase (JPM) and Exxon Mobil (XOM) that pay significantly more than the average large-cap stock.

Vanguard High Dividend Yield Index's focus on income results in a different sector mix than the above funds. For instance, financial companies make up more than 20% of holdings, followed by double-digit weightings in the industrial, technology, health care, and consumer staples sectors.

VHYAX is offered in ETF form, too: The Vanguard High Dividend Yield ETF (VYM, 0.04% expense ratio) trades around $160 per share.

4. Vanguard Strategic Small-Cap Equity Fund

Style: U.S. small-cap stock
Management: Active
Assets under management: $2.8 billion
Dividend yield: 0.9%
Expense ratio: 0.21%, or $2.10 per year for every $1,000 invested

If your primary investing concern is growth, and you have a pretty healthy risk appetite, you might get more bang for your buck by investing in small-cap stocks.

As a general rule, smaller companies have more growth potential than larger firms. For one, as they say, it's much easier to double your revenues from $1 million than $1 billion. And as these stocks become noticed by institutional investors and fund managers, or begin qualifying for certain indexes, they can begin to enjoy large-scale investments that drive their prices even higher.

The rub is that smaller stocks tend to be more volatile. A smaller 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, so they're less likely to get a lifeline should they suffer from broader economic headwinds.

Buying these kinds of stocks individually is a high-risk, high-reward proposal—a company could feasibly double or get cut in half overnight. But if you wanted to harness some of the upside potential of small caps while tamping down risk, you could invest in a small-company fund like the Vanguard Strategic Small-Cap Equity Fund (VSTCX).

VSTCX, managed by Cesar Orosco, invests in roughly 635 small-cap equities that can be found within the MSCI US Small Cap 1750 Index. Orosco selects stocks that have similar risk to the index, but that he believes will provide better performance. The result is a diversified portfolio blending value stocks and growth stocks that have produced much better earnings growth as a whole than the benchmark index's average.

Toss in top-90th-percentile performance over the trailing three-, five-, and 15-year periods, as well as exceedingly low management fees compared to its peers, and Strategic Small-Cap Equity easily rates among the best Vanguard mutual funds I've reviewed.

Just note that, like with many small-cap funds, turnover is on the high side at around 65%, so this is best held in tax-advantaged accounts like an individual retirement account (IRA), health savings account (HSA), or, if available, a 401(k).

5. Vanguard Mid-Cap Index Fund Admiral Shares

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Style: U.S. mid-cap stock
Management: Index
Assets under management: $213.8 billion
Dividend yield: 1.4%
Expense ratio: 0.05%, or 50¢ per year for every $1,000 invested

Mid-cap stocks are the "Goldilocks" holding of the investment world. They're bigger, more stable, and have better access to capital than their small-cap brethren, but they tend to be nimbler and have more upside potential to their big brothers in the large-cap space. Unfortunately, they often go ignored by people who gravitate either toward big, "safe" blue chips or potent small-caps … to their detriment.

Big mistake.

Here's what Oregon-based equity manager Jensen Investment Management found in a study of mid-caps: "Since 1978, mid-cap stocks have outperformed small-caps over each of these rolling time periods: five, 10, 20, 30 and 40 years. They've even bested large-caps over the 30- and 40-year windows. These returns came with lower volatility than small-caps as well, making the evidence even more compelling. That means mid-caps haven't just delivered better performance—they've done it more consistently, with fewer drawdowns."

If you'd like to inject your portfolio with some mid-cap exposure, you can do so cost-effectively with the Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX).

This Gold-rated fund owns about 290 stocks. It's not a pure mid-cap fund, with roughly 10% to 15% of assets veering into large-cap territory. VIMAX also boasts less concentration among top holdings than similar funds. Single-stock concentrations are generally minimal, though a handful of stocks—including data storage companies Western Digital (WDC) and Seagate Technology (STX)—are currently weighted above 1%.

Again, as is common among Vanguard index mutual funds, VIMAX has a sister ETF: the Vanguard Mid-Cap ETF (VO, 0.03% expense ratio). VO currently trades around $80 per share following a 4-for-1 share split in April.

6. Vanguard Strategic Equity Fund Investor Shares

Style: U.S. small- and mid-cap stock
Management: Active
Assets under management: $11.2 billion
Dividend yield: 1.1%
Expense ratio: 0.17%, or $1.70 per year for every $1,000 invested

Another way to go about getting your small and mid-cap (“SMID”) exposure in one place is the Vanguard Strategic Equity Fund Investor Shares (VSEQX), also managed by VSTCX’s Orosco.

Orosco takes a quantitative approach here. He uses a computer-driven stock selection process, hunting down attractive stocks within an MSCI index of SMID companies that he believes is capable of above-average growth. His system evaluates other variables, too, including improving fundamentals and attractive valuation.

VSEQX currently holds 595 positions, split roughly 65/35 between small caps and mid-caps. Sector weights are largely in line with the category—technology, financials, and industrials enjoy the greatest slices of assets. And despite VSEQX's focus on smaller-sized companies, there are still numerous recognizable names, including State Street (STT), Expedia (EXPE), and Roku (ROKU).

Orosco has only managed the fund since 2021 but has largely kept up the fund's outstanding track record of performance. VSEQX sits within the top 15% of category funds over the trailing three-year period; it's at the top 10% or better in the trailing five-, 10-, and 15-year periods.

“Orosco joined Vanguard’s QEG in April 2020 after a decade as a principal running systematic models at quant value firm AJO," Morningstar's Trubey writes. "He became a named manager here in February 2021 and a solo skipper later that year after managers James Stetler and Binbin Guo retired in June and September, respectively. Because he hadn’t spent a lot of time in QEG, Orosco brought a fresh, new perspective. And he brings a rare combination of computer expertise and investment acumen. Plus, he’s sensibly maintained what was working and adjusted what wasn’t.

"Clearly, portfolio manager Orosco has been the driving force since his arrival nearly five years ago. Long-term, it’s a great choice for smaller-cap U.S. equities."

VSEQX does a fair bit of trading, with turnover of more than 60%. You can snuff out the tax liability of the resulting capital gains by stuffing this Vanguard fund into an IRA, HSA, or another tax-advantaged account.

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7. Vanguard International Dividend Appreciation Index Fund Admiral Shares

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Style: Foreign large-cap dividend-growth stock
Management: Index
Assets under management: $9.1 billion
Dividend yield: 2.1%
Expense ratio: 0.16%, or $1.60 per year for every $1,000 invested

Up until now, I've focused exclusively on funds that invest predominantly in U.S. stocks. That's because we (and most of you reading) live in the U.S., and typical portfolio recommendations for Americans involve owning a lot of American stocks. For good reason! U.S. markets have long been among the most productive in the world, and if you believe in the American economy's ability to keep growing, that should remain the case.

But most experts would tell you that it's worth having at least some international exposure, and years like 2025 (in which international equities outperformed American stocks). One way to do that is through the Vanguard International Dividend Appreciation Index Fund Admiral Shares (VIAAX).

Vanguard International Dividend Appreciation Index has a similar thrust to Vanguard Dividend Growth in that it's interested in owning high-quality companies, which it does by identifying and holding companies with a history of increasing their dividends. VIAAX tracks the S&P Global Ex-U.S. Dividend Growers Index, which consists of international firms that have improved their payouts on an annual basis for at least seven consecutive years. As an additional quality screen, the index excludes the 25% highest-yielding eligible companies from the index. Without getting too far into the weeds, high dividends can sometimes be the result of significant price drops and in some cases might not be sustainable.

VIAAX is most heavily invested in developed European and Asian markets such as Japan, Switzerland, and the U.K., though it also has a high concentration in Canadian stocks, as well as some exposure to emerging markets such as India and China. But many of its roughly 340 holdings will be plenty familiar to Americans—it's loaded with blue-chip multinational firms like Swiss food giant Nestlé (NSRGY), Canada's Toronto-Dominion Bank (TD), and Japanese tech titan Hitachi.

What you won't find are real estate investment trusts (REITs). Why exclude what is typically the market's highest-yielding sectors? One possible explanation is that most common stocks, such as 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 non-qualified and 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.

Yet, even without real estate, VIAAX's yield is higher than comparable U.S. funds, which is typical for international developed-markets strategies.

You can get this Vanguard fund as an ETF, too: the Vanguard International Dividend Appreciation ETF (VIGI, 0.07%), which currently trades for around $95 per share.

8. Vanguard Intermediate-Term Corporate Bond Index Fund Admiral Shares

Style: Intermediate-term corporate bond
Management: Index
Assets under management: $68.1 billion
SEC yield: 5.1%*
Expense ratio: 0.06%, or 60¢ per year for every $1,000 invested

Most investors will want some exposure to bonds—debt issued by governments, companies, and other entities that pay interest to bondholders. But how much will largely depend on your age.

Bonds tend to be much less volatile than stocks, for better or worse; it limits downside, yes, but it also limits upside. Instead, most of the return from bonds comes from the steady stream of interest income they produce. They're not great for generating wealth, which is your prime concern when you're younger, but they're outstanding for protecting wealth, which becomes increasingly pivotal as you age.

But it's tough to go out and buy a single bond. Data and research on individual issues is much thinner than it is for publicly traded stocks, plus, some bonds have minimum investments in the tens of thousands of dollars. So, your best (and most economical) bet is to buy a bond fund, which can provide you with access to hundreds if not thousands of bonds.

For instance, the Vanguard Intermediate-Term Corporate Bond Index Fund Admiral Shares (VICSX) allows you to invest in 2,235 investment-grade corporate bonds with maturities of between five and 10 years.

Investment-grade corporates are a little riskier than similar-maturity Treasuries, but you get a bit more yield as a result … and they're not exactly poor-quality bonds. VICSX's portfolio is split roughly 50/50 between BBB-rated bonds (the lowest investment-grade rating) and A-rated or above. Meanwhile, the focus on intermediates provides a fair blend of risk and income.

Duration (a measure of interest-rate risk) is 6.1 years, which implies that a 1-percentage-point increase in market interest rates would lead to a 6.1% short-term decline in the fund, and vice versa. And we're getting a nice 5%-plus in yield in return.

VICSX's ETF version is the Vanguard Intermediate-Term Corporate Bond ETF (VCIT, 0.03% expense ratio), which goes for about $85 per share.

* 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.

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9. Vanguard Short-Term Treasury Index Fund Admiral Shares

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Style: Short-term U.S. Treasury bond
Management: Index
Assets under management: $33.5 billion
SEC yield: 3.9%
Expense ratio: 0.06%, or 60¢ per year for every $1,000 invested

Investors who want to significantly reduce risk might prefer the Vanguard Short-Term Treasury Index Fund Admiral Shares (VSBSX), which focuses on a subset of bonds that have very low risk for two reasons: they have short maturities, and they're issued by the U.S. Treasury.

Maturity helps determine risk. Generally speaking, the longer the bond, the greater the risk that the bond might not be repaid. Interest rates come into play, too. When rates go higher, new bonds pay more, which tempt people to sell their old bonds for the new, higher-paying bonds. But the temptation is much greater when you're dealing with longer-term bonds with lots of payments remaining—and not so great for short-term bonds with one or just a couple payments left.

Meanwhile, U.S. Treasury bonds, which are backed by the full faith and credit of the U.S. government, are some of the highest-rated bonds on the planet. Is there 100% certainty they'll be repaid? No. But is there a higher likelihood of repayment than the vast majority of issuers out there? You betcha.

Vanguard Short-Term Treasury Index Fund invests in more than 90 Treasury bond issues with maturities of between one and three years. And the lower risk is reflected in the averaged duration, which currently sits at just 1.9 years—thus, a 1-percentage-point hike in interest rates would knock VSBSX just 1.9% lower, versus a roughly 6% hit for the corporate bond fund VICSX. The flip side? VSBSX wouldn't rise as much if interest rates declined.

That's OK, as long as you know what you're buying. If all you want is portfolio protection that can still generate some yield (at nearly 4% currently), VSBSX is one of the best Vanguard mutual funds you can buy. Or, if you prefer ETFs, you can purchase the Vanguard Short-Term Treasury ETF (VGSH, 0.03%), which goes for roughly $60 per share.

10. Vanguard Wellington Fund Investor Shares

Style: Moderate allocation
Management: Active
Assets under management: $121.3 billion
Dividend yield: 2.0%
Expense ratio: 0.24%, or $2.40 per year for every $1,000 invested

Vanguard Wellington Fund Investor Shares (VWELX) is Vanguard's oldest mutual fund—a "balanced" or "allocation" product (read: stocks and bonds) that has been around since 1929. It's managed by Wellington Management, an investment management company with nearly a century of operational experience.

Wellington, which is considered a moderate allocation fund, invests about two-thirds of assets in stocks, and the other third in bonds. The stock portion of the portfolio currently holds about 80 predominantly large-cap stocks with a median market cap of around $500 billion. It's a "who's who" of blue chips such as Microsoft, Apple, Amazon (AMZN), and Wells Fargo (WFC). It also includes a little exposure to international stocks—predominantly developed-country names like UBS Group (UBS) and British American Tobacco (BTI).

The bond portfolio is much more broadly diversified, at nearly 1,500 investment-grade issues. The majority of that (roughly two-thirds) is invested in corporate bonds, with another 25% in Treasuries and agency bonds, and the rest peppered across mortgage-backed securities (MBSes), foreign sovereign bonds, and other debt.

Put more succinctly: Wellington is a one-stop shop for your core large-cap stock and bond needs, and its 0.24% in annual expenses is very inexpensive for the skilled management and strong performance track record you're getting in return. Just make sure you're considering your own investment needs with this fund—if you don't want a third of your portfolio to be in bonds, you'll want to put additional money into individual stocks, equity funds, and/or alternative investments.

Wellington has a fair bit of turnover (62%) and generates a decent chunk of interest income from its bond portfolio. So, if you're going to invest in VWELX, it makes sense to do so in a tax-advantaged account.

11. Vanguard Wellesley Income Fund Investor Shares

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Style: Moderately conservative allocation
Management: Active
Assets under management: $48.2 billion
SEC yield: 3.7%*
Expense ratio: 0.22%, or $2.20 per year for every $1,000 invested

Another term for Wellington is a "portfolio in a can." You see, because it holds most of what you'd want in an investment portfolio—mostly U.S. stocks and bonds, with a little international exposure—you theoretically could invest your entire nest egg in the fund and call it a day.

However, what if you wanted a portfolio in a can like Wellington but thought that its 66/33 stock-bond split was just too aggressive?

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 about 1,330 bonds—primarily corporate debt, but also Treasury and agency bonds, and even sprinklings of foreign debt and MBSes. The remaining equity portion is spread across 75 stocks or so, with a distinct value tilt and with a little exposure to developed international markets.

VWINX performance has been mixed in nearer-term time frames, but its long-term track record is excellent. The fund's trailing 15-year return is ahead of 80% of its peers.

"Vanguard Wellesley Income’s experienced managers wield a proven process rooted in fundamental research," says Morningstar Analyst Stephen Margaria. "Paired with low fees, this fund is an excellent choice for investors seeking an income-focused allocation fund."

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What Is the Minimum Investment Amount on Vanguard Mutual Funds?

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.

What Is a Mutual Fund?

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Equity funds or bond funds will generally be a far more practical solution.

Actively Managed Funds vs. Index Funds

There are infinite types of mutual funds, but all can be divided into two main camps:

actively managed funds
passively managed funds, also known as passive funds or, most commonly, index funds

Actively managed funds have professional managers that use their discretion to buy and sell securities. Whether they are value funds, growth funds, or anything in between, they are all essentially run the same way: A manager or team of managers buys and sells stocks, bonds, or other securities in the pursuit of price returns, dividends/income, or both.

Index funds, in contrast, are passive. There's no manager actively looking to "beat the market." The fund is simply looking to copy an index—which is based on a set of rules that the index automatically applies—enjoying that underlying investment exposure. Actively managed stock funds will try to cherry pick the stocks or bonds they like best. An index fund simply buys whatever its rules say to buy, then lets that portfolio run until it's time to "rebalance" (apply the rules again).

The primary advantages of actively managed funds is that a talented manager can potentially outperform over time and may be adept at navigating a difficult period such as a bear market. But with an index fund, 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.

What Are Balanced Mutual Funds?

Balanced mutual funds, sometimes also called "hybrid funds" or "allocation funds," hold both stocks and bonds. However, while the name might imply that all balanced funds hold an equal amount of stocks and bonds, that's not quite the case.

Some balanced funds are "aggressive" and dedicate far greater assets to stocks than bonds—say, 80/20 stocks, or 70/30 stocks. Meanwhile, some balanced funds are "conservative" and invest most of their assets in bonds. Still more are much closer to a 50/50 split.

How Are Mutual Funds Different From Exchange-Traded Funds?

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There is a lot of overlap between traditional mutual funds and their cousins, exchange-traded funds (ETFs). That's because exchange-traded funds are very similar to mutual funds, but with a few different traits.

Like traditional mutual funds, an ETF will hold a basket of stocks, bonds, and other securities. These can be broad and tied to a major index like the S&P 500, or they can be exceptionally narrow and focus on a specific sector or even a specific trading strategy. For the most part, anything that can be held in an exchange traded fund can also be held in a mutual fund.

Related: The 10 Best ETFs for Beginners

But there are some major differences. When you invest in a mutual fund, you (or your broker) actually send money to the manager, who in turn uses the cash to buy stocks or other investments. When you want to sell, the manager will sell off a tiny piece of the securities the mutual fund owns and send you the proceeds. Money generally enters or exits the fund once per day.

Exchange-traded funds, on the other hand, trade on the New York Stock Exchange or another major exchange like a stock. If you want to buy shares, you don't send the manager money; you just buy shares from another investor on the open market.

There are two advantages here. The first is that ETFs allow for intraday liquidity. If you want to buy or sell in the middle of the trading day—or multiple times throughout the trading day—you can.

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Why Does a Fund's Expense Ratio Matter So Much?

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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.

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Related: 15 Stocks You Can Buy and Hold Forever

So if you're looking for a starting point for your own portfolio, look no further. Check out our list of the best long-term stocks for buy-and-hold investors.

Related: The 10 Best-Rated Dividend Aristocrats in 2026

Dividend growth puts more cash in our pockets and signals that the company we're invested in is confident in its ability to keep churning out profits. And there's no more heralded group of dividend growers than the Dividend Aristocrats, which are companies that have paid higher cash distributions each year for at least a quarter-century.

But even Aristocrats aren't created equally. Check out which dividend growers Wall Street loves the best right now in our list of the top-rated Dividend Aristocrats.

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10 of the Best Index Funds You Can Buy Now

Kyle Woodley — Tue, 02 Jun 26 07:30:49 -0400

It's hard to find something that investors love more than index funds. No wonder: These simple, automated investments give us a nearly perfect blend of attributes. Index funds offer up the diversification of a standard managed fund, but with the added cost efficiency and simplicity that comes with tracking a rules-based index.

Index funds have rapidly grown in popularity for decades, but it was only recently that they cleared the most noteworthy of milestones: beating mutual funds by assets under management (AUM).

The first index fund—what today is the Vanguard 500 Index Fund—launched in 1976. Twenty years later, index funds still represented a single-digit market share of assets across all long-term mutual funds and exchange-traded funds (ETFs) in the U.S., according to Morningstar data. However, that number grew to 10% by the turn of the century, then swelled to nearly 30% by 2015. By the start of 2024, U.S. index funds' share of assets finally surpassed actively managed funds for the first time with a 50.15% share, and that lead has just kept growing: As of the end of 2025, passive strategies enjoyed a 54% share in the U.S.

Of course, those assets are scattered across thousands of products. But unless you're a billionaire and a masochist, you're probably not looking to juggle a few thousand index funds in your portfolio. Indeed, if you're investing in index funds, you'd likely only need a handful to build yourself an effective portfolio.

I'm going to help simplify your search by providing you with a shortlist of the best index funds you can buy right now. The goal here is to provide you with a variety of options that should fill most investors' basic needs. (Note: This list is exclusively index mutual funds—but you can find a plethora of great index ETFs in our best ETFs list.)

Editor's Note: Tabular data is up-to-date as of May 29, 2026.

How Did I Select the Best Index Funds?

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Mutual funds are big business. The Investment Company Institute's most recent annual Fact Book shows that investors have plowed $25.5 trillion in assets into nearly 8,600 U.S. mutual funds. But that same Fact Book shows the median number of mutual funds that a given household owns is … three.

That means if the average household splits their money between actively managed mutual funds and passively managed index funds, they might only need two index funds, possibly only one. Of course, that's the average household; some investors might hold a few more. Regardless, selecting a handful of the best index funds from a universe of thousands is awfully difficult. So I've pared that list down to a more digestible group of about 10.

I start virtually every review of investment funds by booting up Morningstar Investor and running a quality screen I customize for each article. Here, I began by seeking out only index funds that have earned a Gold Morningstar Medalist rating. Morningstar has two ratings systems—the Star ratings and the Medalist ratings. The latter are a forward-looking analytical view of a fund. Per Morningstar:

"For actively managed funds, the top three ratings of Gold, Silver, and Bronze all indicate that our analysts expect the rated investment vehicle to produce positive alpha relative to its Morningstar Category index over the long term, meaning a period of at least five years. For passive strategies, the same ratings indicate that we expect the fund to deliver alpha relative to its Morningstar Category index that is above the lesser of the category median or zero over the long term."

To narrow the list further, I also required the following:

No loads: Almost every fund charges an annual expense fee. But some funds collect additional fees, among them "sales charges" or "loads." For example, if you invested $10,000 in a mutual fund with a 5% front-end load, the mutual fund company would immediately take $500 out in fees. So, you'd already be starting behind the 8-ball, investing just $9,500 to start with. The funds here have no sales charges.
Reasonable investment minimums. The maximum investment minimum for inclusion is $3,000, which is the common investment minimum for Vanguard funds. But most of the remaining funds on this list have a minimum of just $1, or no minimum requirement (which is effectively a $1 minimum). Also, some fund providers explicitly lay out lower investment minimums for specific retirement plans, such as individual retirement accounts (IRAs). T. Rowe Price, for instance, requires a $2,500 minimum initial investment for many of its funds, but it lowers that minimum to $1,000 when investing through an IRA.
Broad availability: Mutual funds commonly have several share classes, many of which are limited to certain types of accounts, like, say, only for 401(k)s or only for wealth management clients. All of the index funds listed here are Investor-class or similar shares that are generally considered to be widely available to retail investors.

From the much more manageable resulting list, I've selected a group of index funds that provide a wide array of core and tactical strategies, ensuring there's at least one fund, if not many funds, for just about everyone.

The Best Index Funds to Buy Now

Before we dig into the funds, I want to a few other features of the funds you're about to discover (that were not included in the selection criteria):

All of these are index mutual funds. If you're looking for great indexed exchange-traded funds, you'll find many of my favorites in my look at the market's best ETFs to buy.
These aren't just the best index funds you can buy at the moment—in almost every case, they're either the cheapest such index fund you can buy, or within just a couple of basis points of being the cheapest. (A basis point is one one-hundredth of a percentage point.)
While these funds have no sales loads, brokerage commission fees might apply; check your brokerage before purchasing.
Your brokerage might require a larger minimum initial investment for mutual funds than the fund itself requires.
Some brokerage accounts might not let you purchase certain funds, even if they're generally available to retail investors. (For instance, you might be able to buy the completely made-up Woodley Investments Large-Cap Opportunities Fund at Schwab, but not at Fidelity.)
This isn't a ranking of the best funds. Every fund on here rates as excellent already. This is just listed in a natural progression of various portfolio needs, starting broadly with different stock flavors and ending with a few bond funds.
And lastly … you're about to see a lot of Vanguard and Fidelity. These two firms specialize in low-cost index funds, and I frequently gave their funds the nod over virtually identical products from other providers because their costs were slightly lower—something that, if you look at past returns, has historically contributed to a slight performance advantage.

With all that out of the way, let's look at the best index funds you can buy.

1. Fidelity 500 Index Fund

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Style: U.S. large-cap stock
Assets under management: $791.7 billion
Dividend yield: 1.1%
Expense ratio: 0.015%, or 15¢ per year for every $1,000 invested
Minimum initial investment: None

The Fidelity 500 Index Fund (FXAIX) isn't just one of the best index funds you can buy—it's one of the best mutual funds you can buy, period.

FXAIX tracks the S&P 500—a collection of 500 of America's largest companies that have met certain size, liquidity, and earnings criteria. This index, which has been around since the 1950s, is considered a reflection of the U.S. economy. But it's not a perfect representation, nor is the U.S. economy perfectly balanced. Consider that the technology sector accounts for a third of FXAIX's assets, while real estate, materials, and utilities are weighted at less than 3% apiece.

Like many indexes, the S&P 500 is market capitalization-weighted, which means the greater the size of the company, the more "weight" it's given in the index. Currently, trillion-dollar-plus tech stocks Nvidia (NVDA), Apple (AAPL), and Google parent Alphabet (GOOGL) sit atop Fidelity 500 Index Fund's holdings list.

So ... what makes a simple index fund so great?

The S&P 500 Index is the most common performance benchmark for funds that invest in U.S. large-cap stocks*. However, the majority of fund managers who run these funds typically struggle to beat this benchmark. As I write this, data from S&P Dow Jones Indices shows that 86% of all actively managed large-cap funds have failed to produce a higher average annual return than the S&P 500 over the trailing 10-year period. That number ticks up to 90% for the trailing 15-year period.

Also helpful is that index funds usually buy and sell less than actively managed strategies. "Turnover" in a portfolio can generate capital gains that the fund must distribute to shareholders, and these distributions are subject to capital gains taxes if the fund is held in a taxable account. S&P 500 index funds are especially light on turnover and rarely distribute capital gains, making FXAIX and other S&P 500 trackers exceedingly tax-efficient, and thus optimal for taxable brokerage accounts. (Of course, there's nothing wrong with holding them in tax-advantaged retirement accounts, either.)

Fidelity 500 Index Fund isn't the only S&P 500 mutual fund. Far from it—numerous fund providers offer these products, sometimes across a variety of share classes. What makes FXAIX stand out from the rest is a combination of traits: It offers one of the lowest fees among S&P 500 trackers, it's open to retail investors like you and me, and because Fidelity has no investment minimums, you can typically get started for as little as $1.

* There are different ways to define "cap" levels. We're going by 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.

2. Fidelity Mid Cap Index Fund

Style: U.S. mid-cap stock
Assets under management: $50.0 billion
Dividend yield: 1.0%
Expense ratio: 0.025%, or 25¢ per year for every $1,000 invested
Minimum initial investment: None

Mid-cap stocks are a way to thread the needle between the relative size and stability of large-cap stocks and the high growth potential of small-cap stocks. Indeed, this ideal middle ground has earned mid-caps the nickname of "Goldilocks" stocks.

"Since 1978, mid-cap stocks have outperformed small-caps over each of these rolling time periods: five, 10, 20, 30 and 40 years," says Oregon-based equity manager Jensen Investment Management. "They've even bested large-caps over the 30- and 40-year windows. These returns came with lower volatility than small-caps as well, making the evidence even more compelling.

"That means mid-caps haven't just delivered better performance—they've done it more consistently, with fewer drawdowns."

Fidelity Mid Cap Index Fund (FSMDX) is an exceedingly cost-efficient way to tap this area of the market. FSMDX tracks the Russell MidCap Index, which is made up of the 800 smallest stocks in the Russell 1000 (which is itself an index of the U.S. market's 1,000 largest stocks). As a result, you're getting exposure to about 800 mostly mid-cap stocks—the fund typically is 75% weighted in mids, with another 5% to 10% in smaller large caps, and another 10% to 15% in larger small caps.

This isn't an aberration. In fact, it's very common for 20% to 30% of a mid-cap fund's holdings to bleed into small- and/or large-company territory, largely because different fund providers and indexes have different definitions for market-cap ranges. Where FSMDX stands out is that "the index selects larger stocks than most," Morningstar says. "Larger stocks are generally less volatile, so the portfolio could exhibit lower volatility than its peers."

Sector weights will naturally change over time as certain businesses come into and go out of favor, but right now, industrials are tops at 18%, followed by technology (16%), financials (12%), and consumer discretionary stocks (11%). And thanks to both the market cap-weighting of the Russell MidCap Index and the high number of holdings, single-stock risk is minimal; currently, every stock is weighted at less than 1%.

A sound methodology for Wall Street's mid-sized companies, dirt-cheap fee, and strong historical performance all make FSMDX one of the best index funds you can buy.

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3. Vanguard Small Cap Index Fund Admiral Shares

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Style: U.S. small-cap stock
Assets under management: $177.4 billion*
Dividend yield: 1.2%
Expense ratio: 0.05%, or 50¢ per year for every $1,000 invested
Minimum initial investment: $3,000

The market's smallest companies are considered some of the most fertile ground for growth-hungry investors ... as long as they're not terribly risk-averse.

A basic business concept is that the larger your company, the harder it is to sustain high growth rates. (And conversely, the smaller your company, the easier a time you should have delivering rapid growth.) As it was aptly explained to me: "It's a lot easier to double your revenues when you're starting from $1 million instead of $1 billion." These stocks can also get a lift when they start hitting the radar of institutional investors and fund managers, or begin qualifying for certain indexes that force index funds to buy them.

The other side of this quid pro quo is risk. Revenues might be dependent on fewer products or services—meaning a single disruption could have massive financial consequences. They usually also have less access to capital than their larger peers, so they're less likely to get a lifeline should they suffer from broader economic headwinds. Thus, small caps are the definition of "high risk, high reward."

However, you can harness small caps' upside while mitigating some of that risk by investing in a large basket of these companies. That's where products such as the Vanguard Small-Cap Index Fund Admiral Shares (VSMAX) come in.

Vanguard scatters that risk across 1,310 U.S. stocks. To be precise, they're not all "true" small caps—a good third of the portfolio includes smaller mid-cap stocks. And like with FSMDX, single-stock risk is extremely minimal in VSMAX. No company accounts for more than 1% of assets. In fact, the largest component right now—engineering firm Emcor Group (EME)—is weighted at just half a percent. These tiny weightings mean you won't enjoy the full potential of wild upside in any single stock, but you also won't feel the full brunt of a stock collapse, either.

Similar to many Vanguard index funds, Vanguard Small-Cap Index Fund is also available as an ETF: The Vanguard Small-Cap ETF (VB, 0.03% expense ratio), which goes for around $295 per share currently.

* 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.

4. Schwab Total Stock Market Index Fund

Style: U.S. all-cap stock
Assets under management: $43.3 billion
Dividend yield: 1.0%
Expense ratio: 0.03%, or 30¢ per year for every $1,000 invested
Minimum initial investment: $1

What if you just wanted to own U.S. stocks of all sizes? Well, there's a whole class of mutual funds for you, too.

"Total market" funds hold stocks of all sizes. For instance, the Schwab Total Stock Market Index Fund (SWTSX) says right on its provider page that it's designed to "track the total return of the entire U.S. stock market."

If I'm nitpicking, SWTSX's 2,960 or so stocks isn't "the entire U.S. stock market." But if I'm being pragmatic, it's as close as you'd ever need to get.

Total-market funds rarely provide even exposure to different stock sizes, however. They're usually market cap-weighted, which results in heavy concentration in larger companies. Schwab Total Stock Market Index Fund, for instance, invests about 70% in large caps (like with the S&P 500 fund, Nvidia, Apple, and Alphabet are top weights here), 20% in mid-caps, and the remaining 10% in smalls. And a reminder: That's Schwab Total Stock Market Index's current composition, but it can change over time.

The point of a total-market fund like SWTSX is simplicity. One fund gives you exposure to virtually all of the U.S. stock market—and it overloads you in the largest, most stable firms while providing only modest exposure to smaller, more volatile firms. Better still? You can get all this for just 0.03% in annual expenses. It's a one-two punch of coverage and price that has been recognized with a Morningstar Gold Medalist rating, inclusion on my list of Schwab's top mutual funds, and a place here among the best index funds you can buy.

How (or whether) you use it is a matter of preference.

If you like the exact breakdown of SWTSX's large-, mid-, and small-cap exposure, you could make it the core of your portfolio and not have to bother with any other broad U.S. stock funds.

If you like the idea of owning all these different-sized stocks, but would want to do so in different ratios, you could either hold SWTSX and augment with the funds above, or buy your ideal mixture of large-, mid-, and small-cap funds.

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5. Vanguard High Dividend Yield Index Fund Admiral Shares

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Style: U.S. large-cap dividend stock
Assets under management: $94.6 billion
Dividend yield: 2.2%
Expense ratio: 0.08%, or 80¢ per year for every $1,000 invested
Minimum initial investment: $3,000

Investors who want a higher level of income than what the S&P 500 provides, but still want to enjoy stocks' growth potential, can do so for a song by purchasing the Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX).

The name says it all. This Vanguard index mutual fund is constructed to deliver a high dividend yield, which it does by tracking an index of stocks that pay higher-than-average dividends. The result is a fairly conservative, largely blue-chip portfolio of about 610 stocks weighted by market cap.

"Vanguard High Dividend Yield strikes a nice balance between higher-yielding stocks and distressed yield traps," says Morningstar Analyst Bryan Armour. "Sweeping half the dividend-paying universe into its portfolio diversifies stock-specific risks and limits the influence of distressed firms. Market-cap weighting also emphasizes larger, more stable firms that should have the capacity to continue making dividend payments."

VHYAX provides decent exposure to sectors defined by their defensive nature and higher-than-average dividends, such as health care (13%) and consumer staples (11%). However, its biggest sector allocation is to financials, which currently command more than 20% of assets. Just understand that if you invest in Vanguard High Dividend Yield Index, you won't be invested in the real estate sector. That's because the fund's underlying index explicitly excludes real estate investment trusts (REITs).

Why exclude REITs, which are among the market's highest-yielding sectors? One possible explanation is that most common stocks, such as 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 non-qualified and 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.

Anyways, top holdings are a who's who of mega-cap dividend payers, including Broadcom (AVGO), JPMorgan Chase (JPM), Johnson & Johnson (JNJ), and Exxon Mobil (XOM). And while it's difficult to call a sub-3% dividend "high," it's certainly much higher than you'd get from normal large-cap stock funds—and about twice what the S&P 500 delivers right now.

VHYAX is also offered in ETF form: the Vanguard High Dividend Yield ETF (VYM, 0.04% expense ratio), which currently trades around $160 per share.

6. Vanguard Dividend Appreciation Index Fund Admiral Shares

Style: U.S. large-cap dividend stock
Assets under management: $14.6 billion
Dividend yield: 1.5%
Expense ratio: 0.07%, or 70¢ per year for every $1,000 invested
Minimum initial investment: $3,000

Not all dividend mutual funds provide a high yield—or even try to. Occasionally, dividend funds such as the Vanguard Dividend Appreciation Index Fund Admiral Shares (VDADX) have different goals in mind.

This index fund targets U.S. companies that consistently increase their cash distributions over time. Its underlying index is made up of firms that have improved their payouts on an annual basis for at least 10 consecutive years. High yield isn't a priority. In fact, VDADX's underlying index excludes the 25% highest-yielding eligible companies, implying that high current yields are actually a liability.

Why? Well … without getting too far into the weeds, high dividends can sometimes be the result of significant price drops, and in some cases might not be sustainable.

That said, VDADX's different view on dividends produces two important potential benefits:

High quality: Only firms with strong financials and excellent cash flows can afford to keep paying shareholders more every year. So, in a way, VDADX's commitment to dividend growers acts like a quality screen, ensuring you're owning a higher grade of stock.
Higher yield on cost over time: These companies might not yield much right now, but if they continue raising their dividends, you should enjoy a higher "yield on cost"—what you're actually earning based on the price at which you bought an investment. (Example: A $100 stock paying $1 in annual dividends yields 1% [$1 / $100 = 1%]. But if you bought the stock at $50 a couple of years ago, your yield on cost is actually 2% [$1 / $50 = 2%] … plus you enjoyed a 100% price gain along the way.)

VDADX holds roughly 330 predominantly large-cap stocks with bulletproof balance sheets and the ability to churn out cash—which they increasingly fork over to shareholders in the form of dividends. All of these dividend-growth stocks have raised their payouts for at least 10 years, but some have much longer histories of uninterrupted improvement. That includes Dividend Aristocrats, which are stocks that have raised their cash distributions annually for at least 25 consecutive years. And it even includes a few Dividend Kings (Aristocrats whose streaks are at 50 years or longer) such as Procter & Gamble (PG) and J&J.

However, like Vanguard High Dividend Yield Index, you won't get any exposure to REITs here, either.

I mentioned above that all the Vanguard index funds on this list have relatively low expenses. VDADX is a great example. The average fee on large-cap funds like this is 0.68%, according to Morningstar. But Vanguard Dividend Appreciation charges a mere 0.07%. Fees are even lower for VDADX's ETF class, Vanguard Dividend Appreciation ETF (VIG, 0.04% expense ratio), which goes for about $235 per share.

7. Fidelity Total International Index Fund

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Style: International all-cap stock
Assets under management: $23.5 billion
Dividend yield: 2.5%
Expense ratio: 0.06%, or 60¢ per year for every $1,000 invested
Minimum initial investment: None

Up until now, I've exclusively covered equity funds that own U.S. companies. That's because most of our readers are U.S. investors, and thus have the most access to U.S. stocks. Not to mention, U.S. markets have long been among the most productive in the world—and if you believe in the American economy's ability to keep growing, that should remain the case.

However, most experts would tell you that it's worth having at least some international exposure. One of the best ways to do that without breaking the bank is to own a product like Fidelity Total International Index Fund (FTIHX).

FTIHX tracks an international index that holds large-, mid-, and small-cap stocks in both developed and emerging markets—basically anywhere that isn't the U.S. And its passport is covered in stamps. The fund holds nearly 5,100 stocks across a few dozen countries.

But, as is the case with similar index funds, Fidelity Total International Index Fund hardly does any of this equally. Geographically speaking, this Fidelity mutual fund favors developed markets, including Japan (15%), the U.K. (9%), and Canada (8%). From a company-size perspective, it's predominantly large-cap in nature—nearly 80% of the portfolio is invested in big, blue-chip international firms such as Taiwan Semiconductor (TSM), South Korea's Samsung, and U.K. pharmaceutical mainstay AstraZeneca (AZN). That's common for international funds, and it tends to result in dividend yields that are much bigger than comparable U.S. products; indeed, FTIHX's yield is more than double the S&P 500's.

It is worth noting that while Fidelity Total International Index Fund does enjoy a Morningstar Gold medalist rating, a lot of that is shouldered by its dirt-cheap investment fee. FTIHX's historical performance has been generally good, but not necessarily excellent; this is a category in which actively managed funds can do quite well.

Also, if you're compelled to build the lowest-fee portfolio possible and you have a Fidelity account (or you are willing to open one), you can own a similar, Silver-rated product from Fidelity's ZERO Funds line—Fidelity ZERO International Index Fund (FZILX)—for an annual fee of literally nothing.

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8. Vanguard Intermediate-Term Corporate Bond Index Fund Admiral Shares

Style: Intermediate-term corporate bond
Assets under management: $68.1 billion
SEC yield: 5.1%*
Expense ratio: 0.06%, or 60¢ per year for every $1,000 invested
Minimum initial investment: $3,000

Most investors will want some exposure to bonds—debt issued by governments, companies, and other entities that pay interest to bondholders. But how much exposure you want will largely depend on your age.

Bonds tend to be much less volatile than stocks, for better or worse; it limits downside, yes, but it also limits upside. Instead, most of the return from bonds comes from the steady stream of interest income they produce. They're not great for generating wealth, which is your prime concern when you're younger, but they're outstanding for protecting wealth, which becomes increasingly pivotal as you age.

However, making an educated purchase of a single bond is tougher than you might expect. Data and research on individual issues is much thinner than it is for publicly traded stocks, plus, some bonds have minimum investments in the tens of thousands of dollars. So, your best bet is to buy a bond fund, which can provide you with access to hundreds if not thousands of bonds. Your most economical bet is to do so through bond funds.

Take the Vanguard Intermediate-Term Corporate Bond Index Fund Admiral Shares (VICSX), for instance.

VICSX allows you to invest in 2,235 investment-grade corporate bonds with maturities of between five and 10 years. Investment-grade corporates are a little riskier than similar-maturity Treasuries, but you get a bit more yield as a result … and they're not exactly poor-quality bonds. The portfolio is split roughly 50/50 between BBB-rated bonds (the lowest investment-grade rating) and A-rated or above. Meanwhile, the focus on intermediates provides a fair blend of risk and income.

VICSX's ETF version is the Vanguard Intermediate-Term Corporate Bond ETF (VCIT, 0.03% expense ratio), which goes for about $85 per share.

* 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.

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9. Vanguard Short-Term Bond Index Fund Investor Shares

Style: Short-term bond
Assets under management: $69.9 billion
SEC yield: 4.2%
Expense ratio: 0.06%, or 60¢ per year for every $1,000 invested
Minimum initial investment: $3,000

Stocks aren't the only asset with varying levels of risk and potential reward. Bonds can run the gamut, too.

If you can remember back to 2022-23, volatility ripped through not just the stock market, but also the bond market. Bonds that were set to mature in 20 to 30 years actually saw greater price declines than the S&P 500!

That's because maturity is a major factor in determining bond risk. As a general rule, the longer the bond, the greater the risk that the bond might not be repaid. Interest rates matter, too. When rates go higher, new bonds pay more, which tempt people to sell their old bonds for the new, higher-paying bonds. But the temptation is much greater when you're dealing with longer-term bonds with lots of payments remaining—and not so great for short-term bonds with one or just a couple payments left.

Investors looking to ratchet down their risk by investing in shorter-term debt, then, might consider the Vanguard Short-Term Bond Index Fund Admiral Shares (VBIRX)—a diversified bond index fund including both government and corporate bonds.

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 3,190 bonds (versus the benchmark's 4,040 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—just 2.6 years right now—the fund's risk to rising interest rates is low.

A 4%-plus yield despite this conservative portfolio makes this one of the best Vanguard index funds for beginners, and really, one of the best index funds you can buy overall.

You can also invest in this strategy through the ETF shares. Vanguard Short-Term Bond ETF (BSV, 0.03% expense ratio) trades for around $80 per share.

Related: 5 Best Silver ETFs You Can Own

10. Fidelity Freedom Index Funds

Style: Target-date
Assets under management (collectively): $209.6 billion
Expense ratio: 0.12%, or $1.20 per year for every $1,000 invested
Minimum initial investment: None

OK, technically, our last entry isn't the final fund on this list ... it's the final 14.

Target-date funds (TDFs) are the ultimate buy-and-hold instrument, meant to stay in your portfolio for literally decades.

TDFs are funds that shift their asset allocation over time to meet investors' changing needs as they age. A person who turned 25 in 2025 might expect to retire in 2065, so they'd buy a fund with a target retirement date of 2065. That fund will probably start out with a very heavy allocation to stocks (to grow the investors' wealth), but as the years roll on and the fund approaches its target retirement date, it will start putting more of its assets into bonds (to protect the investors' wealth).

Many fund providers have at least one target-date series, though larger asset managers sometimes offer more. Fidelity is well outside the norm, however, with a whopping four—and the highest-rated among them are the Fidelity Freedom Index Funds.

You can read our coverage of Fidelity's full set of target-date lineups to get a better idea of how these funds work. But you should know that Fidelity Freedom Index Funds, which are built exclusively from Fidelity's lineup of low-cost index funds, are a rarity—few target-date series can boast a Gold Medalist rating. That rating is due in no small part to extremely low costs. Unlike actively managed target-date funds whose management fees tend to be different across the series, all Fidelity Freedom Index Funds charge the same fee: 0.12%.

Here's a quick look at the full lineup:

Fidelity Freedom Index 2010 Fund (FKIFX)
Fidelity Freedom Index 2015 Fund (FLIFX)
Fidelity Freedom Index 2020 Fund (FPIFX)
Fidelity Freedom Index 2025 Fund (FQIFX)
Fidelity Freedom Index 2030 Fund (FXIFX)
Fidelity Freedom Index 2035 Fund (FIHFX)
Fidelity Freedom Index 2040 Fund (FBIFX)
Fidelity Freedom Index 2045 Fund (FIOFX)
Fidelity Freedom Index 2050 Fund (FIPFX)
Fidelity Freedom Index 2055 Fund (FDEWX)
Fidelity Freedom Index 2060 Fund (FDKLX)
Fidelity Freedom Index 2065 Fund (FFIJX)
Fidelity Freedom Index 2070 Fund (FRBVX)
Fidelity Freedom Index Income Fund (FIKFX)

That last product, Fidelity Freedom Index Income Fund, is designed for people who have reached retirement, and it boasts the most conservative asset blend. When a Fidelity Freedom Index target-date fund expires, it merges with Fidelity Freedom Index Income.

So, why do Fidelity Freedom Index Funds stand out? Well, at least within the Fidelity lineups, here's a comparison from our Charles Sizemore:

"We'll compare the Fidelity Freedom 2065 Fund to its indexed sister fund, the Fidelity Freedom Index 2065 Fund (FFIJX). The index-only Fidelity Freedom fund has an expense ratio of just 0.12% compared to 0.68% for the active target-date fund. Those 56 basis points (a basis point is one one-hundredth of a percentage point) might not sound like much of a difference, but over time it compounds. Over the course of 10 years, if performance is equal, the index fund will make about 13 percentage points more overall due to the lower fees—and the difference will get wider with time."

Learn More About These and Other Funds With Morningstar Investor

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If you're buying a fund you plan on holding for years (if not forever), you want to know you're making the right selection. And Morningstar Investor can help you do that.

Why does a fund's expense ratio matter so much?

Young and the Invested

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. This figure 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.

Example: 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.

Why should I buy no-load funds?

You should buy no-load funds for the same reason you should look to buy funds with lower expenses: The less money that goes to the provider, the more money that goes into your pocket.

Let's say you have $20,000, so you invest $10,000 into two different mutual funds. Mutual Fund A has no sales charge. Mutual Fund B has a 5% front-end sales charge. Both funds gain 7% annually over the next 30 years. And for the sake of simplicity in this example, we'll say both funds don't charge any annual expenses.

Mutual Fund A will earn you $76,123 at the end of those 30 years.
Mutual Fund B will earn you $72,317 at the end of those 30 years. You see, when you buy Mutual Fund B, that 5% front-end sales charge means the provider takes 5% out of your initial investment. So rather than investing $10,000 to start, you're actually just investing $9,500. But you don't lose just that $500—you also lose another $3,806 in "opportunity cost," which is the additional money that $500 would have earned had it not been lost to fees!

Sales charges are a significant handicap to a fund's performance, so it's only worth buying funds with loads if they produce much superior performance compared to the other funds you're considering.

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Related: The 10 Best-Rated Dividend Aristocrats Right Now

But even Aristocrats aren't created equally. Check out which dividend growers Wall Street loves the best right now in our list of the top-rated Dividend Aristocrats.

Related: 10 Dividend Stocks That Pay You Each and Every Month

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13 Mutual Funds That Stand Above the Rest

Kyle Woodley — Mon, 01 Jun 26 09:45:29 -0400

Mutual funds are among the most vital instruments in the investor tool belt. The best mutual funds for 2026 just happen to be tops among those tools.

You could spend countless hours (that you don't have) researching hundreds or thousands of stocks and bonds. Then you could spend hundreds of thousands of dollars (that you also might not have) to buy all the individual stocks and bonds you'd need to put together a truly diversified portfolio.

Or, you could do all of that at a fraction of the time and cost, and get similar if not better results, by purchasing a mutual fund or two with a few quick clicks.

Most investors agree, which is why trillions of dollars remain parked in mutual funds today. However, while mutual funds are a valuable shortcut, they can't help you completely sidestep the decision-making process—because you still have to determine the best mutual funds to buy out of a field of literally thousands.

But I can help with that. Today, I'm going to show you our list of the very best mutual funds you can buy right now. Whether you're interested in something as simple as a core fund of blue-chip names or as complex as a state-specific municipal-bond fund—or one of the many investment categories in between—this list has something for you.

Editor's Note: Tabular information in this article is up-to-date as of May 28, 2026.

How Were the Best Mutual Funds Selected?

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According to the Investment Company Institute's most recent annual Fact Book, investors have plowed $25.5 trillion in assets into nearly 8,600 U.S. mutual funds. But according to that same Fact Book, the median number of mutual funds that a given household owns is … three.

Selecting the three (or two or four or however many mutual funds you personally need) best mutual funds for you from a universe of thousands is awfully unrealistic. So I've whittled that list down into a more digestible group numbering in the teens.

I start virtually every review of investment funds by booting up Morningstar Investor and running a quality screen I customize for each article. Here, I began my search by seeking out only mutual funds that have earned a Gold Morningstar Medalist rating*. Morningstar has two ratings systems—the Star ratings and the Medalist ratings. The latter are a forward-looking analytical view of a fund. Per Morningstar:

As I've written in other Young and the Invested articles, a Medalist rating doesn't mean Morningstar is necessarily bullish on the underlying asset class or categorization. It's merely an expression of confidence in the fund compared to its peers.

That's the starting piece of criteria. Now let's look at other features each fund must have.

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Additional Criteria Our Best Funds Had to Meet

To narrow the list further, I also required the following:

No sales "loads": In addition to annual expenses, some funds charge additional fees, including "loads." For instance, if you invested $10,000 in a mutual fund with a 5% front-end load, the mutual fund provider would immediately take $500 out in fees. So, you'd already be starting behind the 8-ball, investing just $9,500 to start with. The funds here have no sales charges.
Reasonable investment minimums. The maximum investment minimum for inclusion is $3,000. But only one fund on this list requires that much to start. Most require between $1,000 and $2,500, and a few funds have zero investment minimums. Also, some fund providers explicitly lay out lower investment minimums for specific accounts, such as individual retirement accounts (IRAs). T. Rowe Price, for instance, has $2,500 minimum initial investments on many of its funds, but lowers that minimum to $1,000 when investing through an IRA.
Broad availability: Many mutual funds have several share classes, many of which are limited to certain types of accounts, like, say, only for 401(k)s or only for wealth management clients. All funds here are Investor-class or other shares that are generally considered to be widely available to retail investors.

From the much more manageable resulting list, I've selected a group of mutual funds that provide a wide array of core and tactical strategies, ensuring there's at least one fund, if not many funds, for just about everyone.

* All mutual funds on this list had a Gold Medalist rating as of their selection. Funds will remain on the list as long as they maintain a minimum of Silver. Funds that fall below this threshold will be replaced.

The Best Mutual Funds to Buy Now

The following represent some of the best mutual funds you can buy at the moment—and they're priced quite reasonably too.

While annual expense ratios weren't used explicitly in the selection process, the vast majority of these funds sport below-category-average fees. It makes sense, too: Fees eat into a fund's performance, so providers that charge onerous management expenses are, in a way, handicapping their fund's returns. Meanwhile, providers with lower fees get a bit of an intrinsic performance edge.

A few final notes to keep in mind as you're reading this list:

All of these funds have no loads, but brokerage commission fees might apply; check your brokerage before purchasing.
Your brokerage might require a larger minimum initial investment for mutual funds than the fund itself requires.
Some brokerage accounts might not let you purchase certain funds, even if they're generally available to retail investors. (For instance, you might be able to buy the completely made-up Woodley Investments Large-Cap Fund at Schwab, but not at Fidelity.)

Lastly, this isn't a ranking of the best funds. Every fund on here rates as excellent already. This is just listed in a natural progression of various portfolio needs, starting broadly with different stock flavors and ending with a few bond funds.

With all that out of the way, let's look at the best mutual funds you can buy.

1. Fidelity 500 Index Fund

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Style: U.S. large-cap stock
Assets under management: $791.7 billion
Dividend yield: 1.1%
Expense ratio: 0.015%, or 15¢ per year for every $1,000 invested
Minimum initial investment: None
Morningstar Medalist Rating: Gold

Investors are frequently told to start building their portfolio's foundation with an equity fund that invests in large, American companies. These stocks provide a relatively high amount of stability while still offering some upside potential—and in many cases, returns from dividends, too.

One of the most common ways of getting this exposure is through an S&P 500 Index fund like the Fidelity 500 Index Fund (FXAIX).

The S&P 500 Index is a collection of 500 of the largest American businesses, and a barometer of the American stock market. The index requires a few other criteria for a company to join, including a market cap of at least $22.7 billion, highly liquid shares (the stock is frequently bought and sold), and more. There's a bit of a quality check, too: A company must also have positive earnings in the most recent quarter, and the sum of its previous four quarters must be positive. (Note: Once a company becomes an S&P 500 component, it's not automatically kicked out if it fails to meet all of the criteria. However, the selection committee would take this under consideration and possibly boot the company.)

The S&P 500 is considered a reflection of the U.S. economy, but it's not perfectly representative, nor is the U.S. economy evenly split among certain types of business. Right now, for instance, technology makes up a full third of FXAIX's assets, but energy, real estate, materials, and utilities only account for 3% apiece. That's because the S&P 500 is market capitalization-weighted—a common weighting system in which the greater the company's size by market cap (share price times outstanding shares), the more "weight" it's given in the index. That's why this Fidelity index fund currently has the largest percentages of its assets invested in multitrillion-dollar companies like Nvidia (NVDA), Apple (AAPL), and Google parent Alphabet (GOOG/GOOGL).

Meanwhile, turnover (how much the fund tends to buy and sell holdings) is always low, given that only a handful of stocks enter or leave the index in any given year. This tamps down and sometimes even eliminates capital-gains distributions, which can receive unfavorable tax treatment, making FXAIX an extremely tax-efficient option for taxable brokerage accounts.

Now that you understand what the S&P 500 is, you're probably wondering: Why should we unload such a core part of our portfolio to a brainless index fund?

The S&P 500 Index is commonly used as a performance benchmark for mutual funds that invest in U.S.-based large-cap stocks.* But most fund managers who run these products typically struggle to beat this benchmark. Indeed, according to S&P Dow Jones Indices, the vast majority (86%) of active large-cap U.S. equity funds failed to beat the S&P 500 over the trailing 10-year period, and that number is closer to 90% when looking at the past 15 years.

"I know guys that rate active managers in all these categories, and even they’re like, 'I'm not buying actively managed large blend; I'm just indexing,'" says Daniel Sotiroff, Senior Analyst for ETF and Passive Strategies at Morningstar. "Because it’s so brutally tough to beat a dirt-cheap index fund in the large blend category."

And if you're buying an S&P 500 fund, it might as well be Fidelity 500 Index Fund. It has one of the cheapest expense ratios for any mutual fund period, it has no minimum initial investment, and it's widely available. That makes FXAIX not just one of the best Fidelity mutual funds to buy—but one of the best mutual funds across all providers.

* There are different ways to define the different "cap" levels. We're going by 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.

2. T. Rowe Price Dividend Growth Fund

Style: U.S. large-cap dividend-growth stock
Assets under management: $23.6 billion
Dividend yield: 0.9%
Expense ratio: 0.64%, or $6.40 per year for every $1,000 invested
Minimum initial investment: $2,500
Morningstar Medalist Rating: Gold

If you’d prefer a large-cap “blend” fund (a mix of value and growth, like the S&P 500) that’s actively managed, you can look to one of T. Rowe Price’s best mutual funds: T. Rowe Price Dividend Growth Fund (PRDGX).

Dividend funds are not all built the same. Some expectedly prioritize a higher-than-average level of equity income. But some, like PRDGX, focus more on dividend growth, where its components' payouts increase over time, than headline yield.

What’s the appeal? Well, even dividend stocks with a low yield right now can deliver a higher “yield on cost” down the road. Yield on cost is what you're actually earning based on the price at which you bought the stock. (Example: A $100 stock paying $1 in annual dividends yields 1%. But because you bought the stock at $50, your yield on cost is 2%.)

Also, dividend-growth stocks tend to be high-quality equities. After all, you can't sustainably increase how much cash you're shelling out to shareholders if you're unable to turn a profit—you need strong financials and excellent cash flows. So dividend growth is often considered a quality screen of sorts that ensures the fund owns a higher grade of company.

That's what you get with PRDGX. "[Manager Tom] Huber targets financially healthy companies capable of sustaining above-average payout growth, believing dividend growers offer attractive returns with lower volatility," Morningstar Senior Analyst Stephen Welch says about this Gold-rated fund.

But one thing to note: Huber is tasked with building a portfolio of companies "that have a strong track record of paying dividends or that are expected to increase their dividends over time." I emphasize "or" because it's … well, different.

Many dividend-growth index funds are required, thanks to the rules that govern the index, to own companies that have improved their payouts without interruption for some set period of time. That's not the case with T. Rowe Price Dividend Growth. Huber has full discretion here. For instance, holding Ross Stores (ROST) actually suspended its distribution for a few quarters in 2020—and was booted from the Dividend Aristocrats as a result. However, it resumed payouts in 2021 at its previous level and has raised each year since then, so it's certainly a dividend grower once more.

For the most part, however, this U.S.-centric portfolio of about 90 holdings is full of blue-chip stocks such as Visa (V), Chubb (CB), and Walmart (WMT) that boast solid dividend-growth histories.

The actively managed T. Rowe Price Dividend Growth ETF (TDVG) offers similar exposure and charges 0.50% annually.

3. Vanguard Strategic Small-Cap Equity Fund Investor Shares

Style: U.S. small-cap stock
Assets under management: $2.8 billion
Dividend yield: 0.9%
Expense ratio: 0.21%, or $2.10 per year for every $1,000 invested
Minimum initial investment: $3,000
Morningstar Medalist Rating: Gold

Naturally, you don't need to limit yourself to just the market's largest companies—you can (and often should) invest in companies of all sizes.

As a general rule, smaller companies (usually considered to be those with market capitalizations of $2 billion or less) have more growth potential than larger firms. For one, as they say, it's much easier to double your revenues from $1 million than $1 billion. And as these stocks become noticed by institutional investors and fund managers, or begin qualifying for certain indexes, they can begin to enjoy large-scale investments that drive their prices even higher.

Just note that, like with many small-cap funds, turnover is on the high side at 66%, so this is best held in tax-advantaged accounts like an individual retirement account (IRA), health savings account (HSA), or, if available, a 401(k).

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4. Fidelity Mid Cap Index Fund

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Style: U.S. mid-cap stock
Assets under management: $50.0 billion
Dividend yield: 1.0%
Expense ratio: 0.025%, or 25¢ per year for every $1,000 invested
Minimum initial investment: None
Morningstar Medalist Rating: Gold

I frequently refer to mid-cap stocks—companies worth $2 billion to $10 billion by market cap—as "Goldilocks" stocks. That's because they enjoy some qualities of their large-cap brethren (some size, some stability, revenue stream diversity, some access to capital) and some qualities of smaller firms (they're nimble and have more upside potential). That combination of traits is what Goldilocks would call "just right."

"That means mid-caps haven't just delivered better performance—they've done it more consistently, with fewer drawdowns."

Fidelity Mid Cap Index Fund (FSMDX) is an exceedingly cost-efficient way to tap this area of the market. FSMDX tracks the Russell MidCap Index, which is made up of the 800 smallest stocks in the Russell 1000 (which is itself an index of the U.S. market's 1,000 largest stocks). As a result, you're getting exposure to about 800 mostly mid-cap stocks—the fund typically is 75% weighted in mids, with another 5%-10% in smaller large caps, and another 10%-15% in larger small caps.

That might seem odd. But it's pretty commonplace for 20%-30% of a mid-cap fund's holdings to bleed into small- and/or large-company territory, largely because different fund providers and indexes have different definitions for market-cap ranges. Where FSMDX stands out is that "the index selects larger stocks than most," Morningstar says. "Larger stocks are generally less volatile, so the portfolio could exhibit lower volatility than its peers."

Sector weights will naturally change over time as certain businesses come into and go out of favor, but right now, industrials are tops at 19%, followed by financials (15%), consumer discretionary (12%), and information technology (12%). Also, thanks to both the market cap-weighting of the Russell MidCap Index and the high number of holdings, single-stock risk is minimal; currently, every stock is weighted at less than 1%.

A sound methodology for Wall Street's mid-sized companies, dirt-cheap fee, and strong historical performance all make FSMDX one of the best index funds you can buy, and one of the best mutual funds period.

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5. Primecap Odyssey Aggressive Growth Fund

Style: U.S. all-cap growth stock
Assets under management: $7.8 billion
Dividend yield: 0.3%
Expense ratio: 0.66%, or $6.60 per year for every $1,000 invested
Minimum initial investment: $2,000
Morningstar Medalist Rating: Gold

Primecap Odyssey Aggressive Growth Fund (POAGX) is a supreme example of the advice to "look under the hood" before you buy a mutual fund.

This is a fund that has the words "aggressive growth" in the name, and that is categorized as a mid-cap growth fund. However …

POAGX isn't an "aggressive growth" fund—at least not right now. While it's true that POAGX's management aims to own companies with "prospects for rapid earnings growth," its actual holdings aren't as aggressively "growthy" as comparable products. "The fund has recently tilted more toward the core column of the Morningstar Style Box as many of its holdings' growth rates and valuation ratios have declined in recent years, and the managers have been unwilling to chase benchmark stocks they think are overvalued," says Morningstar Principal Robby Greengold.
POAGX isn't really a mid-cap growth fund, either. The fund's page itself says the company "has historically invested significant portions of its assets in mid- and small-capitalization companies," and "may invest in stocks across all market sectors and market capitalizations." There's nothing strictly tethering this fund to mid-caps. In fact, it currently boasts a pretty balanced 40/30/30 blend of large-, mid-, and small-cap stocks.

Fortunately, you're still left with an awfully useful fund.

Primecap Odyssey Aggressive Growth and its team of managers own nearly 200 stocks across the market-cap spectrum, with an eye for growth. Each manager oversees a separate "sleeve" of selections, while a few picks are made by other analysts.

As is common with actively managed funds, size isn't everything when it comes to allocations. Yes, top holdings include mega-caps like Micron (MU), Nvidia, and Alphabet ... but they also include companies like $6 billion Rhythm Pharmaceuticals (RYTM) and $38 billion BeOne Medicines (ONC) that would never see daylight in a cap-weighted index fund.

The proof is in the performance pudding. POAGX is in the top 20% of all category funds by performance over the trailing three-, five-, and 10-year periods, and the top 5% over the trailing 15 years.

Again, past performance isn't indicative of future returns, but management has a track record of going anywhere within the U.S. market-cap spectrum and finding gold. And that makes Primecap's product one of the best mutual funds to buy in 2026.

6. Fidelity Select Semiconductors Portfolio

Style: Industry (Semiconductors)
Assets under management: $43.1 billion
Dividend yield: < 0.0%
Expense ratio: 0.60%, or $6.00 per year for every $1,000 invested
Minimum initial investment: None
Morningstar Medalist Rating: Gold

Fidelity has roughly 30 "Select" funds—the company's name for its sector- and industry-specific funds. Several of these funds currently boast Morningstar Gold Medalist ratings. However, given that many investors have a heightened interest in the technology sector, I figured a tech-focused offering was the top fit for our best mutual funds list.

Fidelity Select Semiconductors Portfolio (FSELX) is an actively managed industry fund focused on semiconductor stocks, which have a pretty straightforward bull case: As both our personal and business worlds become increasingly dependent on technology, semiconductor companies—which design and manufacture one of the most essential components of technology—stand to benefit. And some of the greatest opportunities rest within those semiconductor companies powering emergent and high-growth technologies such as data centers, cloud computing, and artificial intelligence.

Adam Benjamin, who has led FSELX for six years, aims to beat the broader semiconductor industry by picking winners and losers within the space. In addition to single-company research, Benjamin also attempts to identify themes that will impact the largest end markets, and determine how technology disruptors might impact incumbent companies.

Fidelity Select Semiconductors' 65-stock portfolio might seem tight, but it's pretty standard for a single-industry fund. The same goes for the massive 25% weight in Nvidia—as it goes, so too goes most semiconductor portfolios, not just Benjamin's pick list.

Kudos to Fidelity Select Semiconductors: In addition to its Gold Medalist rating, it has beaten every meaningful benchmark—the S&P 500, the technology sector, the MSCI US IMI Information Technology 25/50 Index—over every meaningful time period. And over the trailing three-, five-, 10- and 15-year periods, it has been in either the top 2% or 1% of products in its Morningstar category: tech-stock funds.

Morningstar, in explaining its Gold Medalist rating, also points out that "Benjamin has invested between $100,000 and $500,000 in the strategy, making an effort to align interests with shareholders and establish a proper incentive structure." To be clear: Fund managers virtually always have investors' best interests in mind, but when a manager actually has tangible skin in the game, that often provides additional confidence and comfort in the product.

Related: The 10 Best ETFs for Beginners

7. Vanguard Real Estate Index Fund Admiral Shares

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Style: Sector (Real estate)
Assets under management: $69.9 billion
Dividend yield: 3.6%
Expense ratio: 0.13%, or $1.30 per year for every $1,000 invested
Minimum initial investment: $3,000
Morningstar Medalist Rating: Gold

Real estate investment trusts (REITs) are a specially structured type of company that owns and sometimes operates real estate. REITs enjoy a special tax status that allows them to avoid corporate taxation so long as they distribute at least 90% of their net profits as dividends. Because of this tax incentive, REITs tend to be one of the highest-yielding sectors and a perennial favorite among income investors.

By the way: This tax status was built in by Congress when it created REITs as part of the Cigar Excise Tax Extension of 1960. REITs were brought to life to give regular Joes and Janes like us to invest in real estate. After all, most of us don't have the six or seven digits it takes to buy investment properties, but we probably have the $20 or $30 it takes to buy a share of a REIT.

We need a little bit more than that—$3,000—to own the collection of REITs held by Vanguard Real Estate Index Fund Admiral Shares (VGSLX), but it's still a doable sum for most investors. (And if it's not doable for you, I'll tell you about the lower-dollar-cost exchange-traded alternative in a second.)

This Vanguard index fund plugs investors into nearly 150 REITs across a variety of property types, including industrial, retail, telecom tower, self-storage, office, residential, and more. Right now, top holdings include health care property owner Welltower (WELL), logistics and warehousing REIT Prologis (PLD) and datacenter landlord Equinix (EQIX).

Also worth noting is that the fund's top position is another Vanguard fund: the Vanguard Real Estate II Index Fund Institutional Plus Shares (VRTPX), which makes up about 15% of assets and owns many of the same companies.

VGSLX is one of the better-yielding REIT funds out there, paying out well more than 3% at the moment. That's more than three times what you'd get from an S&P 500 fund.

Just note that REITs are very tax-inefficient. As mentioned above, they tend to pay nonqualified dividends, which are taxed as ordinary income (thus as high as 37%, depending on your bracket). So if at all possible, you'll want to hold REITs and REIT funds like FRESX in a tax-advantaged plan like a 401(k) or IRA to negate those tax consequences.

And if that $3,000 minimum is an issue, you can get VGSLX in ETF form via the Vanguard Real Estate ETF (VNQ, 0.13% expense ratio), which trades around $90 per share.

8. Schwab Fundamental International Equity Index Fund

Style: International large-cap value stock
Assets under management: $5.1 billion
Dividend yield: 3.1%
Expense ratio: 0.25%, or $2.50 per year for every $1,000 invested
Minimum initial investment: $1
Morningstar Medalist Rating: Gold

The U.S. has been one of the world's most fruitful stock markets for decades. So if you believe in the American economy's ability to keep growing, naturally, you should continue to invest the lion's share of your money in U.S. assets.

Still, many advisors will tell you it's important to diversify geographically, too. It's a little hedging of bets, sure—while U.S. stocks tend to outperform international, 2025 was a year in which the rest of the world outdid America. But also, there are hundreds of high-achieving companies scattered across the globe, and it makes sense to have a little exposure to those firms, too.

Schwab Fundamental International Equity Index Fund (SFNNX) isn't your average international-stock index fund. Whereas most cheap index funds use a few baseline qualifying criteria and assign weights by market capitalization, SFNXX tracks a RAFI (Research Affiliates Fundamental Index) series index that prioritizes fundamental metrics—adjusted sales, retained operating cash flow, and dividends plus buybacks—when both selecting and weighting its components.

"When the fund rebalances, it increases exposure to stocks that have become cheaper relative to these metrics and trims those that have become more expensive," Morningstar Senior Analyst Daniel Sotiroff says.

Top country allocations are pretty similar to what you'd get in other large-cap international funds—a heavy dose of Japan, western European countries like the U.K. and France, and Canada. Top holdings? Similar again! Big, blue-chip firms like South Korea's Samsung and British energy giant Shell (SHEL) can be found in many competitor funds. And while the dividend is indeed juicy compared to U.S. blue-chip funds, that's also typical of most international large-cap offerings.

However, SFNNX's fundamental focus has made itself heard where it counts: performance. Schwab Fundamental International Equity Index has topped both its Morningstar category average and index returns across all meaningful time periods. It's also within the top 15% of category funds over the trailing-15-year period, and within the top 10% over the past 10 years.

* 0.48% gross expense ratio is reduced with a 15-basis-point fee waiver until at least April 30, 2026.

9. Artisan Sustainable Emerging Markets Fund Investor Class

Style: Emerging-markets stock
Assets under management: $568.3 million
Dividend yield: 1.5%
Expense ratio: 1.15%, or $11.50 per year for every $1,000 invested
Minimum initial investment: $1,000
Morningstar Medalist Rating: Silver

If you're a little more adventurous, you might eschew developed markets for "emerging markets" (EMs).

Emerging markets are considered to be less developed economies and capital markets. The downside here is more risk, ranging from political corruption and possible nationalization of publicly traded companies to less scrutinizing stock markets or economies dependent on just a handful of goods or services. But the upside is far greater growth potential compared to more established countries—and Wall Street is generally favorable on them heading into 2026.

"EM stocks have benefited from capital flight out of the U.S. while the global economy is benefiting from easing trade tensions and rising fiscal stimulus," T. Rowe Price said in its 2026 equity outlook. "A weaker U.S. dollar offers a further tailwind." And indeed, so far this year, emerging markets have outperformed their U.S. counterparts.

It's rare for EM funds to earn Morningstar's Gold Medalist rating. Artisan Sustainable Emerging Markets Fund Investor Class (ARTZX) did at the time of selection, though it is now rated Silver. Regardless, that still makes it one of the highest-rated emerging-markets mutual funds that's accessible to your average investor.

Manager Maria Negrete-Gruson brings 34 years of investment experience to this strategy, in which she's looking for not just the growth potential typical of emerging markets—but companies that boast "sustainability" in more ways than you'd expect. Some of that sustainability involves assessing environmental, sustainability, and governance (ESG) issues, sure. But the fund also focuses on companies with sustainable earnings, analyzing potential picks' historical drivers of sustainable return on equity (RoE) and companies' competitive advantages.

Most emerging-markets funds have a large allocation to Chinese equities, and ARTZX is no different, at a 18% weight currently. Taiwan is tops, though, at 21%, and South Korea is the only other double-digit country weight at 14%. The rest of the portfolio is largely allocated to countries from South America, southeast Asia, and Eastern Europe.

Historical performance hasn't been as dominant as some of the other funds on this list, but its three- and 10-year returns are within the top 20% of category funds.

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10. Dodge & Cox Income Fund

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Style: Intermediate-term core-plus bond
Assets under management: $107.7 billion
SEC yield: 4.3%*
Expense ratio: 0.41%, or $4.10 per year for every $1,000 invested
Minimum initial investment: $2,500
Morningstar Medalist Rating: Gold

Most investors need some exposure to bonds, which is debt that's issued by governments, companies, and other entities. Their interest payments and relative lack of volatility make them an excellent tool for providing a portfolio with stability and income.

But how much bond exposure you need will vary by age—because they're better at protecting wealth than growing it, people typically start with little in the way of bond holdings earlier in life, then gradually hold more bonds as they get closer to (and into) retirement. (Purpose-built investment products called target-date funds capture this dynamic automatically for investors.)

Individual bonds can be a hassle. Data and research on individual issues is much thinner than it is for publicly traded stocks. And some bonds have minimum investments in the tens of thousands of dollars. But you can blunt these problems by purchasing a bond fund, which allows you to invest in hundreds or even thousands of bonds with a single click—and, in many cases, very low fees.

Bond funds like Dodge & Cox Income Fund (DODIX) are, ahem, the gold standard.

DODIX is referred to as a "core-plus" bond fund, which means it can hold not only several types of core debt categories, but also noncore categories such as below-investment-grade (aka junk) corporate bonds and emerging-markets debt.

While this Dodge & Cox fund is allowed to pursue "below-investment-grade debt, debt of non-U.S. issuers, and other structured products," it's not doing much of that at the moment. Currently, more than half of assets are invested in securitized debt, 28% is allocated to mostly investment-grade corporates, 14% goes to Treasuries, and the rest is scattered other government-related bonds. Across all of that, DODIX does hold a little international debt, and about 5% of the portfolio is junk-rated, but past that, it's more "core" than "core-plus"—but it's an opportunistic fund, so that could change at any time.

Duration, a measure of interest-rate sensitivity, is 6.1 years. While the actual calculation is much more complex, this basically implies that for every 1-percentage-point increase in interest rates, DODIX would decline by 6.1% in the short term, and vice versa. It's a moderate amount of risk, nothing more.

Past that, Dodge & Cox Income has beaten its category average and its benchmark index—the Bloomberg U.S. Aggregate Bond Index (the "Agg"), arguably the market's most prominent broad bond index—in every meaningful time period. It's also among the top 20% or better of all category funds over the trailing one-, five-, 10-, and 15-year periods.

* SEC yield reflects the interest earned across the most recent 30-day period.

11. Fidelity Tax-Free Bond Fund

Style: National long-term municipal bond
Assets under management: $3.8 billion
SEC yield: 3.6%
Expense ratio: 0.25%, or $2.50 per year for every $1,000 invested*
Minimum initial investment: None
Morningstar Medalist Rating: Gold

Municipal bonds are typically issued by states, counties, cities, and other sub-federal government agencies. They're sometimes used to fund general obligations and are backed by the municipality, though some are backed by the revenue a project would generate—say, a toll road. Muni bonds' quality usually isn't as high as similar federal debt but higher than comparable corporates.

But the glitziest trait of "munibonds" is their tax treatment. Municipal bonds' interest is exempt from federal income taxes and net investment income tax (NIIT) … and if you live in the municipality in which it was issued, state and possibly even local income taxes. So whatever headline yield you see on a municipal bond, you're probably earning much more once you factor in taxes.

Here's a hypothetical example: You live in Maryland, make $275,000 per year, and are a single filer. In 2026, that puts you in the 35% federal tax bracket and the 5.75% Maryland state tax bracket, plus it requires you to pay an additional 3.8% in NIIT, for a total tax rate of 44.55%. You buy a Maryland municipal bond with a 3% yield, so your income isn't subject to any of those taxes. Your "tax-equivalent yield" would be 5.4%. That means if you wanted to buy a normal taxable bond and get the same amount of post-tax yield as the muni, that bond would have to yield 5.4%!

The Fidelity Tax-Free Bond Fund (FTABX) is a national munibond fund that holds about 1,300 debt issues from 48 states and the District of Columbia. Issuers include the likes of the New Jersey State Transportation Trust Fund Authority, Alabama's Black Belt Energy Gas District, and the state of Illinois.

Because it holds such a wide variety of funds, state taxes won't be much of a factor no matter where you live—the greatest portion of the portfolio is invested in munis from New York State, and even then that's just a little more than 10% of assets. The big break is on the federal end. While a 3.6% SEC yield doesn't sound like all that much, someone paying the top 35% federal rate and the 3.8% NIIT would need to be earning a yield of roughly 5.9% from a taxable bond fund to bring in the same amount of post-tax income.

Just be smart about account selection. This tax advantage disappears inside of a tax-advantaged account like an individual retirement account (IRA) or 401(k). To get the benefit of the tax-free income, you need to hold munibond funds like FTABX in a taxable brokerage account.

* 0.43% gross expense ratio is currently reduced with an 18-basis-point fee waiver.

12. Vanguard Wellington Fund Investor Shares

Style: Moderate allocation
Assets under management: $121.3 billion
Dividend yield: 2.0%
Expense ratio: 0.24%, or $2.40 per year for every $1,000 invested
Minimum initial investment: $3,000
Morningstar Medalist Rating: Gold

It's possible to get both your stock and bond exposure in a single fund. These funds are known by many names, including "balanced" or "allocation" funds, though I prefer to refer to them as "portfolios in a can."

One of the best such funds—Vanguard Wellington Fund Investor Shares (VWELX)—is Vanguard's oldest mutual fund, a product that debuted back in 1929. It's managed by Wellington Management, an investment management company with nearly a century of operational experience.

Wellington, which is considered a moderate allocation fund, invests about two-thirds of assets in stocks, and the other third in bonds. The stock portion of the portfolio currently holds about 80 predominantly large-cap stocks with a median market cap of more than $325 billion. It's a "who's who" of blue chips such as Nvidia, Apple, Alphabet, Microsoft (MSFT), and Amazon (AMZN). It also includes a little exposure to international stocks—predominantly developed-country names like UBS Group (UBS) and British American Tobacco (BTI).

The bond portfolio is much more broadly diversified, at more than 1,500 investment-grade issues. Two-thirds of that is invested in corporate bonds, with another 25% or so in Treasuries and agency bonds. The rest is peppered across mortgage-backed securities (MBSes), foreign sovereign bonds, and other debt.

Put more succinctly: Wellington is a one-stop shop for your core large-cap stock and bond needs, and its 0.24% in annual expenses is very inexpensive for the skilled management and strong performance track record you're getting in return. It's one of the best Vanguard funds you can buy, and in our view, one of the best mutual funds you can buy.

Just make sure you're considering your specific investment needs with this fund. If you don't want a third of your portfolio to be in bonds, you'll want to put additional money into individual stocks, equity funds, and/or alternative investments.

13. T. Rowe Price Capital Appreciation

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Style: Moderate allocation
Assets under management: $70.8 billion
Dividend yield: 1.7%
Expense ratio: 0.71%*, or $7.10 per year for every $1,000 invested
Minimum initial investment: $2,500
Morningstar Medalist Rating: Gold

T. Rowe Price Capital Appreciation (PRWCX) comes at the tail end of this list—very much out of order—because of its status. Specifically, PRWCX is closed to most new investors. This is very much an exception to the rules I laid out above. However, I'm still including it among the best mutual funds you can buy both because of its extremely high quality and because this T. Rowe fund still might be available to some investors via select registered investment advisory (RIA) firms.

T. Rowe Price Capital Appreciation is another allocation fund—this one designed to invest at least half its assets in stocks, with the rest socked into various debt securities, including corporate bonds, government debt (Treasuries, MBSes, asset-backed securities), and bank loans. It's primarily a domestic fund, but it can hold at least a quarter of its assets in foreign equities and debt. PRWCX, which currently holds around 165 securities, places 55% of assets in domestic shares and a little more than than 30% in domestic bonds, sprinkling the rest around foreign bonds, foreign stock, preferred stock, convertible securities, and cash.

Morningstar Analyst Jason Kephart says David Giroux, who has managed the fund since June 2006, and his team "have earned a well-deserved reputation as one of the leading investment teams managing money for individual investors."

"Giroux has helmed T. Rowe Price Capital Appreciation since mid-2006," Kephart says. "Over that time, he's displayed an innate ability to invest opportunistically across equities and bonds, capturing pockets of value through strong stock selection and impressively timed shifts between stock and bond exposure. His execution of this strategy's nimble, contrarian approach has delivered topnotch returns for its investors."

During his tenure, Giroux has beaten all of his category peers on both an absolute and risk-adjusted basis. He has also bested 89% of peers over the trailing five-year period, 97% over the trailing 10 years, and all peers over the trailing 15 years.

However, T. Rowe Price Capital Appreciation has a couple of critical sticking points, too:

The nature of its returns. The lion's share of PRWCX's returns come not as price appreciation, but year-end distributions of dividends and capital gains. That adds a layer of tax complexity, and as such, PRWCX is best held in tax-advantaged accounts like 401(k)s and IRAs.
Availability. Again, PRWCX is largely closed to new investors, so most of us can't just log into our browsers and buy this fund. But again, if your money is managed through certain registered investment advisers, you might actually be able to buy shares of this gem.

* 0.74% gross expense ratio is reduced with a 3-basis-point fee waiver until at least Feb. 29, 2028.

Learn More About These and Other Funds With Morningstar Investor

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If you're buying a fund you plan on holding for years (if not forever), you want to know you're making the right selection. And Morningstar Investor can help you do that.

Why Does a Fund's Expense Ratio Matter So Much?

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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.

Why Should I Buy No-Load Funds?

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You should buy no-load funds for the same reason you should look to buy funds with lower expenses: The less money that goes to the provider, the more money that goes into your pocket.

Mutual Fund A will earn you $76,123 at the end of those 30 years.
Mutual Fund B will earn you $72,317 at the end of those 30 years. You see, when you buy Mutual Fund B, that 5% front-end sales charge means the provider takes 5% out of your initial investment. So rather than investing $10,000 to start, you're actually just investing $9,500. But you don't lose just that $500—you also lose another $3,806 in "opportunity cost," which is the additional money that $500 would have earned had it not been lost to fees!

Sales charges are a significant handicap to a fund's performance, so it's only worth buying funds with loads if they produce much superior performance compared to the other funds you're considering.

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Riley Adams, CPA

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Investment advisory services offered through NewEdge Advisors, a registered investment advisor.

Related: 8 High-Quality, High-Yield Dividend Stocks

Related: The 12 Best Vanguard ETFs for a Low-Cost Portfolio

Vanguard's exchange-traded funds (ETFs) are among the most popular funds out there thanks to their low fees. But there's more appeal to their ETF lineup than low costs alone.

Vanguard ETFs are big, liquid, and tend to track well-constructed indexes, meaning you're not just paying low expenses ... you're actually getting some value out of your fees. And these Vanguard ETFs represent the best of the best.

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What Was the Average Tax Refund in 2026?

Rocky Mengle — Wed, 29 Apr 26 11:15:23 -0400

You might have heard some of the hype about bigger tax refunds in 2026. The Trump administration, for example, has said this year's average refund will be $1,000 higher than last year. That would be a huge increase.

However, the average tax refund for the year fell well short of the administration's lofty projection—but they were indeed higher than last year. Tax law changes made by the "One Big Beautiful Bill" (OBBB) are primarily responsible for the uptick. But that doesn't necessarily mean you received a big refund (or smaller tax bill).

If you're wondering how your refund compares to others, read on to see how high the average tax refund actually climbed in 2026. We'll also explore why refunds rose, who was expected to get a bigger refund, how long it typically takes to get paid, and what steps you should take if you do get a substantial refund.

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What's the Average Tax Refund So Far in 2026?

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As of April 17, 2026 (two days after tax returns were due), the IRS processed over 138 million tax returns and issued over 90 million refunds.

For all the refunds issued so far, the average amount is $3,275, which is $333 (or 11.3%) higher than the average refund at the same point during last year's tax season (which was $2,942).

This is a far cry from the expected extra $1,000 that I mentioned earlier. So, while refunds are higher, they're not as large as originally expected.

Why Are Tax Refunds Expected to be Higher This Year?

Generally speaking, you get a tax refund from the IRS when the federal income taxes you paid during the year through paycheck withholding and/or estimated taxes are greater than the taxes you owe for the year (as reported on your tax return).

So, for example, if too much tax is withheld from your income, or your tax bill is cut, you could end up with a larger tax refund … and the OBBB, which was enacted in July 2025, made both of these things possible for millions of Americans.

First, the OBBB created four new tax deductions and expanded several other tax breaks for the 2025 tax year. These changes will reduce the amount of tax owed for qualifying taxpayers. Among other things, the legislation enhanced or added the:

Child tax credit (increased from $2,000 to $2,200 per eligible child)
Standard deduction (increased it by 5%)
State and local taxes (SALT) deduction (increased the maximum deduction from $10,000 to $40,000)
Senior deduction (added new deduction)
Tip deduction (added new deduction)
Overtime deduction (added new deduction)
Car loan interest deduction (added new deduction)

Second, after these changes were made, the IRS didn't adjust the 2025 withholding tables used by employers to calculate the amount of federal income tax to withhold from their employees' paychecks. As a result, for people who can benefit from the new or improved tax breaks listed above, their withholding wasn't reduced by a corresponding amount. This caused over-withholding for many people in 2025.

Likewise, the estimated tax payment rules weren't adjusted after the OBBB's passage. So, self-employed people and other taxpayers who made estimated payments for the 2025 tax year may have also paid more tax in advance than necessary.

So, again, if you took advantage of any of the OBBB changes, and your 2025 withholding or estimated tax payments stayed the same, this likely either:

Triggered a tax refund
Boosted the tax refund you would have otherwise received
Cut the tax bill you would have otherwise had to pay when you filed your return

Which outcome applies depends on all the factors that make up your overall tax situation.

Who Could Get a Bigger Refund This Year?

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Millions of people could potentially receive a larger tax refund this year because of the new or enhanced tax breaks enacted by the OBBB. For instance, the following taxpayers might get a larger refund under the OBBB:

Families with children: The increased child tax credit will put more money in your pocket. Since the credit is worth $2,200 per eligible child, families with more than one child will qualify for a larger overall credit. Plus, some of the credit may be "refundable," which means a portion of the credit will be paid back to you even if you owe no or little tax.

Seniors who are at least 65 years old: The new senior deduction is worth up to $6,000 per eligible person. If you're married and both you and your spouse were at least 65 years old at the end of 2025, your combined deduction could be as much as $12,000. However, if your income is too high, your deduction is reduced (potentially to $0).

Residents in high-tax states: If you pay a lot of state and/or local income, sales, or property taxes, you might be able to deduct an additional $30,000 of those taxes on your federal income tax return. That's because the SALT deduction cap was raised from $10,000 to $40,000 (although the cap can drop back down to $10,000 if your income is above a certain threshold). Note that you have to itemize in order to claim the SALT deduction (so you can't claim the standard deduction), and you have to choose between deduction state and local income taxes or sales taxes (you can't deduct both).

Workers who receive tips or earn overtime pay: New tax deductions for tip income and overtime pay will help a lot of workers. However, not all tips or overtime pay are deductible, and various restrictions apply. For instance, you can only deduct the first $25,000 of qualified tips received during the year, or the first $12,500 of overtime pay earned during the year (up to $25,000 for joint filers). These deductions are also gradually phased-out if your income is above a certain amount.

Non-itemizers: If you take the standard deduction instead of claiming itemized deductions on Schedule A (you can't claim both), you'll benefit from the OBBB's increased "regular" standard deduction amount for 2025. Since close to 90% of all taxpayers claim the standard deduction, the 5% increase will help a lot of people. Plus, if you're 65 or older, or blind, you can take an "additional" standard deduction of either $1,600 or $2,000, depending on your filing status. If you're both 65+ and blind, you can double the additional amount.

New-car owners: If you took out a loan in 2025 to buy a new car that was assembled in the U.S., you may be able to deduct up to $10,000 of interest you paid last year on the loan. However, this deduction is also gradually reduced (or completely eliminated) if your income is too high. You can find out if your car was assembled in the U.S. by checking the car's "window sticker" or entering its VIN in the National Highway Traffic Safety Administration's online VIN Decoder.

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How Quickly Will Your Tax Refund Arrive?

The IRS seems very proud of the fact that they typically process your return and issue a refund within 21 days if you file electronically. However, if you file a paper return, it can take six weeks or longer from the date they receive your return to send a refund payment. So, there's lesson No. 1 if you want your refund sooner: E-file your tax return!

However, there are a number of reasons why your refund could be delayed (even if you e-file). For instance, it could be held up for:

Mistakes on your return (e.g., math errors or missing income)
Incomplete returns (e.g., missing forms or forgetting to sign your return)
Identity theft or fraud (e.g., someone filed a return using your name and Social Security number)
Injured spouse relief (if you file Form 8379 to request relief, the IRS has to manually process your case)

Also note that the IRS is phasing out the use of paper refund checks. They will only mail you a paper check in rare cases. So, that means most people will get their refund payment via direct deposit into your bank account. But the good news is that direct deposit is a much faster way to get your money!

Want to Avoid a Large Refund Next Year?

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You might be thinking: "Why would I want to avoid a big refund next year!?" Fair question.

I understand the excitement when the IRS drops a big refund payment into your bank account. But a tax refund basically means you gave Uncle Sam an interest-free loan. For workers, the extra taxes withheld from each paycheck, which generated your refund, could have been earning interest in your bank account during the year, instead of in the government's account.

It's generally best if the amount of federal income tax withheld from your paychecks during the year comes close to the amount of tax you'll owe for the year. That way, you'll either get a small refund or only pay a small amount when you file your return.

To reach that balance, workers can submit a new W-4 form with their employer. Your employer will then use the new form to reset your income tax withholding. Plus, the IRS recently updated the W-4 form to account for the OBBB changes. So, if you receive a big refund this year because of the new or improved tax breaks from the OBBB, completing a new W-4 form should help correct your withholding for 2026.

For more information, see When and How to Adjust Your Tax Withholding.

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The Geography of a Raise: Cities Where the Minimum Wage Outpaces the Nation.

Riley Adams, CPA — Fri, 17 Apr 26 15:15:49 -0400

The federal minimum wage provides an earnings floor for employees—no matter where you live in this country, you can expect at least $7.25 an hour for your work.

But across much of the U.S., that floor is even higher.

More than half of all states have a state-level minimum wage that exceeds the federal minimum, in some cases by quite a bit. And in various pockets around the country, cities have established their own minimum wages that even exceed the higher bar their state has set.

Today, I'll show you the cities with the highest minimum wages in the nation. Indeed, even at the bottom of this list, these cities' minimums are more than double the current federal standard.

What Is the Federal Minimum Wage?

The federal minimum wage for covered nonexempt workers is $7.25 per hour. But with the federal minimum wage mired at that same rate since 2009, some states and cities have enacted their own minimum wage requirements.

In the event there are different local, state, and federal minimum wages that all apply to the same employee, the highest rate is the one that must be paid.

Cities With the Highest Minimum Wages

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Using data from the Economic Policy Institute, I've compiled a list of the U.S. cities with the highest minimum wages.

The cities with the highest minimum wages don't just beat out the federal minimum wage incrementally—every city on this list requires employers to pay more than double the federal minimum.

Understandably, many of the cities boasting the nation's highest minimum wage requirements also happen to have high costs of living. Regardless, even the lowest-paid workers in each of these cities make more than double the federal minimum wage.

#12 (tie): Cupertino + Los Altos + Santa Clara + Palo Alto, California

Cupertino, located in California's Silicon Valley, is known for being the home of Apple's headquarters. Nearby Los Altos, on the western edge of Silicon Valley, houses many of the area's workers; though it has more than 30,000 residents, people still describe the city as having a small village atmosphere. Santa Clara, in the center of Silicon Valley, is home to the headquarters of some of the world's largest chipmakers, including Nvidia, Intel, and Advanced Micro Devices. (And a fun fact: Santa Clara University is the oldest university in the state.) Palo Alto is known as the "Birthplace of Silicon Valley." It's home to numerous technology companies, including HP, VMware, and Google's Nest Labs—but, despite the name, not Palo Alto Networks, which is HQ'd in Santa Clara.

Cupertino, Los Altos, Santa Clara, and Palo Alto are all less than a half an hour's drive from one another, so it isn't surprising that they will all have the same minimum wage in 2025: $18.20 per hour. That's a big step above the upcoming 2025 California state minimum wage of $16.50 per hour.

Cupertino, Los Altos, and Palo Alto enacted their own minimum wages in 2016, and Santa Clara established its minimum wage in 2017. All three will increase their minimum wages to the upcoming rate at the beginning of 2025.

#11: El Cerrito, California

El Cerrito, which translates to "the little hill" in Spanish, has a total area of just 3.7 square miles. From this hilly area, residents and visitors can see parts of San Francisco, including the Golden Gate Bridge. Its southern reaches are less than 500 feet from the outskirts of Berkeley and just a few miles from the University of California, Berkeley campus.

This town enacted its own minimum wage in 2015. Thanks to the most recent bump, made at the beginning of 2025, minimum wage workers in El Cerrito now make $18.34 per hour.

#9 (tie): Berkeley + San Francisco, California

Berkeley is perhaps best known for the acclaimed University of California, Berkeley, as well as the university-operated Lawrence Berkeley National Laboratory. The city also has the Graduate Theological Union, which is one of the largest religious study institutions around the globe.

Most people are familiar with at least a couple of San Francisco's most noteworthy claims: the Golden Gate Bridge, Alcatraz, the "Painted Ladies" Victorian houses, great sourdough bread. And if you're a fellow Millennial and would like to reminisce with me, it's also where the characters of the show Full House lived.

As Berkeley and San Francisco are both high-cost-of-living cities, it's no surprise that they also have higher minimum wages than most of the country. Both cities made local minimum wage increases on July 1, 2024, which brought their minimum rates up to $18.67 per hour.

#8: Denver, Colorado

You're probably wondering by now whether every city on this list is located in California. Not so! Colorado's capital city has a high minimum wage that matches its altitude! Denver is known for being nestled in the foothills of the Rocky Mountains, hence its nickname, "The Mile-High City." It's best known for Coors Field, the Red Rocks Amphitheatre, and the Denver Art Museum, among other attractions.

Denver enacted its own minimum wage in 2019, and its most recent increase—effective as of the start of 2025—ensures that even its lowest-paid hourly workers enjoy a rate of $18.81 per hour. That's not just a higher minimum wage than the federal standard—it's considerably better than even Colorado, which provides one of the 10 highest state minimum wages.

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#7: Sunnyvale, California

Sunnyvale is another city in the Bay Area chock full of tech names, including LinkedIn, Armorblox, Fortinet, and med-tech name Intuitive Surgical, which makes robotic surgical systems. (It's also where Atari was founded.) And many of the city's residents who don't work for Sunnyvale companies tend to commute to work for Apple, Google, Lockheed Martin Space, Amazon, and more.

Sunnyvale, like many other California cities, makes minimum-wage adjustments every year. Its latest update, effective as of Jan. 1, 2025, was a bump from $18.55 per hour to $19.00 per hour.

#6: Emeryville, California

Emeryville is a town on the San Francisco Bay. It's home to Pixar Animation Studios—fun fact: nearly all Pixar films feature Emeryville in some small way—Peet's Coffee & Tea, Clif Bar, and LeapFrog.

The town enacted its own minimum wage in 2015. Emeryville's most recent increase became effective on July 1, 2024, bringing the minimum wage to $19.36 per hour.

#5: Mountain View, California

Mountain View is another Silicon Valley city—headquarters to not just a slew of technology giants including Google and Intuit, but also the home of Microsoft's Silicon Valley HQ. Among points of interest in the city are Shoreline Park, the Computer History Museum, and the Shoreline Amphitheater.

The city established its minimum wage law in 2015. Its most recent increase, effective Jan. 1, 2025, will raise the current minimum wage to $19.20 per hour, up from $18.75 per hour in 2024.

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#4: SeaTac, Washington

While this list is just loaded with California names, the top cities for high minimum wages all belong to Washington—which offers up the highest minimum wage for any state, at $16.28 per hour.

I'll start with SeaTac, which is a portmanteau of Seattle and Tacoma. This area includes the communities of Angle Lake, Bow Lake, McMicken Heights, and Riverton Heights. SeaTac is home to the Seattle-Tacoma International Airport and is the headquarters for Alaska Airlines and Horizon Air. Roughly 80 of the city's businesses are Fortune 1000 companies.

SeaTac's minimum wage, which was bumped from $19.71 per hour to $20.17 per hour on Jan. 1, 2025, increases every year based on inflation. But there's a big caveat: It doesn't apply to all workers making minimum wage—it only applies to hospitality and transportation workers.

#3: Seattle, Washington

Many of the cities with the highest minimum wages are home to giant tech firms, and Seattle is no exception, hosting Amazon's headquarters. But it's also home to Starbucks, it's where Boeing got its start, and it's just a hop, skip, and a jump away from other massive HQs, including Microsoft's and Costco's home bases. On top of that, Seattle is known for the Space Needle, Pike Place Market, Frasier, and being the birthplace of grunge.

This seaport city enacted its own minimum wage back in 2014, and it will soon increase that wage on Jan. 1, 2025, to $20.76 per hour, up from $19.97 per hour in 2024. But again, there's an asterisk: Smaller employers (with 500 or fewer employees) only have to pay $17.25 per hour if covered employees receive tips, or if employer contributions toward their medical benefits are equivalent to at least $2.72 per hour.

#2: West Hollywood, California

Trendy, progressive West Hollywood is a city within Los Angeles County. It's home to the Sunset Strip, which is well-known for its restaurants, shops, and vibrant nightlife. And visitors going celebrity-watching can sometimes find the stars at some of West Hollywood's more upscale locales.

While hourly paid workers almost certainly don't make as much as those celebrities, they do earn some of the higher minimum wages around. The most recent minimum wage increase in West Hollywood went into effect on July 1, 2024, raising the bar to $20.86 per hour.

#1: Tukwila, Washington

Tukwila, located south of Seattle, boasts a diversity of cultures—the city claims more than 80 languages are spoken in the area, and unsurprisingly, residents also get to enjoy a wide range of cuisines. Top employers include Sound Health, Boeing Employees Credit Union, Boeing Company, and Prime Now LLC.

Tukwila also is home to the highest city-level minimum wage in the country. The city enacted its own minimum wage in 2022. The most recent increase, which became effective at the beginning of 2024, puts the current minimum rate at $20.29 per hour, but this rate will rise to $21.20 per hour on July 1, 2025.

But like with Washington's other city-level minimum wages, Tukwila's minimum isn't applicable across the board—it only applies for large employers (those with 500 or more employees). Employers with between 15 and 499 employees have a separate minimum wage of $18.29 per hour. And employers with fewer than 15 employees that also earn less than $2 million in annual revenue default to the state minimum wage.

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Last Pre-Iran War Inflation Reading Comes in as Expected

Kyle Woodley — Wed, 11 Mar 26 09:47:23 -0400

February's inflation data was largely in line with economists' expectations and showed little change from January, though last month's annual data remained stubbornly above the Federal Reserve's 2% inflation target. But economists and other experts were already looking ahead to March's print, which is expected to show the effects on inflation from the United States' war on Iran.

“Reading too far into today’s CPI in most respects amounts to arguing over the dinner menu on the Titanic, since the economy has struck an energy cost iceberg," says Brad Conger, Chief Investment Officer at investment firm Hirtle Callaghan.

The U.S. Bureau of Labor Statistics said Wednesday that February's CPI, which measures the change in prices on a variety of consumer goods and services, rose by a seasonally adjusted 0.3% month-over-month—a hair faster than in January (0.2%) but on par with consensus expectations. That put consumer prices 2.4% higher year-over-year, which also matched economists' expectations and was level with January's CPI growth.

DepositPhotos

"Core" CPI—a measure of inflation that excludes food and energy costs (factors that are more volatile than the other prices tracked by the Labor Department)—remained steady, too. Core CPI for February was just 0.2% higher month-over-month, which was the same as January and December and right where economists expected. On a year-over-year basis, the core CPI rate of 2.4% was a touch softer than projections for 2.5% growth.

Here's a quick look at February's key CPI figures—the last before the Iran war (and its effects on global energy markets) is expected to bleed into the data:

MoM CPI: +0.3% (estimate: +0.3%)
YoY CPI: +2.4% (estimate: +2.4%)
MoM Core CPI: +0.2% (estimate: +0.2%)
YoY Core CPI: +2.4% (estimate: +2.5%)

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"This is a welcomed number on the surface, but one that may already be outdated," says Alexandra Wilson-Elizondo, Global Co-CIO of Multi-Asset Solutions at Goldman Sachs Asset Management. "February's data was collected before the conflict in Iran sent crude oil surging roughly 30%, with natural gas, aluminum, fertilizer, freight rates, and shipping insurance moving higher with it.

"The Strait of Hormuz remains the wildcard, and if disruption is sustained, the inflation improvement embedded in today's print could reverse quickly. That said, no lasting damage to the Strait has been reported thus far. Should the Strait reopen in short order, shut ins can come back online in as little as 48 hours, with full operations restored within zero to four weeks, and the pass-through to inflation would be limited."

U.S. Bureau of Labor Statistics

Fuel oil saw the sharpest increase in costs, spiking by 11.1%, which drove energy commodities as a whole 1.1% higher. Utility gas service costs also grew, by 3.1%. Other noteworthy increases in price included apparel (+1.3% month-over-month), gasoline (+0.8%), and medical care services (+0.6%).

The only two areas in which prices actually declined were electricity (-0.7% MoM) and used car and truck prices (-0.4%). But some categories did start to show signs of relief last month.

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"Housing costs, captured by the 'shelter' component of CPI, continued to moderate (+0.2% MoM), while broad services prices also showed meaningful deceleration," says Gargi Chaudhuri, Chief Investment and Portfolio Strategist, Americas at BlackRock. "This has been one of the most encouraging trends in recent months, as shelter has been a component that kept inflation elevated the last few years. Continued easing in this category should help support further gradual progress in overall inflation.

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"Auto-related inflation eased, driven by declines in used car prices and car insurance costs. Airfare prices were broadly in line with the prior month. However, rising jet fuel costs, linked to geopolitical tensions in the Middle East, could put upward pressure on airfares in the coming months."

Fed Expected to Keep Interest Rates Level

While inflation remained above the Federal Reserve's 2% target, Wall Street continues to expect that uncertainty about economic data because of the Iran war will stay the hand of America's central bank, and that the target range for its benchmark interest rate will remain steady at the central bank's next meeting later this month.

Specifically, the CME FedWatch Tool, which uses trading in federal-funds futures to determine Wall Street's expectations for future Federal Reserve actions, now shows a 99% chance that the target range for the federal funds rate will stay at its current 3.50% to 3.75% at the conclusion of the next Federal Open Market Committee (FOMC) meeting, scheduled for March 17-18. The figure also barely flinched last week after a surprise loss in February's jobs report.

"This report alone is unlikely to change the Fed’s calculus for next week’s meeting," says Jason Pride, Chief of Investment Strategy and Research at Glenmede. "The overwhelming expectation remains that policymakers stay on hold.

"Looking further ahead, one to two rate cuts this year remains a reasonable base case, though the path will depend on the balance between the health of a fragile labor market and potential inflation pressures from the Middle East conflict. But if the geopolitical risk premium currently embedded in energy markets begins to fade, it could give the Fed more room to lean toward supporting a fragile labor market."

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What the Experts Think About February's CPI Report

Here, we outline more thoughts from the experts on what last month's CPI numbers mean for consumers, markets, the Federal Reserve's future actions, and more:

John Kerschner, Global Head of Securitized Products and Portfolio Manager, Janus Henderson Investors

"The highlight of today's numbers for us comes from the Owner's Equivalent Rent (OER) measure coming in at 3.17% on a YoY basis—the lowest level since October 2021—proving that affordability of shelter continues to progress. OER is now at the steady state level that we saw from 2016-2020, once housing had recovered from the Global Financial Crisis (GFC) but before the post-Covid spike in HPA (home price inflation).

Now for the not so good news. PCE inflation on Friday will likely look significantly worse than this morning's numbers—likely north of 3%—and even more worrisome, headed in the wrong direction. This is a result of PCE inflation focusing on what consumers actually buy (Personal Consumption Expenditures), and thus, PCE has a higher exposure to healthcare, but less on housing. Over the long term, PCE inflation averages approximately 50 basis points less than CPI, but currently we see this relationship flipped, where PCE inflation is approximately 50 basis points higher."

Josh Jamner, Senior Investment Strategy Analyst, ClearBridge Investments

"CPI printed in-line with consensus expectations for February—a ho-hum release that reflects the period before the escalation of military action in the Middle East that will lift inflation readings next month due to higher energy prices.

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An encouraging sign was the moderation in both core and 'supercore' CPI, showing that price pressures were not accelerating into the current oil price shock, which should give policymakers some degree of comfort. Core CPI stayed at 2.5% on a YoY basis—the lowest reading in nearly four years.

With today’s release already largely 'stale' due to recent events in the middle east, we expect financial markets to have a limited reaction to this news."

David Russell, Global Head of Market Strategy, TradeStation

"Steady disinflation on shelter is a good sign, but tariffs seemed to drive up the apparel category. These inflation numbers provide some comfort, but this month’s spike in energy prices make them a relic of the past.

Investors and the Fed are in uncharted territory right now, taking their cues from crude oil and tanker traffic in the Strait of Hormuz."

Sonu Varghese, Chief Macro Strategist, Carson Group

“CPI inflation for February was along expectations but this is the calm before the storm that will show up due to surging gasoline prices in March. Still, this report does show that the Fed has an inflation problem even if you set aside the energy shock. Tariff impacts are still hitting core goods inflation, while services inflation outside housing remains hot."

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