Investors have seemingly limitless choices for ways to invest, but many long-term investors favor more secure assets with established reputations. Vanguard funds are among the investments that have earned trust and respect, and for good reason – they have a proven track record of returns.
Vanguard is one of the largest investment companies in the world.
In this article, we’ll learn:
- What is an Investment Fund?
- What is an Exchange-Traded Fund?
- An Example of an Exchange Traded Fund (ETF)
- How Many Vanguard Funds Are There?
- What are the Best Performing Vanguard Funds?
- Top 10 Vanguard Funds Since Inception
- Top 10 Vanguard Funds the Past 10 Years
- Top 10 Vanguard Funds the Past 5 Years
- What is the Average Return on Vanguard Funds?
- How Much do you Need to Invest in Vanguard Funds?
- The Bottom Line: Is Vanguard a Good Investment?
What is an Investment Fund?
Investment funds hold several assets together that are offered to the investor as one asset. They’re essentially a group of, say, stocks bonds or commodities bundled into one asset.
Having several underlying assets in the fund gives investors diversity. And diversity lowers risk because it reduces the chance that your overall investment portfolio will decline just because one declines.
Mutual funds are one example of an investment fund. You buy mutual funds through a broker like Vanguard. Mutual funds often have a minimum investment requirement, say of $1,000 to $2,000.
Exchange traded funds are another example of an investment fund. With ETFs, you typically don’t have a minimum investment requirement.
What is an Exchange-Traded Fund?
An exchange-traded fund (ETF) is an investment fund that trades like a stock. Investors can buy shares of the fund through an exchange by using the fund’s ticker. The price of shares of an ETF rises and falls throughout the day as they are bought and sold.
In contrast, you buy other investment funds through a broker, not through an exchange platform. However, many brokerage firms have high minimum investment requirements.
One benefit to an exchange-traded fund is that there is a low barrier to entry. More investors can buy into exchange traded fund because there is not minimum – just the price of one share. The price of a share of an ETF varies from fund to fund, usually around $50 per share on the low end. The market has many ETF choices that are low enough in price for most investor to afford.
An Example of An Exchange-Traded Fund (EFT)
An example of an exchange-traded fund is the Vanguard S&P 500 ETF (VOO). Using the ticker “VOO” you can buy a share of this ETF on an exchange like E*Trade, TDAmeritrade or Robinhood.
VOO mirrors the S&P 500 with its holdings. So, investors can expect to see gains and losses that are similarly, in fact nearly identical, to the gains and losses of the S&P 500 Index.
What is the S&P 500?
Sometimes called the “S&P”, the S&P 500 Index includes 500 of the largest companies trading publicly. Investors often use it to measure overall stock market trends.
You cannot invest directly in the S&P 500 because it is only an index used to gauge trends. However, you can invest in ETFs that follow the S&P 500.
- How to Invest $5,000 Right Now
- Determine Your Best Asset Allocation by Age
- Apps that Can Make You Money
How Many Vanguard Exchange-Traded Funds are There?
Vanguard has 74 ETFs that hold various assets types, from stocks to bonds. The categories of Vanguard ETFs are:
- Vanguard offers 15 U.S. Bond ETFs. These allow investors to invest in multiple bonds with one ETF. Bond ETFs are generally considered lower risk. They offer a good way to diversify a portfolio because they can offset the risk of stocks.
The three categories of U.S. Bond ETFs are: 1.) Treasury/Agency 2.) Investment-Grade 3) Tax-Exempt
- Vanguard offers 33 U.S. Stock ETFs. Stock ETFs often come at a higher risk, but they can also provide the most potential for growth. The categories of Vanguard’s U.S. Stock ETFs are: 1.) Large Cap 2.) Mid-Cap and 3.) Small-Cap
- Vanguard offers 3 International Bond ETFs. They include a Global ETF, an International ETF and an Emerging Markets ETF.
- Vanguard offers 12 International Stock ETFs. They are categorized the same way as its International Bond ETFs: Global, International and Emerging Market.
Vanguard offers 11 sector specific ETFs. These funds follow specific sectors such as communications, utilities, financials, health care or real estate.
- How to Maximize Your IRA Contribution for Retirement
- IRAs for Kids: What to Know
- Is a $1,000 Emergency Fund Enough?
What are the Best Performing Vanguard Funds?
Each Vanguard fund carries a different level of risk and a different potential for reward. Over time, investors can get a sense of how each fund performs.
There are several ways to measure the historical performance of a fund to determine its average annual yield. You can measure it from different time periods of, say five years, 10 years or since the inception (beginning) of the fund. Then you can calculate the average annual yield.
Vanguard does this calculation for investors on its ETF list page. There, you can quickly see the top performing funds by various metrics.
Now, we’ll summarize that information so that you can easily see the best performing Vanguard funds. All of these figures are as of mid-2020, or the end of June 2020.
Top 10 Best Performing Vanguard Exchange-Traded Funds Since Inception
First, we’re naming the top performing Vanguard ETFs as they’ve performed on average since they were started. Each of these are U.S. Stock ETFs, with the exception of the Information Technology ETF, which is a Sector ETF.
Since each fund has a different inception, or start date, these averages are not exactly apples-to-apples comparisons. But they do give you a great sense of how the fund has performed throughout its life.
- Russell 1000 Growth ETF (VONG) – 16.15% Average Annualized Return
- S&P 500 Growth ETF (VOOG) – 16.03%
- S&P 500 ETF (VOO) – 13.52%
- Russell 1000 ETF (VTHR) – 12.91%
- Russell 3000 ETF (VTHR) – 12.66%
- S&P Small-Cap 600 Growth ETF (VIOG) – 12.57%
- Russell 2000 Growth ETF (VTWG) – 12.00%
- Information Technology ETF (VGT) – 11.93%
- S&P Mid-Cap 400 (IVOG) – 11.90%
- Mega Cap Growth ETF (MGK) – 11.53%
Top 10 Best Performing Vanguard ETFs in the Past 10 Years
Again, we’re referring to June 2020 and the previous 10 years. Funds that began in the past 10 years are noted.
- Information Technology ETF (VGT) – 20.26% Average Annualized Returns
- Mega Cap Growth ETF ((MGK) – 17.28%
- Consumer Discretionary ETF (VCR) – 17.26%
- Growth ETF (VUG) – 16.78%
- Health Care ETF (VHT) – 16.17%
- Mega Cap ETF (MGC) – 14.33%
- Mid-Cap Growth ETF (VOT) – 14.27%
- Large-Cap ETF (VV) – 14.04%
- Small-Cap Growth (VBK) – 13.93%
- Total Stock Market ETF (VTI) – 13.74%
Top 10 Best Performing Vanguard Exchange-Traded Funds in the Past 5 Years
- Information Technology ETF (VGT) – 22.94%
- Mega Cap Growth ETF (MGK) – 15.91%
- Russell 1000 Growth EFT (VONG) – 15.76%
- Growth ETF (VUG) – 14.93%
- S&P 500 Growth ETF (VOO) – 14.45%
- Extended Duration Treasury ETF (EDV) – 12.51%
- Consumer Discretionary ETF (VDC) – 11.58%
- Mega Cap ETF (MGC) – 11.51%
- Large Cap ETF (VV) – 10.76%
- S&P 500 ETF (VOO) – 10.68%
What is the Average Return on Vanguard Funds?
The average return on Vanguard funds vary from fund to fund. In general, the higher-risk funds like those that focus on stocks have higher returns. However, keep in mind that they are also prone to higher losses when the market declines.
Every Vanguard ETF has made gains as of June 30 since its inception with one exception. (The ESG International Stock ETF (VWO) was down 0.13% since it began Sept. 18 2018.)
How Much do you Need to Invest in Vanguard Funds?
If you have a brokerage account with Vanguard, you can trade ETFs commission-free. That means the price it costs to buy into a Vanguard Exchange-Traded Fund is simply the price of a share, plus a trading fee.
For mutual funds, Vanguard does have a minimum investment requirement. It varies from about $1,000 to $3,000, depending on the fund.
The Bottom Line: Is Vanguard a Good Investment?
Many investors turn to Vanguard for its reputable investment products and for the long-term gains its assets have made. Whether Vanguard’s funds are right for you depends on your personal situation.
Learning about the risks and rewards Vanguard funds have provided in the past as we described above is a great starting point. Knowing how these funds have performed can help you better determine whether they might be a good investment for you.