October 25, 2014

The 8 Best Vanguard Funds That You Should Buy

47 minutes

We’re big fans of Vanguard, but admittedly, investing in Vanguard funds is a bit more complicated than using a Robo Advisor. In this article, we break down what we think of Vanguard’s 8 best funds while balancing both performance and cost.

If you’re looking for a deeper dive into our logic as well as some colorful commentary than check out the podcast episode we did on this:

Before we jump in, it’s important to mention why we are focusing so heavily on fees here. Due to their exponential nature, fees of just 1% can cause you to lose up to 25% of your earnings. That’s pretty horrendous and often what turns investors on to Vanguard in the first place.

I also highly suggest you check the fees on your accounts via the free Personal Capital fee analyzer. In addition to running simulations, the analyzer pinpoints all of the overly fee-hungry funds across your accounts – retirement or otherwise.

The difference between an Index Fund (ETF) and a Mutual Fund

First, let’s quickly discuss what an Index Fund (ETF) and a Mutual Fund are. Who better to ask then Vanguard themselves?

An ETF is a collection (or “basket”) of tens, hundreds, or sometimes thousands of stocks or bonds in a single fund.

If you’ve ever owned a mutual fund—particularly an index fund—then owning an ETF will feel familiar because it has the same built-in diversification and low costs.

Source: Vanguard

A Mutual Fund is very similar to an ETF with one crucial difference:

You can set up automatic investments and withdrawals into and out of mutual funds based on your preferences.

Source: Vanguard on ETF vs. Mutual Fund

In other words, if you want to automate your investing, then you use a Mutual Fund. If you want cheaper fees over time and don’t mind making contributions every month, then you should choose an ETF. I use ETFs because I don’t mind making investments manually and fees are the worst.

We often get asked how much you need to invest in Vanguard. If you’re investing in an ETF, then all you need is $1. If you’re investing in a Vanguard Mutual Fund, then the minimum initial investment is between $1,000 and $3,000.

Total Stock Market (ETF) – VTI

NYSEARCA:VTI | Vanguard | MorningStar | Fee: 0.04% | 5yr Avg: 14.24%

This ETF is Vanguard’s flagship fund and in our opinion,

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By ListenMoneyMatters.com | Andrew Fiebert and Matt Giovanisci

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