Vanguard mutual funds is one of the more popular investment products out there. Aside from having a 40-year track record, the company’s exchange trade and mutual funds are staples right alongside managed portfolios, IRAs, pension plans and 401(k)s.
The reason why Vanguard is such a successful firm is perhaps due to its innovative approach and launching the first index mutual fund, which gives clients greater returns compared to conventional funds.
Vanguard Mutual Funds, Explained
A mutual fund is a type of investment where investors’ money are pooled together to purchase bonds, stocks and similar assets. Mutual funds offer a very diverse portfolio, where your investment is spread out across a number of vehicles. Conversely, it’s convenient in that you won’t have to decide which ones you want to get.
Vanguard takes care of the management and selling part. It gets better when index mutual funds are involved- the company aims to make the same amount as a broad market index and similar benchmarks.
Why Clients Choose Vanguard
There’s many reasons people prefer Vanguard over iShares funds, below are some of the ones we hear most commonly:
Varied Options
Vanguard has a comprehensive range of investment options for its clients. There are currently around 80 ETFs and 170 mutual funds, which make it a veritable haven for every investor.
Its ETFs can be bought or sold like stocks, and Vanguard has made it so that investors can pick their preferred funds in smaller increments. The company has a $1,000 fund investment minimum and has a lower entry price compared to having to invest in a single share.
Employer-sponsored 401(k)s usually lean towards target-date retirement funds, which are diversified and contain several broad index funds. The movement gets more conservative as time passes and as the client gets closer to the retirement date.
Vanguard also has actively managed mutual funds and index mutual funds, which are recommended by the firm’s investment managers. It’s worthy to note that Vanguard’s index fund has expanded to accommodate emerging markets, international stocks and bonds, among others.
Reasonable Fees
A fund will have an expense ratio whether it’s an ETF or mutual fund. This is computed via percentage of the client’s fund balance and deducted from investment returns yearly to cover overhead, management salaries and administrative charges.
Vanguard offers a much lower expense ratio compared to most, if not all major investment types across the industry. What this means is the investor gets to keep their money invested and working. Over time, these small fractions add up and make a significant difference.
Excellent Long Term Results
Vanguard is very competitive when it comes to beating out other mutual funds, mostly because of its low-fee management style. Historically, the company’s funds enjoy greater returns compared to its peers in the same timeframe.
What’s The Best Vanguard Fund?
The answer to this question is that it depends on the client’s budget and investment objective. The good news is that there are many options across passive and active management platforms. As long as you can meet the minimum of $1,000 for mutual funds (and lower for ETFs), you can identify which funds seem right and which ones can give you favorable returns.
Steps to Purchase Vanguard Mutual Funds
Interested investors can easily join the Vanguard mutual funds platform via their 403(b) or 401(k) if allowed. This way, you can avoid investment minimums. However, the expense ratio may be a bit higher due to retirement plan fees being added to the mix. If you wish to get a lower expense ratio, then the recommended route is a direct purchase or through a discount broker.
You can inquire if your employer offers Vanguard funds. You can also go straight to Vanguard or by working with another provider to open a brokerage account.
With a direct route you can enjoy benefits such as zero trading commission. Just make sure you meet the minimum requirements, which is $3k for actively managed funds and $1k for target date funds to get going. If not, you can get the ETF version of the index fund options at a lower entry price.
With a broker you can enjoy a more diverse portfolio and investment tools on stock trading. You may have to pay extra if your preferred Vanguard fund isn’t on the list, with ETFs and fund trades ranging from $5 to $50, respectively.