7 Best Vanguard Funds for Retirement

These low-cost funds have solid performance histories.

Whether you’re fresh out of college and opening your first 401(k) account or you’re approaching your retirement date, you want to ensure that your nest egg is well protected and growing. Regardless of where you are in your retirement planning, mutual funds and exchange-traded funds, or ETFs, can provide broad market exposure at a relatively low cost. Vanguard is one of the largest investment companies in the world, serving over 30 million investors, and is well known for its funds with ultralow expense ratios. Vanguard offers more than 400 funds, with roughly 200 in the U.S., so deciding which are right for you can be challenging. The choices range from target-date funds to funds that focus on niche industries, and selections should be based on your age, financial goals and risk tolerance. Here are some of the overall best Vanguard funds for retirement.

Vanguard S&P 500 ETF (ticker: VOO)

The Vanguard S&P 500 ETF may be a good option for investors looking for broad market exposure. This passively managed ETF’s goal is to track the performance of the S&P 500 index, which represents roughly 500 of the largest companies in the U.S. Because this fund is focused on U.S. equities, it has a high potential for growth. However, it also could experience more significant declines, as it fluctuates along with market changes. It’s best suited for long-term investors with an investment horizon of 10 years or more. Top holdings in VOO include Apple Inc. (AAPL), Microsoft Corp. (MSFT), Amazon.com Inc. (AMZN) and Tesla Inc. (TSLA). VOO has a 0.03% expense ratio. That means that for every $10,000 invested in VOO, investors pay $3, which is lower than most other funds’ rates.

Vanguard Total International Stock ETF (VXUS)

The Vanguard Total International Stock ETF is for investors looking to diversify their portfolios with international investments. A passively managed fund, VXUS tracks the performance of the FTSE Global All Cap ex US Index, which measures the investment returns of non-U.S. stocks. Funds that track international stocks can offer protection against U.S. economic issues that affect domestic companies. On Vanguard’s risk-to-reward scale, VXUS is a 5, meaning it has a higher level of risk. VXUS investors should know that the fund can lose money over time, and the market price can fluctuate greatly. That said, there is also greater potential for investment growth, and VXUS has a low expense ratio of just 0.07%.

Vanguard Value ETF (VTV)

Value investing is a strategy in which investors buy stocks, bonds and other securities that they believe are undervalued. This form of investing requires patience, as it can take years or even decades to earn returns. Rather than having to research individual companies and decide on their intrinsic value on your own, the Vanguard Value ETF allows you to invest in many companies at once. Its goal is to track the performance of the CRSP US Large Cap Value Index, which measures the investment returns of large-capitalization value stocks. The fund is made up of over 340 stocks, the biggest chunk being in the financial, health care and industrial sectors. It’s appropriate for long-term investors who plan on holding the fund for 10 years or more. VTV is passively managed and has a low expense ratio of 0.04%.

Vanguard Growth ETF (VUG)

The Vanguard Growth ETF aims to replicate the performance of the CRSP US Large Cap Growth Index, tracking the performance of the country’s largest growth stocks. These are companies that investors expect to boost their revenue or cash flow at a faster-than-average rate. On Vanguard’s risk-to-reward scale, VUG is a 4, so it’s on the riskier end and could experience a wide range of price fluctuations. One of those down swings is happening now: This fund’s year-to-date return is -24.4% as of Sept. 8. Moderate to aggressive funds like VUG are for investors with long-term investment goals and growth as their primary objective. VUG is a passively managed fund with an expense ratio of 0.04%.

Vanguard Total Stock Market ETF (VTI)

Many long-term, passive investors look for index funds that provide exposure to the majority of the stock market. One of the most popular total market funds is the Vanguard Total Stock Market ETF, which is also available as a mutual fund, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX). VTI tracks the performance of the CRSP US Total Market Index, including large-, mid- and small-cap equities in various sectors, including technology, health care and consumer discretionary. The largest holdings within the fund include Apple, Microsoft, Amazon, Tesla and Alphabet Inc.’s Class A shares (GOOGL). It’s passively managed with a 0.03% expense ratio, so you can get broad market exposure at a very low cost.

Vanguard Dividend Growth Fund (VDIGX)

Unlike the other funds on this list, Vanguard Dividend Growth Fund is actively managed. Rather than tracking the performance of a market index, a management team makes decisions about the fund’s holdings. John Rekenthaler, vice president of research with Morningstar, says that VDIGX is a category leader and that Vanguard’s actively managed funds have outperformed passively managed funds over the last five years. Because VDIGX is actively managed, it has a higher expense ratio than the other funds on this list, at 0.27%. With an investment minimum of $3,000, it requires more money upfront to get started, too. But it aims to provide investors with a well-balanced, long-term portfolio that can produce income while giving investors exposure to dividend-focused companies in various industries. Top holdings include UnitedHealth Group Inc. (UNH), Colgate-Palmolive Co. (CL), TJX Cos. Inc. (TJX) and Northrop Grumman Corp. (NOC).

Vanguard Total Bond Market ETF (BND)

Conservative investors who want to limit their risk and are focused on income are good candidates for the Vanguard Total Bond Market ETF. According to Morningstar, bonds are a must-have for investors nearing retirement or in retirement already. Even investors who are further away from retirement can benefit from using bonds to diversify their portfolios. A level 2 on Vanguard’s risk-to-reward scale, BND is a passively managed fund that provides exposure to a broad, market-weighted bond index. It’s suitable for investors with mid- to long-term investment goals and those who want a reliable income stream. It has a low expense ratio of 0.03%.

7 best Vanguard funds for retirement-focused investors:

— Vanguard S&P 500 ETF (VOO)

— Vanguard Total International Stock ETF (VXUS)

— Vanguard Value ETF (VTV)

— Vanguard Growth ETF (VUG)

— Vanguard Total Stock Market ETF (VTI)

— Vanguard Dividend Growth Fund (VDIGX)

— Vanguard Total Bond Market ETF (BND)

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7 Best Vanguard Funds for Retirement originally appeared on usnews.com

Update 09/09/22: This story was published at an earlier date and has been updated with new information.