Vanguard, the biggest fund family of the United States in terms of asset under management, is expected to put up a stellar show in the final quarter of this year. It offers a variety of investment options from index funds to key actively managed funds. The company helps to create effective investment goals with a suitable asset allocation and low cost portfolio.
While a bulk of Vanguard’s assets are invested in index funds, around 30% of these are focused on actively managed funds. Strong performance by most of the mutual funds of this fund family calls for investment in some of the major Vanguard mutual funds.
What Contributed to Vanguard’s Strong Fund Performance?
The biggest fund family of the United States has successfully attracted the interests of more than 20 million investors on the back of its low cost approach. This approach helped most of the Vanguard index funds to perform better than their peers. Along with index funds, there are plenty of actively managed Vanguard mutual funds which bear low expense ratios.
Most of the Vanguard funds are managed outside. Unlike other fund families, Vanguard doesn’t hire its own employees to manage its funds. Instead, the biggest fund family of the world hires managers from outside the company. This makes it easier to replace the funds in case the manager fails to deliver. This in turn helps to control the overall cost of the actively managed Vanguard funds.
As per the editor of The Independent Adviser for Vanguard Investors newsletter, Dan Wiener, out of 18 domestic, non-sector, actively managed stock and balanced funds, 14 performed better than the S&P 500 index in the last 15 years. One of the major reasons for this stupendous run is Vanguard’s ability to offer low cost funds consistently.
Sectors Contributing to Vanguard’s Gains
Vanguard invests in a variety of sectors that are sensitive, cyclical and defensive. From the sensitive sectors, technology is the largest holding. In the cyclical sectors, the fund family invests the maximum in the financial sector, while in defensive sectors it invests heavily in healthcare.
Financials Select Sector SPDR (XLF) climbed 35.4% in the last one year and was the biggest gainer among the S&P 500 sectors. Also, the financials mutual fund posted a positive one-year return of 31.1%, according to Morningstar. Also, technology and healthcare mutual funds registered positive one-year returns of 34.4% and 23.3%, respectively.
Buy These 5 Best Performing Vanguard Mutual Funds
Vanguard is one of the world’s largest investment management companies, founded by John C. Bogle in 1975. It manages more than $4.4 trillion in assets and offers nearly 180 domestic funds and 190 funds for foreign markets (as of Jun 30, 2017).
Here, we have selected five Vanguard mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy). We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
These funds have encouraging year-to-date (YTD) and one-year annualized returns. Also, each of these funds has a low expense ratio and minimum initial investment is within $5000.
Vanguard International Growth Investor VWIGX invests predominantly in stocks of companies located outside the United States and is expected to diversify its assets in countries across developed and emerging markets. The fund focuses mainly on those companies that have above-growth potential.
VWIGX has an annual expense ratio of 0.46%, which is below the category average of 1.20%. The fund respective returns are 40.6% and 35.1% for the YTD and one-year annualized periods.
Vanguard Global Equity Investor ( VHGEX Quick Quote VHGEX - Free Report) uses bottom-up stock analysis to invest a large share of its assets in equities of companies all over the globe. It invests in both “growth” and “value” companies irrespective of their market capitalization. The fund also diversifies its allocation across different industries.
VHGEX has an annual expense ratio of 0.51%, which is below the category average of 1.26%. The fund has given respective returns of 23.4% and 26.5% during the YTD and one-year annualized periods.
Vanguard Long-Term Investment-Grade Investor VWESX seeks appreciation of income and invests the majority of its assets in intermediate- and long-term investment-grade securities. The fund's dollar-weighted average maturity is believed to vary by 5 years around the maturity period of its benchmark index.
VWESX has an annual expense ratio of 0.22%, which is below the category average of 0.82%. The fund has given respective returns of 9.5% and 4.3% during the YTD and one-year annualized periods.
Vanguard Selected Value Fund Investor Shares VASVX seeks growth of capital and income for the long run. VASVX invests its assets heavily in undervalued stocks issued by mid-cap domestic companies. Undervalued stocks are those that trade below the book value. The fund uses multiple investment advisors.
VASVX has an annual expense ratio of 0.35%, which is below the category average of 1.18%. The fund’s respective returns are 14.1% and 27.3% for the YTD and one-year annualized periods.
Vanguard Growth Index Investor VIGRX seeks long-term capital growth by investing in equity securities of large-cap companies. VIGRX employs an indexing investment approach. The fund aims to track the performance of the CRSP US Large Cap Growth Index by investing most of its assets in the stocks that make up the index.
VIGRX has an annual expense ratio of 0.18%, which is below the category average of 1.22%. The fund’s respective returns are 22.5% and 24.7% for the YTD and one-year annualized periods.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.
Get it free >>