As someone who has spent years analyzing investment strategies, I know that few things match the reliability of Vanguard funds for long-term investors. Vanguard stands out for its low costs, broad diversification, and consistent performance. In this guide, I’ll walk you through the seven best Vanguard funds to buy and hold, explaining why each deserves a place in your portfolio.
Table of Contents
Why Vanguard Funds Are Ideal for Long-Term Investors
Before diving into the list, let’s address why Vanguard funds work so well for buy-and-hold strategies. Vanguard pioneered index investing, and its expense ratios are among the lowest in the industry. Lower fees mean more of your money stays invested, compounding over time. The power of compounding is best illustrated with the formula for future value:
FV = PV \times (1 + r)^nWhere:
- FV = Future Value
- PV = Present Value
- r = Annual return rate
- n = Number of years
If you invest $10,000 in a fund with a 0.10% expense ratio instead of one charging 1%, you save $900 annually in fees. Over 30 years, that difference compounds into tens of thousands of dollars.
The 7 Best Vanguard Funds to Buy and Hold
1. Vanguard Total Stock Market Index Fund (VTSAX)
Why It’s Great:
This fund tracks the CRSP US Total Market Index, giving exposure to the entire U.S. stock market—large, mid, small, and micro-cap stocks.
Key Metrics:
- Expense Ratio: 0.04%
- 10-Year Average Annual Return: ~12%
- Number of Holdings: ~4,000
Who Should Buy It:
Investors who want broad U.S. equity exposure without picking individual stocks.
Example Calculation:
If you invest $10,000 in VTSAX and it returns 10% annually, after 20 years, your investment grows to:
2. Vanguard Total International Stock Index Fund (VTIAX)
Why It’s Great:
This fund provides exposure to developed and emerging markets outside the U.S., reducing geographic risk.
Key Metrics:
- Expense Ratio: 0.11%
- 10-Year Average Annual Return: ~5.5%
- Number of Holdings: ~7,500
Who Should Buy It:
Investors seeking international diversification.
3. Vanguard Total Bond Market Index Fund (VBTLX)
Why It’s Great:
A low-cost bond fund that tracks the Bloomberg U.S. Aggregate Float Adjusted Index, offering stability.
Key Metrics:
- Expense Ratio: 0.05%
- 10-Year Average Annual Return: ~3%
- Yield to Maturity: ~4.5% (as of 2023)
Who Should Buy It:
Conservative investors or those nearing retirement who need income and capital preservation.
4. Vanguard 500 Index Fund (VFIAX)
Why It’s Great:
This fund mirrors the S&P 500, making it a staple for core equity exposure.
Key Metrics:
- Expense Ratio: 0.04%
- 10-Year Average Annual Return: ~12.5%
- Number of Holdings: 500
Who Should Buy It:
Investors who prefer large-cap U.S. stocks.
5. Vanguard Dividend Appreciation Index Fund (VDADX)
Why It’s Great:
Focuses on companies with a history of increasing dividends, offering a mix of growth and income.
Key Metrics:
- Expense Ratio: 0.08%
- 10-Year Average Annual Return: ~10%
- Dividend Yield: ~1.8%
Who Should Buy It:
Income-focused investors who want dividend growth.
6. Vanguard Real Estate Index Fund (VGSLX)
Why It’s Great:
Provides exposure to REITs, which often perform differently than stocks and bonds.
Key Metrics:
- Expense Ratio: 0.12%
- 10-Year Average Annual Return: ~8%
- Dividend Yield: ~3.5%
Who Should Buy It:
Investors looking for real estate diversification.
7. Vanguard Balanced Index Fund (VBIAX)
Why It’s Great:
A 60/40 split between stocks and bonds, offering automatic rebalancing.
Key Metrics:
- Expense Ratio: 0.07%
- 10-Year Average Annual Return: ~9%
Who Should Buy It:
Investors who want a hands-off, diversified portfolio.
Comparing the Funds
| Fund Name | Ticker | Expense Ratio | 10-Year Return | Best For |
|---|---|---|---|---|
| VTSAX | VTSAX | 0.04% | ~12% | Broad U.S. stocks |
| VTIAX | VTIAX | 0.11% | ~5.5% | International stocks |
| VBTLX | VBTLX | 0.05% | ~3% | Bonds |
| VFIAX | VFIAX | 0.04% | ~12.5% | S&P 500 exposure |
| VDADX | VDADX | 0.08% | ~10% | Dividend growth |
| VGSLX | VGSLX | 0.12% | ~8% | Real estate |
| VBIAX | VBIAX | 0.07% | ~9% | Balanced portfolio |
Final Thoughts
The best Vanguard funds for long-term investors combine low costs, diversification, and historical reliability. Whether you prefer stocks, bonds, or a mix of both, Vanguard has a fund that fits. By holding these funds for decades, you harness the power of compounding, minimizing fees, and maximizing returns.
