Vanguard, the biggest fund family of the U.S. in terms of asset under management, is expected to put up a stellar show in the coming months. At present, the fund family is managing more than $4 trillion of assets. It offers a variety of investment options from index funds to key actively managed funds.
While a bulk of Vanguard's assets are invested in index funds, around 30% of them are focused on actively managed funds. Strong performance by both in the last one year calls for investment in some of the major Vanguard index funds that beat their respective indices.
What Contributed to Vanguard's Strong Fund Performance?
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.
Moreover, 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. 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 actively managed Vanguard funds.
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 the healthcare sector.
Technology Select Sector SPDR (XLK) climbed 28.9% in the last one year and was the biggest gainer among the S&P 500 sectors. Also, the technology mutual fund posted a positive one-year return of 35.3%, according to Morningstar. Also, the financial and healthcare mutual funds have registered a positive one-year return of 21.7% and 10.7%, 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 trillion in assets and offers nearly 180 domestic funds and 190 funds for foreign markets (as of December 31, 2016). It offers asset management and financial planning services to clients throughout the globe. Unlike other mutual fund companies, Vanguard is owned by the funds themselves. This helps its management to focus more on shareholder interests. Among the other advantages, it claims to offer low-cost funds.
We have selected five 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 one-year annualized returns, which beat the one-year return of the respective benchmark indexes. Also, each of these funds has a low expense ratio and minimum initial investment is within $5000.
Vanguard Selected Value Fund Investor Shares VASVX invests a lion's share of its assets heavily in undervalued stocks issued by mid-cap domestic companies. Undervalued stocks are those stocks whose prices trade below the book value.
VASVX has an annual expense ratio of 0.35%, which is below the category average of 1.24%. The fund has one-year annualized return of 15.8%, better than Russell 1000 Value Index's one-year return of 14.6%.
Vanguard Global Equity Investor VHGEX 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.
VHGEX has an annual expense ratio of 0.51%, which is below the category average of 1.11%. The fund has one-year annualized return of 20.6%, better than iShares MSCI World Index's one-year return of 16.7%.
Vanguard High Dividend Yield Index Investor VHDYX employs an indexing investment approach designed to track the performance of the FTSE High Dividend Yield Index, which consists of common stocks of companies that pay above-average dividends.
VHDYX has an annual expense ratio of 0.15%, which is below the category average of 1.12%. The fund has one-year annualized return of 12.8%, in contrast to FTSE High Dividend Yield Index's one-year negative return of 0.5%.
Vanguard International Growth Investor VWIGX invests predominantly in the stocks of companies located outside the U.S. and is expected to diversify its assets in countries across developed and emerging markets. The fund focuses mainly on those companies, which have above growth potential.
VWIGX has an annual expense ratio of 0.46%, which is below the category average of 1.27%. The fund has one-year annualized return of 27.2%, better than iShares MSCI EAFE Growth Index's one-year return of 13.8%.
Vanguard Precious Metals and Mining VGPMX invests heavily in the stocks of both domestic and foreign companies whose primary operations are regarding precious metals including gold. This non-diversified fund may also invest around one-fifth of its assets in gold, silver and other precious metals coins and bullion.
VGPMX has an annual expense ratio of 0.43%, which is below the category average of 1.10%. The fund has one-year annualized return of 2.2%, better than iShares Gold Trust's one-year return of 0.3%.
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 >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Get Your Free (VWIGX): Fund Analysis Report Get Your Free (VASVX): Fund Analysis Report Get Your Free (VHDYX): Fund Analysis Report Get Your Free (VGPMX): Fund Analysis Report Get Your Free (VHGEX): Fund Analysis Report To read this article on Zacks.com click here. Zacks Investment Research