In 2017, Vanguard Group emerged as the fastest-growing asset management firm for the sixth straight year. Its ability to create effective investment goals with suitable asset allocation and low cost portfolio contributed to this series of gains. Additionally, strong recovery in markets in 2017 following the passage of the Tax Cuts and Jobs Act of 2017also benefited Vanguard, which manages a large number of index funds.
Major oil producing nations' decided to extend the crude production cut accord, thereby giving aboost to the equity-based fund market. In this context, strong performance by most of the mutual funds of this fund family calls for investment in the major Vanguard mutual funds this year.
What Contributed to Vanguard's Strong Fund Performance?
Vanguard generated net inflows of $368 billion in 2017, which was 13.9% more than 2016's figure. Also, the market leader in low-cost investing and target date funds managed more than $5 trillion of assets last year. In fact, the asset manager managed to bring in more than $1 billion per day in new investable assets, becoming the best growing fund family for six consecutive years.
CEO of Vanguard, Mortimer J. "Tim" Buckley has said the main focus of the company in recent times is to focus more on Personal Advisor Services. The services will be provided to investors, who have investable assets of $50,000 or higher, at a minimal fee of 0.3%.
Further, Buckley added that the company is focused on expanding its business outside the U.S. by maintaining financial advice costs similar to that of target date funds. The fund family started exploring the U.K. market last December by offering two target-date retirement funds specifically to young investors.
Sectors Contributing to Vanguard's Gains
Vanguard invests in a variety of sectors that are sensitive, cyclical and defensive. Among the sensitive sectors, technology is the largest holding. As for the cyclical sectors, the fund family invests the maximum in the financial sector. It also invests heavily in healthcare when considering defensive sectors.
Incidentally, the Technology Select Sector SPDR (XLK) climbed 33.8% over the last one year, emerging as the biggest gainer among the S&P 500 sectors. Sector-wise data from Morningstar shows that technology mutual funds have posted a positive one-year return of 37.2% on average. Meanwhile, financials and healthcare mutual funds have registered encouraging one-year returns of 19.4% and 25.5%, respectively.
Buy These 5 Top Performing Vanguard Mutual Funds
Mutual funds from the Vanguard stable are expected to perform favorably in 2018. The fund family's ability to provide low cost funds constantly and its wide variety of index funds will continue to grab investors' attention further in coming months.
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 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 seeks capital growth for the long run by investing mainly in stocks of those companies that are located outside the United States. The fund diversifies its assets in companies based in developed and emerging markets. VWIGX invests in companies with different market caps and have above-average growth potential.
VWIGX has an annual expense ratio of 0.45%, which is below the category average of 1.19%. The fund has given returns of 43.5% for a one-year annualized period.
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 are traded below the book value. The fund uses several investment advisors.
VASVX has an annual expense ratio of 0.39%, which is below the category average of 1.16%. The fund has given returns of 20.4% for a one-year annualized period.
Vanguard Global Equity Investor VHGEX uses bottom-up stock analysis to invest a large chunk of its assets in equity securities of both domestic and foreign companies. It invests in both "growth" and "value" companies irrespective of their market cap. The fund also diversifies its allocation across different industries.
VHGEX has an annual expense ratio of 0.48%, which is below the category average of 1.17%. The fund has given returns of 29% for a one-year annualized period.
Vanguard Diversified Equity Investor VDEQX is a "fund of funds," which means that the fund invests in other Vanguard mutual funds instead of any particular securities. The fund may invest in those funds that allocate their assets in small-, mid- and large-cap U.S. companies. VDEQX seeks capital growth and dividend income for the long run.
VDEQX has an annual expense ratio of 0.36%, which is below the category average of 1.13%. The fund has given returns of 24.8% for a one-year annualized period.
Vanguard Growth and Income Fund Investor Shares VQNPX invests in a diversified group of stocks chosen with the help of quantitative analysis. VQNPX offers dividend income, have an impressive growth prospect and, as a group, are likely to provide higher returns than the Standard & Poor's 500 Index, while having similar risk characteristics. The fund invests a minimum of 65% of its assets in companies included in the index.
VQNPX has an annual expense ratio of 0.34%, which is below the category average of 1.04%. The fund has given returns of 23.2% for a one-year annualized period.
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 (VDEQX): Fund Analysis Report Get Your Free (VASVX): Fund Analysis Report Get Your Free (VHGEX): Fund Analysis Report Get Your Free (VQNPX): Fund Analysis Report To read this article on Zacks.com click here. Zacks Investment Research