Vanguard funds make outstanding investment choices for retirement savings plans. So you wouldn’t be surprised to see several Vanguard funds among the most popular funds in 401k plans.
So out of the 100 top mutual funds for 401k plans, how many would you guess are Vanguard funds? Ten funds? Maybe twenty funds? Try more than thirty.
In fact, a list of 105 most popular funds in 401k plans, compiled for Kiplinger by 401k rating company Brightscope, included 35 Vanguard funds. That’s more than any other mutual fund company.
Fidelity Investments, T. Rowe Price, and American Funds all had impressive showings on the list of most popular mutual funds in 401k plans, but none topped Vanguard funds.
As you might imagine, Vanguard had several of their target retirement funds on the list, but the top funds include a diverse mix of choices that can combine to make a complete set of offerings for a 401k plan.
Of the 35 Vanguard funds on the list of 105, here are the seven most popular used in 401k plans:
Most Popular Vanguard Funds for 401k Plans: Vanguard Institutional Index (VINIX)
Expenses: 0.04%, or $4 per $10,000 invested
Minimum Initial Investment: $5,000,000
Due to extremely high minimums, most individual investors don’t have access to institutional-class funds like Vanguard Institutional Index Fund (MUTF:VINIX), but participants in 401k plans can take advantage and buy shares.
VINIX can simply be described as the cheapest mutual fund on the market that tracks the S&P 500 index. Getting exposure to large-cap stocks like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), at the insanely low expense ratio of 0.04% is a rare treasure in the world of investing.
For most of us investors with less than $5 million to meet the fund’s minimum initial purchase, the best and only way to buy a fund like VINIX is through participating in a large-trust account like a 401k plan.
Most Popular Vanguard Funds for 401k Plans: Vanguard Total Bond Market Index (VBMFX)
Expenses: 0.16%
Minimum Initial Investment: $3,000
The largest bond fund in the world, as measured by assets under management, Vanguard Total Bond Market Index (MUTF:VBMFX) is also one of the most popular funds for 401k plans.
Low-cost, passively managed funds are ideal investment choices for everyday investors saving for a long-term goal like retirement, and VBMFX is an outstanding choice to fill the bond space in a 401k portfolio.
VBMFX shareholders get access across the U.S. bond market, which consists of more than 8,700 bonds. About 70% of those bonds are U.S. government issues with the remainder in corporate bonds.
Most Popular Vanguard Funds for 401k Plans: Vanguard Wellington (VWELX)
Expenses: 0.26%
Minimum Initial Investment: $3,000
The oldest mutual fund in the Vanguard funds lineup, Vanguard Wellington Fund (MUTF:VWELX), is also the oldest balanced fund on the market.
VWELX was first opened to investors in 1929, ironically the same year the stock market crashed, kicking off The Great Depression, and decades before 401k plans came into existence.
Balanced funds were the best one-fund solution for long-term investors before target-date funds hit the market in the early 2000’s. But these hybrid funds are still smart choices for investors, as evidenced by the popularity and presence of VWELX in 401k plans.
The VWELX portfolio is a moderate mix of roughly two-thirds stocks and one-third bonds, making it a great Vanguard 401k offering.
Most Popular Vanguard Funds for 401k Plans: Vanguard Primecap (VPMCX)
Expenses: 0.39%
Minimum Initial Investment: $3,000
If you’ve done much research looking for the best mutual funds, you’ve probably run across Vanguard Primecap Fund (MUTF:VPMCX) but soon became disappointed when you saw that the fund is closed.
But there are many happy 401k participants around the country that hold VPMCX. The performance ranks are simply stellar with the one-, three-, five-, 10- and 15-year annualized returns all beating around 95% of all large-growth funds.
VPMCX pulls off its dominating record with low fees, low turnover and outstanding management. The holdings include growth-oriented stocks like Biogen Inc (NASDAQ:BIIB), AAPL and MSFT.
Most Popular Vanguard Funds for 401k Plans: Vanguard 500 Index (VFINX)
Expenses: 0.16%
Minimum Initial Investment: $3,000
The flagship index fund for Vanguard Investments, Vanguard 500 Index Fund (MUTF:VFINX) is the standard-bearer of passively managed mutual funds.
The diverse portfolio of over 500 U.S. large-cap stocks makes for an ideal core holding to lay the foundation for building a solid portfolio of mutual funds.
The low-cost, long-term attributes of VFINX also make it a perfect choice for a retirement savings account, which is no doubt a primary reason for it landing on the list of most popular 401k funds.
Most Popular Vanguard Funds for 401k Plans: Vanguard Extended Market Index (VEXMX)
Expenses: 0.22%
Minimum Initial Investment: $3,000
Investors looking to expand their reach of the equity market beyond the S&P 500 index will like what they see in Vanguard Extended Market Index Fund (MUTF:VEXMX).
The VEXMX portfolio steers clear of mega-cap stocks and instead holds stocks like Liberty Global Plc (NASDAQ:LILA), Tesla Inc (NASDAQ:TSLA) and Las Vegas Sands Corp. (NYSE:LVS).
VEXMX tracks the S&P Completion Index, which consists primarily of mid- and small-cap stocks. This makes VEXMX a solid complement to Vanguard 500 Index among 401k funds.
Most Popular Vanguard Funds for 401k Plans: Vanguard Mid-Cap Index (VIMSX)
Expenses: 0.20%
Minimum Initial Investment: $3,000
Investors looking for higher potential returns than the S&P 500 but not the added market risk of small-cap stocks are smart to consider Vanguard Mid-Cap Index Fund (MUTF:VIMSX).
The long-term strength of mid-cap stocks, such as top holdings Equinix, Inc. (NASDAQ:EQIX), Fiserv Inc (NASDAQ:FISV) and Electronic Arts Inc. (NASDAQ:EA), makes VIMSX a great choice for 401k plan investing. Compare the 15-year annualized return of 9.4% to that of the S&P 500, which did 7.1% for the period.
It was this long-term history, plus potential for future outperformance, that made us name VIMSX the one best mutual fund to hold forever.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities, although he holds VBMFX and VIMSX in some client accounts. His No. 1holding is his privately held investment advisory firm. Under no circ*mstances does this information represent a recommendation to buy or sell securities.
