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The 6 Best Vanguard Index Funds for 2019 and Beyond

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Investing icon Warren Buffett advises investors to stash 90% of their money in a Standard & Poor’s 500-stock index fund and keep the rest in short-term government bonds. That’s a good start for investors who want to keep things simple, but it limits your investments to large U.S. companies. So today, we’ll show you how the best Vanguard index funds can add more portfolio diversification while still keeping your strategy simple.

Rather than help to pay the huge salaries of high-powered fund managers, investors can buy index funds, which simply aim to mirror the returns of their benchmark indexes. Why? Because roughly two-thirds of actively managed funds fail to match or beat their indexes.

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It’s not that fund managers are stupid or incompetent. It’s because picking mispriced stocks is incredibly difficult. It’s not surprising that the average fund lags its benchmark index by just about what it charges investors in annual expenses (a little more than 1%).

Vanguard – whose founder, John Bogle, just passed away – invented the index fund and still does the best job operating them. Vanguard index fund fees are always, if not the lowest, within a few basis points (a basis point is one one-hundredth of a percent) of the lowest. What’s more, its managers are skilled at running index funds, so they don’t stray far from the performance of the index they track – a job that actually sounds a lot easier than it is.

Here are six of the best Vanguard index funds you can use to build a solid portfolio. This includes a general suggestion for a percentage of your assets to allocate to each one. And if you prefer exchange-traded funds to mutual funds, that’s OK too – I’ll offer up the ETF version of each fund.

SEE ALSO: The 27 Best Mutual Funds in 401(k) Retirement Plans

Data is as of Jan. 16, 2019. Yields represent the trailing 12-month yield, which is a standard measure for equity funds. This portfolio would cost roughly 0.06% annually. On a $10,000 investment, you’d pay Vanguard around $6. By contrast, a similar average actively managed fund portfolio would charge about 1.2% annually, or $120 on a $10,000 investment.

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