2022, Half-Way Through: Top and Bottom Funds

Whether the global economy is teetering on the brink of recession is a big question, and some are even arguing the UK is already there. What’s certainly true is markets have had a hard time in the first half of the year, and this is reflected very clearly in our fund universe.

For the second time in 40 years, bonds and stocks have both posted losses for two consecutive quarters under pressure from interest rates, inflation and tightening profit margins for corporations.

UK-domiciled funds have certainly been feeling the squeeze too. Performance-wise, almost 90% of all the funds under our coverage are down in the first half of the year, with the worst-hit fund losing more than half of its value.

At the top of the table, we find AQR Managed Futures, a fund that also did well overall in June. So far this year, it has returned 44.44%.

But the big sector at the top is energy and natural resources. BGF World Energy is up 38.89% and JP Morgan’s two natural resources funds – which were both among the worst performers in June – are up between 15-18% in the year so far.

Somewhat more surprising in the chart is Fidelity China Focus. China had an abysmal end to 2021 but the category has started making a recovery in the last quarter. However, this fund is the only China fund appearing this high up – the next China fund sits at around top 40.

Sterling itself has also been a contributor in keeping some fund categories higher than others. Its fall against the dollar has made a difference in the performance of the Morningstar Global Markets index; in USD, the index is down 20% year to date, but in GBP, its only down 10%.

Ben Yearsley, director at Shore Financial Planning says:

"The stats speak for themselves; it’s been a tough year with only the 11% falling in sterling helping offset the pain of equity markets. There have been some bright spots with clearly energy and commodities being the main two, but also other areas such as insurance which are seen as boring are showing their worth in a rising rate environment. Equity markets often look ahead and predict what will happen in the wider economy – on that basis we are in for a tough six months.”

At the bottom of a list of many bad performers, who’s surprised to see US large-caps and technology? Morgan Stanley accounts for the worst three with a growth and two advantage funds.

Following in Morgan Stanley’s footsteps is T. Rowe Price with its global tech funds. Both are down around 45%, while Baillie Gifford has three global funds in the bottom: two large-caps and one small/mid-cap. These are all down 35-38%.

Looking Ahead

So what can we expect for the coming months? According to Morningstar Investment Management (MIM), there’s no use sugar-coating how badly the second quarter played out for most investors and attention is likely to remain on the threat of inflation and a potential economic recession.

"Behaviourally, this is an important time to remain grounded principally," the MIM team says.

"Looking ahead, we continue to believe stocks and bonds are fabulous assets to help people reach their goals, especially following the healthy rebound in yields.

"Stocks and bonds offer different mechanics, performing differently in various market environments – making them ideal core assets for the majority of investors. Further, following recent losses, the valuations for both stocks and bonds have improved, which is a broad positive that will help investors in the next chapter of their investment journey."

Vanguard Funds - 10 Best Vanguard Mutual Funds

Top-Rated Vanguard Mutual Funds as of 5/31/22

Fund Name, Ticker, Overall Rating, (Risk Grade)

TheStreet Ratings' mutual fund rating model compiles and examines financial data on a monthly basis to gauge a mutual fund's risk-adjusted return compared to its competitors.

The model scores funds on various factors including: risk and reward. The aim is to deliver investors with investment ideas that we feel have the best chance at delivering top risk-adjusted returns.

The 10 Vanguard mutual funds (listed above) are ranked highest by TheStreet Ratings' methodology.

Best Mutual Funds For 2022

Mutual Fund Center

10 Best Vanguard Index Funds to Buy in 2022

With more than $7 trillion in assets under management as of January 2021, Vanguard is one of the biggest investment firms in the world.

Its name is also practically synonymous with the practice of passive investing, a strategy that seeks to match rather than beat the performance of broader asset classes and market sectors.

Vanguard’s passive approach is anchored by a collection of index funds with very low expense ratios that ensure investors receive the vast majority of their returns. According to Vanguard’s own data, the average Vanguard fund’s expense ratio is 83% lower than the industry average.

Many investors looking to build diversified, passively managed portfolios use Vanguard funds precisely because they’re so cost-effective. If you’re looking to join their ranks, use this list of the best Vanguard index funds as your cheat sheet.

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Best Vanguard Index Funds

These Vanguard mutual funds are index funds with extremely low fees and expense ratios and consistent records of market-matching annual returns.

They include bond funds and stock funds. Some mirror entire market indexes and asset classes, while others focus on specific industries or sectors.

As mutual funds, these Vanguard index funds are not quite as liquid as individual stocks or exchange-traded funds (ETFs).

Orders typically fill on the trading day after they’re placed and require relatively high minimum investments (often $3,000). If this is prohibitive, know that virtually all of these index funds have equivalent ETFs that trade in real-time during regular market hours and can be purchased in amounts as low as one share.

Each listing below includes the expense ratio as of Q2 2021, the five-year return through Q1 2021, and the relative risk potential on a scale of 1 to 5, with 5 being the riskiest.

Pro tip: If you’re not as comfortable with DIY investing, consider Vanguard Digital Advisor — one of the most affordable, accessible robo-advisors around. You can open a Vanguard Digital Advisor account with as little as $3,000, and you’ll pay an annual advisory fee of up to 0.20%. That’s much less than the average human investment advisor charges.

1. Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

Expense Ratio : 0.04%

: 0.04% Five-Year Return : 16.65%

: 16.65% Risk Potential: 4

Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) is designed to match the performance of the entire market for U.S. stocks.

Specifically, it mirrors the movements of the CRSP U.S. Total Market Index, a diversified basket of value stocks, dividend stocks, and growth stocks. It includes a balanced mix of small-, mid-, and large-cap names.

As a fully invested fund, VTSAX holds very little cash and does not try to time the market. As such, it is wholly exposed to the stock market’s volatility. When the broader stock market goes up, VTSAX goes up; when the broader stock market dives, so does VTSAX.

Although cautious investors may wish to use VTSAX to gain some exposure to U.S. stocks, they shouldn’t hold the bulk of their investable funds in this instrument.

VTSAX is also available as an ETF: the Vanguard Total Stock Market ETF (VTI).

2. Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)

Expense Ratio : 0.05%

: 0.05% Five-Year Return : 3.07%

: 3.07% Risk Potential: 2

Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) is a bond index fund that tracks the performance of a broad benchmark index of taxable investment-grade bonds:

Short-term and long-term U.S. Treasuries

Mortgage-backed securities

Corporate bonds, mainly in the industrial sector

VBTLX excludes two classes of bonds that don’t align with its investment objectives:

Tax-exempt bonds issued by non-federal government entities (principally municipalities and states)

Inflation-protected federal government bonds (Treasury inflation-protected securities or TIPS).

VBTLX has an important role to play in any diversified portfolio, including those that are principally invested in stocks.

Because bonds are generally less volatile than stocks, VBTLX can act as a hedge against the inevitable market risk associated with stock investments, especially for investors with shorter investment time horizons and lower overall tolerance for volatility.

VBTLX is also available as an ETF: the Vanguard Total Bond Market ETF (BND).

3. Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)

Expense Ratio : 0.11%

: 0.11% Five-Year Return : 9.97%

: 9.97% Risk Potential: 5

Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) provides investors with low-cost exposure to a broad selection of publicly traded companies based in countries other than the United States.

Because it doesn’t include stocks of U.S.-based companies, it’s an effective complement to the Vanguard Total Stock Market Index Fund (VTSAX), which includes only U.S.-based companies.

VTIAX is designed to track the returns of the FTSE Global All Cap ex U.S. Index.

This index’s components include small-, mid-, and large-cap companies based in low-, middle-, and high-income economies (developed and emerging markets), excluding the United States.

Its performance is not closely correlated with that of VTSAX; VTIAX has significantly lagged VTSAX over the past five years. Nevertheless, VTIAX provides important diversification for investors who’d prefer not to rely entirely on the whims of U.S. equities markets.

VTIAX is also available as an ETF: the Vanguard Total International Stock ETF (VXUS).

4. Vanguard 500 Index Fund Admiral Shares (VFIAX)

Expense Ratio : 0.04%

: 0.04% Five-Year Return : 16.26%

: 16.26% Risk Potential: 4

The Vanguard 500 Index Fund Admiral Shares (VFIAX) is perhaps the preeminent S&P 500 index fund.

As its name suggests, it’s designed to match the performance of the S&P 500 stock index, whose 500 large-cap U.S. stocks are closely watched as a barometer for the health of the U.S. economy.

The S&P 500 stock index is relatively volatile, so it should come as no surprise that VFIAX is as well.

Nevertheless, VFIAX is a popular component of diversified stock portfolios and is particularly useful for investors seeking additional exposure to large-cap stocks, which tend to be less volatile than small- and mid-cap stocks.

Still, VFIAX is not a good fit for investors with a low tolerance for risk, short time horizons, or both.

VFIAX is also available as an ETF: the Vanguard S&P 500 ETF (VOO).

5. Vanguard Balanced Index Fund Admiral Shares (VBIAX)

Expense Ratio : 0.07%

: 0.07% Five-Year Return : 11.36%

: 11.36% Risk Potential: 3

Vanguard Balanced Index Fund Admiral Shares (VBIAX) is a hybrid index fund that maintains an allocation of roughly 60% stocks and 40% bonds. Specifically, it tracks two indexes, one for U.S. equities and one for taxable U.S. bonds.

Because VBIAX is less volatile than stocks-only index funds and provides more exposure to the stock market’s upside than bonds-only funds, it’s a useful instrument for investors with a moderate tolerance for risk.

However, because stock and bond prices tend to move inversely in relation to one another, VBIAX can’t match the gains of funds like VFIAX and VTSAX when stock prices increase consistently.

VBIAX is not available as an ETF.

6. Vanguard Large-Cap Index Fund Admiral Shares (VLCAX)

Expense Ratio : 0.05%

: 0.05% Five-Year Return : 16.71%

: 16.71% Risk Potential: 4

Vanguard Large-Cap Index Fund Admiral Shares (VLCAX) is designed to mirror the performance of an index of large (the CRSP U.S. Large Cap Index).

This index includes some of the biggest names in business today, including Amazon (AMZN) and Apple (AAPL), as well as large U.S.-based health care companies, industrial firms, insurers, and consumer staples companies.

VLCAX’s performance correlates closely with but is not identical to that of the S&P 500 index and VFIAX, the Vanguard fund designed to mirror it.

Accordingly, it’s not an essential portfolio component for investors with adequate exposure to VFIAX. And, like other stocks-only funds, VLCAX is relatively volatile.

VLCAX is also available as an ETF: the Vanguard Large-Cap ETF (VV).

7. Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX)

Expense Ratio : 0.05%

: 0.05% Five-Year Return : 14.60%

: 14.60% Risk Potential: 5

Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX) follows the performance of the CRSP U.S. Mid Cap Index. This index is a representative basket of midsize companies based in the U.S., covering a broad range of sectors and industries.

Because it exclusively trades in mid-cap stocks, which tend to be more volatile than large-cap stocks — although comparatively less volatile than small-cap stocks — VIMAX earns Vanguard’s highest risk potential score: 5 out of 5.

That said, VIMAX is appropriate for risk-tolerant investors with long time horizons seeking to increase their exposure to the broad middle of the U.S. stock market.

VIMAX is also available as an ETF: the Vanguard Mid-Cap ETF (VO).

8. Vanguard Real Estate Index Fund Admiral Shares (VGSLX)

Expense Ratio : 0.12%

: 0.12% Five-Year Return : 6.13%

: 6.13% Risk Potential: 4

Vanguard Real Estate Index Fund Admiral Shares (VGSLX) is designed to match the performance of the broader U.S. real estate sector.

It invests in a broad mix of real estate investment trusts (REITs) and a much smaller selection of real estate service companies. The REITs that make up the bulk of its holdings themselves trade and hold U.S. commercial real estate properties, including office buildings, hotels, multifamily residential, and shopping centers.

Because it invests exclusively in U.S. commercial real estate interests, VGSLX is directly tied to the fortunes of that sector — a notable disadvantage over more diversified Vanguard index funds.

Moreover, the U.S. real estate sector tends to underperform during periods of economic weakness or recession, so this fund is closely correlated with overall U.S. economic health.

On the other hand, VGSLX is not closely correlated with other U.S. and international equities sectors, so it’s a useful hedge against volatility in stocks-only funds like VTSAX and VTIAX.

VGSLX is also available as an ETF: the Vanguard Real Estate ETF (VNQ).

9. Vanguard Growth Index Fund Admiral Shares (VIGAX)

Expense Ratio : 0.05%

: 0.05% Five-Year Return : 20.60%

: 20.60% Risk Potential: 4

Vanguard Growth Index Fund Admiral Shares (VIGAX) mirrors the performance of a specific subset of the U.S. large-cap market: large-cap growth stocks, which represent companies in sectors that have historically grown faster than the broader U.S. market, such as technology.

It does this by tracking the performance of the CRSP US Large Cap Growth Index, which includes immediately recognizable names like Microsoft (MSFT), Facebook (FB), and Tesla (TSLA).

Like other stocks-only funds, VIGAX is volatile and therefore not appropriate for truly risk-averse investors.

However, its risk potential score is not quite as high as that for Vanguard’s mid-cap or international stock funds, providing some respite for investors whose risk tolerance isn’t unlimited.

VIGAX is also available as an ETF: the Vanguard Growth ETF (VUG).

10. Vanguard FTSE Social Index Fund Admiral Shares (VFTAX)

Expense Ratio : 0.14%

: 0.14% Five-Year Return : Not available (24.04% since inception on Feb. 19, 2019)

: Not available (24.04% since inception on Feb. 19, 2019) Risk Potential: 4

Vanguard FTSE Social Index Fund Admiral Shares (VFTAX) is a socially responsible (ESG) mutual fund designed to track the performance of the FTSE4Good US Select Index.

It’s composed mainly of mid- and large-cap stocks and expressly excludes stocks in certain industries, including weapons, adult entertainment, fossil fuels, alcohol, tobacco, gambling, and nuclear power.

VFTAX also excludes stocks of companies that fail to meet U.N. global compact principles — such as anti-corruption and human rights — and certain diversity criteria, such as including at least one woman on the board and having written corporate diversity policies.

VFTAX is not available as an ETF.

Final Word

This is a comprehensive list of the best Vanguard index funds available to U.S. investors right now. But it’s not an entirely comprehensive list of the best Vanguard funds, period.

Vanguard also backs a bevy of exchange-traded funds, the best of which you’ll find on our list of the top Vanguard ETFs. Compare their historical performance and total returns to the products on this list.

And, though it’s mainly known for low-cost, passively managed products, Vanguard does put forth a few actively managed mutual funds that use the promise of market-beating returns (though not the guarantee) to ease the financial pain of higher-than-usual fees and expenses.

As always, do your own due diligence on these Vanguard products and any others that catch your fancy. Before you buy, do the same with comparable competitor funds offered by fellow low-cost firms like Fidelity and Charles Schwab.

Better to do your homework now than after you have real skin in the game.

Raymond Mitchell, Author

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