Nu helps investors untangle the myriad of funds offered at Vanguard and recommends the ones outperforming their peers.
Wealth Lifecycle and Asset Allocation
Vanguard offers several Total Market Index Funds that are ideal for Buy-and-Hold investors interested in asset allocation portfolio construction.
Vanguard Total Stock Market Index Fund
“Vanguard Total Stock Market Index Fund is designed to provide investors with exposure to the entire U.S. equity market, including small-, mid-, and large-cap growth and value stocks.” Source: vanguard.com
Vanguard Total Bond Market Index Fund
“Is designed to provide broad exposure to U.S. investment-grade bonds. Reflecting this goal, the fund invests about 30% in corporate bonds and 70% in U.S. government bonds of all maturities (short-, intermediate-, and long-term issues).” Source: vanguard.com
Vanguard Total International Stock Market Index Fund
“Offers investors a low cost way to gain equity exposure to both developed and emerging international economies. The fund tracks stock markets all over the globe, with the exception of the United States.” Source: vanguard.com
Vanguard Total International Bond Market Index Fund
“Is designed to provide broad exposure to non-U.S. investment-grade bonds. The fund seeks to track the performance of an index that includes international government, agency, and corporate securities, mostly from developed countries, but also some emerging markets countries.” Source: vanguard.com
Nu collects and analyzes performance data of many funds offered by Vanguard to help investors optimize their portfolio.
Vanguard offers a plethora of funds with similar names and descriptions. Nu collects and analyzes performance data of many funds offered by Vanguard to help investors optimize their portfolio.
- Investments – Equities (stocks), fixed income (bonds), money market (cash reserves)
- Style – Active and passive, growth or value
- Capitalization – Large, Mid, Small
- Sectors – Equity or Bond Indexes
- Region – Domestic (U.S.) and international
- Diversification – Avoid similar or overlapping sectors (i.e. Nu will not select similar or overlapping sector funds)
Diworsification*
Indiscriminately adding global exposure to a total stock market fund results in inefficient diversification and worse performance.
A relative performance chart shows how inefficient diversification reduced long term performance during the economic recovery of 2009 through 2018.
- Vanguard Total World Stock Index Fund (VTWSX) +115.5%
- Vanguard Global Equity Fund (VHGEX) +134.6%
- Vanguard Total Stock Market Index Fund (VITSX) +198.9%
* From Peter Lynch's book, "One Up On Wall Street" (1989). The term diworsification is used to describe inefficient diversification of an investment portfolio.
Targeted Diversification
Selecting targeted international funds can diversify a portfolio and increase overall portfolio returns.
A relative performance chart shows that adding Vanguard’s International Growth Fund (VWILX) and/or Emerging Markets Stock Index Fund (VEMIX) could diversify a portfolio as well as increase overall returns during 2017.
- Vanguard International Growth Fund (VWILX) +43.3%
- Vanguard Emerging Markets Stock Index Fund (VEMIX) +29.7%
- Vanguard Total World Stock Index Fund (VTWSX) +21.7%
- Vanguard Total Stock Market Index Fund (VITSX) +18.0%
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