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Over time as I went from deeply in debt to creating an investment portfolio for both retirement and financial independence my thoughts, words, and actions have changed. Today I want to share my top 5 vanguard index funds and my aggressive style index portfolio.
Most of my money is invested in index funds and not individual stocks. I am predominantly a boring investor.
Yes I invest in low fee passively managed broadly based index funds. However if you lean in a little closer you can see an aggressive style index fund portfolio.
My top holdings are positioned for the market to grow over time as my true retirement is 20+ years away. I’m trusting the stock market will go up over time.
I decided long ago that I am not the smartest guy in the room and able to predict the market by selecting individual stocks as the foundation of my portfolio.
I decided to choose the consistent behavior of investing as my battle and the power of compounding to win the war.
Coming in at number one in my Vanguard index funds and over 20% of our investments is the S & P 500 funds. The money is invested in both retirement (mostly) and non-retirement in a variety of index funds (mutual fund & ETF) consisting of just over 500 individual companies.
I’m using VOO or Vanguard’s S & P 500 ETF as my example but due to different 401K and H.S.A. options available through employers or rollovers we are invested in a variety of similar funds from Fidelity, Principal, and Vanguard.
Over the last 10 years Vanguard’s S & P 500 fund (VOO) has returned over 12% and is considered a four (4) out of five (5) in terms of risk.
VOO while made up of 500+ individual companies and is highly concentrated as 29.10% make up the current top 10 holdings. Most companies people would be familiar with including Google, Facebook, and Visa for example.
Vanguard’s S & P 500 ETF Top 10 Holdings
This is a very similar approach to a Warren Buffett approach as he recommends investing in the S & P 500 as “the best thing” for most people who want to invest.. Bet on the market going up over the long haul.
Coming in at number two (2) in our top 5 Vanguard index funds in the Total Stock Market Index fund. In fact in terms of actual dollars and cents this holds the largest value.
Over 20% of our investments both in retirement and non-retirement accounts are in the Total Stock Market index fund (mutual fund & ETF) consisting of over 3,000+ individual companies.
Over the last 10 years the index fund returned over 12% and is considered a four (4) out of five (5) in terms of risk.
While the fund has 3,000+ stocks the top 10 holdings make up 24% of the overall portfolio. Large cap companies like Apple, Microsoft, and Amazon make up the top holdings similar to the S & P 500 fund. In fact the only difference is number 10, Tesla Inc. rather than Nvidia Corp.
Vanguard’s Total Stock Market Index Fund Top 10 Holdings
My investment view from investing in the S&P 500 and Total Stock Market index funds is that I am betting on low fee passive investing in the stock market. While this is subject to change the current top holdings are in technology and U.S. companies.
This is a very similar approach to Warren Buffett, JL Collins, old man approach to investing.
Coming in as the biggest surprise is number three (3) in my top 5 Vanguard index fund holdings, high yield bonds. High yield bonds are often called junk bonds.
Less than 10% of our investments both in retirement and non-retirement accounts are in the actively managed bond fund (mutual fund). The fund consists of over 500+ below-investment-grade corporate securities offering attractive yields.
Over the last 10 years the actively managed bond fund has returned around 6% (before taxes) and is considered a three (3) out of five (5) in terms of risk.
Vanguard High-Yield Corporate Fund Admiral Shares
This part of my investments is very different than the previous stock index funds and in many ways it’s the polar opposite:
This investment has been somewhat of an experiment since my initial purchase of shares.
The shares purchased have been primarily treated as cash that produce a high yield. Rather than a less risk based passively managed bond fund like Vanguard Total Bond Market Index Fund. Also a large portion of this investment is in non-retirement accounts which is tax inefficient.
Not only am I putting a very inefficient high yield corporate bond in a non-retirement account but I am also adding a layer of risk that I am unsure of the need in my overall portfolio.
The statement in the overview tends to make me question my investment choice. I consider bonds in a portfolio to be investments with less risk. The expectation would be that bonds would act differently than the stock market. It appears this is not the case with high yield bonds.
Although this is a bond fund, high-yield bonds tend to have volatility similar to that of the stock market. This fund may be considered complementary to an already diversified portfolio.
I could see re-evaluating this strategy in the coming years. It’s an easy fix as I rebalance my portfolio.
My concern is my asset allocation is fairly aggressive already. I worry I may be chasing the yield on this one.
Next up in my top 5 Vanguard index funds is a lean into growth. Less than 10% of our investments both in retirement and non-retirement accounts are in the index fund (mutual fund & ETF) Vanguard Growth fund (s) consisting of over 250+ individual companies.
Over the last 10 years VUG has returned over 15% and is considered a four (4) out of five (5) in terms of risk. There are more differences than my previous index fund holdings as well.
Vanguard Growth Fund Top 10 Holdings
Buying Vanguard’s Growth Fund has been a recent bet on growth and technology during the past year. It’s my version of the stay at home stock investment.
Rather than buying individual stocks of Apple, Microsoft, Amazon, etc. I decided to use a highly concentrated index fund to spread out my risk.
Coming in with last spot in my top 5 Vanguard index fund holdings is real estate, more precisely REITs.
Less than 10% of our investments in retirement accounts are in the REIT index fund (mutual fund). This fund consists of just over 180+ individual real estate investment trusts publicly traded companies.
Over the last 10 years the Vanguard Real Estate Index Fund has returned over 7% and is considered a four (4) out of five (5) in terms of risk as it is invested in only real estate .
This fund invests in real estate investment trusts—companies that purchase office buildings, hotels, and other real estate property. One of the fund’s primary risks is its narrow scope, since it invests solely within the real estate industry and may be more volatile than more broadly diversified stock funds.
The Vanguard Real Estate Index Fund is again highly concentrated and the top 49.40% are the current top 10 holdings. This also includes Vanguard Real Estate II Index Fund Institutional Plus Shares as it’s top holding.
Vanguard Real Estate Index Fund Top 10 Holdings
Most companies on the list people would be unfamiliar with. REITs are not well known companies like Coca-Cola or Nike. Rather they own the real estate that many of these popular companies lease buildings from.
When we moved from Chicago to Miami we sold our investment property and moved into our Florida investment property thus eliminating our real estate investment portfolio entirely. While we may buy another investment property in the future our REIT portfolio acts as our only real estate investment.
The rest of our investment portfolio is made up of mostly Vanguard index funds including:
If you liked this article be prepared for more as I discuss my top 5 individual stocks, coming soon. So stay tuned and make sure to subscribe above if you haven’t already.
Disclaimer: This information is not to be considered investment advice. Please do your own research and consult a licensed financial professional.
Vanguard offers some of the best low cost broadly based index funds in the industry. You can’t really go wrong with investing with Vanguard. It’s difficult to call an index fund the best but here are what I consider the best:
This is all going to depend on your risk and time line. Since this is targeted at Vanguard I’ll name a couple other in addition to the S&P 500, Total Stock Market, and Growth index fund previously mentioned.
Previously Warren Buffett has stated that upon his death his wife is to invest in 90% S&P fund like Vanguard 500 Index Fund (VFIAX) and 10% short term cash and bonds like Vanguard Short-Term Bond Index Fund Admiral Shares (VBIRX)
Vanguard Information Technology Index Fund Admiral Shares (VITAX) has a 10 year average annual return over 18% which is the highest I could find in my research. The index fund is highly concentrated in Apple and Microsoft which make up almost 40% of the portfolio’s holdings.
Vanguard Growth Index Fund Admiral Shares (VIGAX) has an equally impressive 10 year average annual return of over 15% which is pretty hard to beat. I’m not sure you can find any better performing index funds from Vanguard than these.
Vanguard Total International Stock Index Fund (VTIAX) has over 7,000+ different individual companies from across the world. If I had one international fund to choose I would go with VTIAX. The fund has an array of emerging and developed countries and is the U.S. equivalent of Vanguard Total Stock Market Index Fund.
