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Vanguard is easy to recommend as a destination
for investors aiming to simplify their financial lives
by investing with a single firm. Morningstar’s
analyst team gives the firm an A rating for steward-
ship, owing to its strong corporate culture and
ultra-low-cost products. It also fields the largest
number of Morningstar Medalist funds of any
fund firm.
If anything, the biggest challenge for investors who
are already sold on what Vanguard has to offer
is winnowing down the firm’s standout lineup into a
reasonably compact portfolio. One way for retire-
ment savers to do so is to buy one of the firm’s target-
date funds; the funds in the series receive Gold
ratings—one of only two target-date lineups to do so.
For investors who would like more nuance in their
portfolios—for example, the chance to own some of
the firm’s standout actively managed funds—I’ve
created Vanguard-specific portfolios. Here are my
retirement-saver portfolios designed for Vanguard-
centric investors who are in the process of accumu-
lating assets for retirement. This group of portfolios
is geared toward investors in tax-deferred accounts,
meaning that they’re not designed for tax efficiency.
Portfolio Basics
As with the other model portfolios, I’ve used the
weightings of Morningstar’s Lifetime Allocation
Indexes to guide the portfolios’ baseline allocations.
To populate the portfolios, I leaned on Morningstar
Medalist funds and input from Morningstar’s analyst
team. I specified the lowest-minimum share class
for these portfolios, but investors who can avail them-
selves of cheaper share classes with higher mini-
mums should obviously do so.
For each portfolio, I’ve included an anticipated time
horizon—the investor’s number of years to retirement.
However, as with any off-the-shelf asset-allocation
guidance, investors should take into account their own
situations before implementing these allocations.
Investors who are nearing retirement and who expect
to be able to rely on nonportfolio assets like a pension
to fund their in-retirement living expenses may well
want a more aggressive allocation than the one fea-
tured in the conservative portfolio, for example. Mean-
while, nervous investors who have retreated from
equities in times of market stress or who are investing
for nearer-term goals as well as retirement may well
want to downplay stocks relative to the weightings of
the aggressive and moderate portfolios. It’s also
worth noting that stocks aren’t especially cheap right
now, so investors who have a substantial amount
of money to invest will want to dollar-cost average to
avoid buying stocks (or bonds!) at a high point.
Aggressive Vanguard Retirement-Saver Portfolio
Anticipated Time Horizon to Retirement: 40 Years
This portfolio is anchored by a sizable position in
a total stock market index fund that covers the water-
front. (Indexers could reasonably use that fund as
their sole U.S. equity position and call it a day.)
I’ve augmented it with some of our analysts’ favorite
actively managed funds to give the total portfolio
a slight tilt toward the value side of the Morningstar
Style Box.
Vanguard Equity-Income
VEIPX
provides
active exposure to value stocks; both of its manage-
ment teams favor firms with above-average dividend
yields as well as other attractive characteristics,
such as low valuations.
Vanguard Selected Value
VASVX
provides exposure to mid-cap value (as well
as mid-cap blend) stocks, employing three distinct
management teams with different spins on a value-
investing strategy.
Unfortunately, all of Vanguard’s actively managed
large-growth-leaning funds are closed to new
investors, including the superb Primecap-managed
offerings. To keep the portfolio from skewing too
heavily toward value stocks, I’ve also included a posi-
tion in
Vanguard Mid Cap Growth
VMGRX
, an
actively managed fund. Finally, because the resultant
A Bucket Portfolio for
Vanguard Tax-Deferred Accounts
Portfolio Matters
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Christine Benz