Best Vanguard Funds for a Roth IRA

So you’ve decided to start investing in a Roth IRA, but now you need to know how to go about doing that – this article will help.

First of all, congratulations! A Roth IRA is the way to go. I won’t explain why (because you probably already know why), but mostly because I’ve done so in other articles: Get Rich by Living Below Your Means and Why the Vanguard VTSAX Is the Only Fund You Need.

However, a Roth IRA is a great option to fund your own retirement, or compliment an already existing retirement account or company 401(k). If you’re looking for more ways to invest money outside your company 401(k), a Roth is the way to go.  But how do you go about doing that?  This is what I would recommend.

Start your Roth online

There are countless options when it comes to funding your own Roth. You can go through a financial advisor, or you can do it on your own through some sort of online platform like Vanguard – that’s what I did.

I’m partial towards Vanguard because that’s who I went through to start my own Roth, so I’m familiar with how it works – it’s easy! However, there are many other online options when it comes to funding a Roth (Fidelity, Capital Group, JPMorgan, are a few others).  Vanguard is just my platform of choice.

What I love about using online platforms is how cheap and easy it is. You can literally start a Roth in a few minutes.

When you do it yourself online, you eliminate a lot of the fees and commissions you’d be paying if you were to go through a financial advisor. If you choose low cost funds (like index funds), you will eliminate even more fees, and investing becomes a cheap and easy process – which is the way it should be.

Some people might be scared to do it themselves because they aren’t sure what they’re doing, but you don’t need to know a whole lot about it – you only need to know the basics. The most important part is to simply start.

If you choose a platform like Vanguard to get started, there are plenty of good options to get your Roth rolling. But first, let’s start with a good one.

Start with one good fund

The best thing to do to when starting a Roth is to pick one good fund (the core fund of your portfolio) to get started.  There are a few reasons for this, but mainly because the initial investments are usually around $3000, so it can get expensive.  Another reason might be the fact that most people will never add funds to it (which is okay – assuming the one fund is a good one).

When I say, “good,” I’m usually referring to a fund that is pretty diversified and gets good returns.

Recommended: For Good Returns, Invest Your Money Like This.

If you add other funds to it, then great – more diversification! If you don’t, no problem – you’re still diversified (assuming you start with the right fund).

A good fund to start with would be the VTSAX.  Once again, you can check out that article here:  Why the Vanguard VTSAX Is the Only Fund You Need. But if I were to sum up that article, I would say this:

The VTSAX is a good growth stock mutual fund, and is already well diversified. It invests in growth and value stock across large, mid, and small cap companies, giving you broad exposure to domestic companies and sectors.  This is a great option for a core holding in U.S. equity, or your only holding in domestic stock.

It’s also an index fund – which means minimal management, so the management fees are almost non-existent. It’s dirt cheap, basically – that’s my kind of fund!  For more detail, you can check it out here.

Adding to this fund will only give you more diversification if you choose to go that route – here are some other funds to consider if you decide to do that.

Add these funds for more diversification

You’ve probably heard that it’s a good idea to be diversified – not to put all your eggs in one basket (so to speak).  Well, you can do that by adding more funds to your portfolio and dividing your contributions across all of them evenly (I say evenly, but you can do it however you want, really).

The only thing to keep in mind when you start adding funds, is that you add the right ones. By that I mean, ones that will match or beat the overall market.  The last thing you want to do is allocate money to a poorly performing fund that stifles your returns.

If you want some good Vanguard funds, here are some to consider:

1. Growth Index Admiral Shares (VIGAX)

This fund invests in stocks of large U.S. companies in market sectors that tend to grow more quickly than the broad market. This low-cost index fund follows a buy-and-hold approach and invests in substantially all of the stocks represented in its broad benchmark. The fund’s primary risk, apart from general stock market volatility, comes from the fact that its focus on large-capitalization growth stocks may, at times, underperform the broader stock market.

Minimum investment:  $3000

Expense ration:  .05%

What I like:  It’s an index fund with minimal fees.  It’s a growth stock mutual fund, which would be a great addition to an already diversified portfolio.  Best part about this fund is that it beats the overall market (S&P 500).  You can check it out here.

Vanguard growth index fund vs S&P 500

2. Growth and Income (VQNPX)

This fund seeks to outperform the Standard & Poor’s 500 Index. The fund’s quantitative investment approach results in risk and sector profiles that are similar to those of its benchmark index. The fund has a total return goal, meaning that it seeks both capital appreciation and dividend income. The key risk for the fund is the volatility that comes with its full exposure to the stock market. The fund provides broad exposure to a diverse group of large U.S. companies and may be considered a primary equity holding in a portfolio.

Minimum investment:  $3000

Expense ratio:  .33%

What I like:  This is a true mutual fund (not an index fund) managed by fund managers, which makes it a little more expensive and more goal oriented.  It’s goal is to outperform the overall market.  However, it has only matched what the market has done so far (which isn’t a bad thing).  It gets its total return from both capital appreciation and dividend income, which makes it a good addition to a core fund or already diversified portfolio.  You can check it out here.

Vanguard growth and income fund vs S&P 500

3. 500 Index Admiral Shares (VFIAX)

As the industry’s first index fund for individual investors, the 500 Index Fund is a low-cost way to gain diversified exposure to the U.S. equity market. The fund offers exposure to 500 of the largest U.S. companies, which span many different industries and account for about three-fourths of the U.S. stock market’s value. The key risk for the fund is the volatility that comes with its full exposure to the stock market. Because the 500 Index Fund is broadly diversified within the large-capitalization market, it may be considered a core equity holding in a portfolio.

Minimum investment: $3000

Expense ratio: .04%

What I like: It’s an index fund with minimal management fees. It’s meant to match the overall market (which it has done). This would be a great core equity holding (or a great alternative to the VTSAX) that is already broadly diversified.  You can check it out here.

Vanguard 500 index fund vs S&P 500

4. U.S. Growth (VWUSX)

Vanguard’s oldest growth fund focuses on well-known blue-chip companies that tend to hold strong positions in their respective industries. The fund’s investment advisors believe these companies have the ability to deliver positive earnings growth and superior returns over the long term. The fund is typically invested in a diversified portfolio of primarily large-capitalization stocks. Investors with a long-term investment horizon who want exposure to large growth companies may wish to consider this fund.

Minimum investment: $3000

Expense ration: .38%

What I like: This is another true mutual fund that seeks to beat the overall market (which it has done). It’s a little more expensive than a low management index fund, but I think it’s worth it.  You can check it out here.Vanguard growth fund vs S&P 500


The important thing is to start with one good fund.  If you start with one good fund, you won’t have to add to it.  But if you wanted to, you certainly could (I would only add funds worth having).  That is to say, only add funds that are beating the overall market (or beating your core fund).  That will give you greater diversification which should lower risk.  Most importantly, it gives you more opportunity for reward – which should mean greater returns.