3 Vanguard Funds Rated 5 Stars by Morningstar
Vanguard funds, including exchange-traded funds (ETFs) and mutual funds, allow investors to obtain exposure to equity and bond markets at reasonable costs with highly competitive expense ratios in the fund industry. Vanguard funds typically come with no load fees, and many are available free of transaction fees through numerous investment broker platforms.
The Morningstar rating system is designed to weigh various factors of a fund, such as past performance, management, fees, and the process that a fund uses to select its holdings. Some Vanguard funds have a five-star rating from Morningstar.
Key Takeaways
- Vanguard offers a wide range of diverse ETFs and mutual funds.
- Morningstar gives many of Vanguard’s funds a five-star rating—the highest rating possible from Morningstar’s rating system.
- The Vanguard Wellesley Income Admira allocates over half its assets to a broad mix of bonds.
- The Vanguard Tax-Managed Balanced Fund Admiral Shares allocates nearly half of its assets in stocks.
- Beginners may be interested in Vanguard’s low-cost, low minimum index funds.
1. The Vanguard Wellesley Income Admiral
The Vanguard Wellesley Income Admiral (VWIAX) seeks to attain long-term growth of income and a sustainable level of current income. As of February 2022, the fund allocates about 60% to 65% of its assets to bonds, including U.S. Treasury bonds, government agency bonds, industrial bonds, and mortgage-backed securities (MBS).
Almost all of the Vanguard Wellesley Income Fund’s bond holdings are investment grade. Since the fund has an average maturity of 10.4 years in 2022, its bond holdings are subject to interest rate risk. The remainder of the fund’s assets is invested in U.S. stocks with a 35% to 40% allocation and a small reserve amount. Equity sectors are diversified amongst 11 categories, including consumer staples, financials, health care, and industrials. Vanguard Wellesley Income Admiral selects equities that have above-average dividends expected to grow in the future.
Vanguard Wellesley Income Admiral has experienced management with a proven track record of delivering strong returns. From 2011 to 2021, the fund has generated an annual average return of 7.67%. As of Feb. 16, 2022, the fund has a very low expense ratio of 0.16% and a 30-day SEC yield of 1.92%. The Vanguard Wellesley Income Admiral is most suitable for investors interested in income investing at a very low cost.
2. The Vanguard High-Yield Tax-Exempt Fund Admiral
The Vanguard High-Yield Tax-Exempt Fund Admiral Shares (VWALX) invests its assets in municipal bonds with current income exempt from federal income taxes. The fund has a very conservative allocation that favors highly rated municipal bonds with A or above credit ratings. Only about 43% of all bonds are rated BBB or below or with no rating as of 2022, while the remaining 57% of the fund’s holdings are A or above. The Vanguard High-Yield Tax-Exempt Fund has an average maturity of 18.2 years, making it sensitive to interest rate risk. As of Feb. 16, 2022, the fund’s 30-day SEC yield is 2.02%.
From 2009 to 2019, the Vanguard High-Yield Tax-Exempt Fund has generated an average annual rate of return of 5.35%. The fund has a very low expense ratio of 0.09% as of 2022. The Vanguard High-Yield Tax-Exempt Fund is most suitable for investors in very high tax brackets and would like to gain exposure to high-quality bonds exempt from federal taxes.
Vanguard offer over 100 index funds and ETFs to investors. The funds vary in account minimum balances and how much each fund charges in fees.
3. The Vanguard Tax-Managed Balanced Fund Admiral Shares
The Vanguard Tax-Managed Balanced Fund Admiral Shares seeks to provide exposure to mid-and large-cap stocks of the U.S. equity market. The fund’s asset allocation is 47.71% in stocks and 52.29% in bonds. The bond portfolio consists of federally tax-exempt municipal bonds.
From 2011 to 2021, the Vanguard Tax-Managed Balanced Fund Admiral Shares has generated an average annual rate of return of 9.01%. The fund has a very low expense ratio of 0.09% and a 30-day SEC yield of 1.11% as of Feb. 16, 2022. The average maturity of the fund is 8.9 years.
The Vanguard Tax-Managed Balanced Fund Admiral Shares is best suited for investors in higher tax brackets with investment goals of growing principal with the ability to absorb market volatility.
What Is the Most Popular Vanguard Fund?
The Vanguard Wellesley Income Admiral, the Vanguard Tax-Managed Balanced Fund Admiral, and the Vanguard High-Yield Tax-Exempt Fund are all popular vanguard funds. What constitutes the “most popular” depends on the individual investor.
What Qualifies a Fund for a 5 Star Rating From Morningstar?
According to Morningstar, funds that qualify for a five-star rating are those whose risk-adjusted returns fall within the top 10% relative to category peers.
Are Vanguard Funds Good for Beginners?
Yes. There are Vanguard funds that are good for beginners, and those who are more financially savvy. Vanguard is known for offering low-cost investing options that may appeal to new investors.
