Tips for choosing funds

Consider a Target Retirement Fund
You may want to consider investing in just one Target Retirement Fund. A single Target Retirement Fund provides diversification and is designed to keep your assets invested appropriately for someone in your stage of life, up to and including your retirement years. Keep in mind that even though Target Retirement Funds simplify the investment process, they still require some monitoring to ensure that the portfolio is in line with your current situation.

Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. The Income Fund has a fixed investment allocation and is designed for investors who are already retired. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the target date.

Consider choosing the fund with the date that's closest to the year when you expect to retire. If you are already retired, consider choosing Vanguard Target Retirement Income Fund. This fund seeks to provide current income and some capital appreciation to retirees.

Whenever you invest, there’s a chance you could lose the money. Diversifying means having different types of investments. It doesn't guarantee you'll make a profit or that you won't lose money.

Look for low costs

If you’re choosing your own mix of funds, remember that costs have a substantial impact on long-term net returns. Fund costs are subtracted, dollar-for-dollar, from investment returns. So lower costs allow a fund to pass on more of its returns to shareholders. To find out how much a fund costs to own, look up its expense ratio.* The lower the expense ratio, the less it costs to own the fund.

*The expense ratio is what you pay each year to cover the cost of running the fund. To calculate it, fund operating costs are divided by the total amount of money in the fund. The expense ratio is deducted from the fund's return. You can find it in the current prospectus. With some funds, you may pay additional charges.

For Target Retirement Funds, the expense ratio has been restated to reflect expenses currently being deducted from fund assets. This figure is an average weighted expense ratio, based on expenses incurred by the Vanguard funds that make up each Target Retirement Fund. This data is as of the most recent prospectus for the funds, dated June 30, 2023. Source: Morningstar, Inc.

Consider an index fund

An index fund aims to track the performance of a certain index such as the Standard & Poor’s 500 Index. Index funds generally have lower expense ratios than actively managed funds because they don’t employ costly fund managers or analysts.