Trying to predict where the market’s headed amid geopolitical unrest and ever-changing tariff policies can be exhausting. Fortunately, you don’t have to predict the future to make money investing. A diversified buy-and-hold portfolio plus a good dose of patience can help you reach your wealth goals without timing the market.
Vanguard funds are good candidates for buy-and-hold portfolios because they cover popular market segments, and many have low expense ratios. Whether you want a simple two-fund portfolio or something more complex, one or more of the six funds on this list can provide the diversified exposure you need.
The Best Vanguard Index Funds To Buy And Hold
The table below introduces six Vanguard funds for the buy-and-hold investor. The first two funds, VTI and VOO, provide overlapping exposure to domestic stocks. Most investors will choose one of them as a core, anchor position. The other four funds provide complementary exposure for a well-diversified portfolio.
Some of these funds are also available as Vanguard mutual funds, which you may have access to in your 401(k).
1. Vanguard Total Stock Market ETF (VTI)
The Vanguard Total Stock Market ETF represents the entire U.S. stock market, from small to large companies. The fund uses a sampling approach to replicate market returns. This helps keep costs lower versus owning every stock available. Even so, VTI holds more than 3,500 stocks and provides exposure to all economic sectors.
VTI is an efficient pick for whole market exposure with its low expense ratio and low tracking error. Tracking error is the performance difference between the fund and its underlying index. VTI’s tracking error on a NAV basis has historically been one or two basis points.
As a core stock holding, you could weight VTI as high as 90%—assuming you can handle risk and you’re not investing in other stock funds. More conservative investors would allocate 40% to 80% to VTI, depending on what else is in the portfolio.
VTI’s average annual return over the past 10 years is 12.14%. The fund does pay quarterly dividends with a 30-day SEC yield of 1.24%.
2. Vanguard S&P 500 (VOO)
The Vanguard S&P 500 ETF invests in the S&P 500, which includes the largest and most successful U.S. public companies. This fund is a popular choice for novice and experienced investors. According to ETF Database, VOO is the largest U.S. ETF as measured by assets under management.
Compared to VTI, VOO is more heavily concentrated on big tech stocks. You’d choose VOO as your core holding if you believe those mega-cap companies will continue their historic growth trajectories. In June 2024, a Morgan Stanley report noted that the Magnificent Seven stocks drove more than half of the S&P 500’s 26.3% gain in 2023. Those stocks—Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla—have been less dominant in 2025, but it’s hard to count them out.
VOO allocation guidelines are the same as VTI’s. Your exposure can range from 40% to 90%, depending on the rest of your portfolio and your risk tolerance.
VOO has returned 12.81% annually on average over the past decade. The fund pays quarterly dividends, with a 30-day SEC yield of 1.24%.
3. Vanguard Small-Cap Value ETF (VBR)
Vanguard Small-Cap Value ETF invests in more than 800 domestic small-cap companies. Industrials and financials are the top sectors in the portfolio, followed by consumer discretionary and real estate.
Small caps suit a buy-and-hold portfolio because they have good growth potential and some volatility. Longer holding periods smooth out the rough edges and average to positive returns. Small-cap returns have outperformed large caps in multi-year cycles, but not since 2011. Analysts from investment firm Wellington Management and Chartered Financial Analyst Daniel Fang believe small caps will take the lead again soon.
An 8% to 10% small-cap allocation is an appropriate starting point for buy-and-hold investors. Remember to consider the small-cap exposure you already have in a total market fund like VTI.
VBR has delivered an average annual return of 7.84% since May 2015. The fund pays quarterly dividends with a 30-day SEC yield of 2.1%.
4. Vanguard Total International Stock ETF (VXUS)
The Vanguard Total International Stock ETF invests in more than 8,000 foreign large-cap companies. The fund tracks the FTSE Global Call Cap ex US Index, which includes stocks from emerging and developed markets.
Investing outside the U.S. can provide access to lower valuations and potentially higher growth potential. There can be more volatility, too, which underscores the importance of diversification and long holding periods. Buying and holding a broad international fund like VXUS checks both boxes.
Charles Schwab recommends an international stock allocation of 5% to 40%, but many investors will opt for 10% to 20%. The David Swensen Portfolio uses a 15% allocation. Swensen formerly managed Yale University’s endowment fund, famously growing it from $1 billion to $31 billion.
VXUS has produced an average annual return of 5.6% since May of 2015.
5. Vanguard Real Estate Fund (VNQ)
The Vanguard Real Estate Fund offers growth and income potential through its real estate investment trusts (REIT) holdings. The fund tracks the MSCI US Investable Market Real Estate 25/50 index. The index includes about 150 small, mid and large-cap REITs, and the top holding comprises less than 7% of the portfolio.
REITs often pay high dividend yields because they distribute 90% of their income to shareholders. A related perk is that REITs do not pay corporate taxes on the distributed income. So REIT investors sidestep the double taxation that occurs with non-REIT companies—when profits are taxed at the corporate level and again with shareholder dividends.
A REIT fund also provides access to the real estate market, which typically doesn’t move in lockstep with stocks. This provides a nice diversification benefit, alongside good returns. The FTSE Nareit All REIT index produced a pretax average annual return of 11.1% between 1972 and 2024, according to data provided by the National Association of Real Estate Investment Trusts (Nareit).
A Morningstar analysis concludes that a portfolio with 51% stocks, 34% bonds and 15% REITs outperformed a 60-40 split between stocks and bonds more than half the time between 1976 and 2022. A typical REIT allocation would be 5% to 15%.
VNQ pays quarterly distributions. The total distributions over the past 12 months were $3.63, which equates to a yield of about 4%.
6. Vanguard Total Bond Market ETF (BND)
The Vanguard Total Bond Market ETF invests in investment-grade, intermediate-term U.S. bonds. Tax-exempt bonds and TIPS are excluded. Treasury bonds comprise nearly half of the portfolio, with government mortgage-backed securities and corporate bonds making up another 44%.
Bonds provide income and relative price stability, two traits that complement stocks. Your allocation to this fund should depend on your risk tolerance. If you don’t like risk, opt for higher bond exposure—say, 50% of your portfolio. If you are comfortable with the volatile nature of stocks, your bond exposure could be as low as 10%.
BND pays monthly distributions with a 30-day SEC yield of 4.47%.
Bottom Line
A buy-and-hold portfolio built with Vanguard funds can be cost-efficient, diversified and profitable. Start by setting target allocations for different asset types—from large caps to REITs and bonds—based on your risk tolerance. Then plug matching funds into your allocation formula and wait for your returns to build over time.
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