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Vanguard funds can play a valuable role within an investment portfolio. Not only do they offer broad exposure to the stock market but they also have low fees.
Of course, the challenge is picking the best ones. On Vanguard’s platform, there are over 80 products to choose from. With that in mind, here are three I like for 2024.
A basic global tracker
When building an investment portfolio, it can be smart to start with a simple global tracker fund.
And one product that fits the bill here is Vanguard’s FTSE Global All Cap Index. With this fund, one gets access to over 7,000 stocks for an annual fee of just 0.23%.
I like this fund’s holdings. Currently, the top 10 positions include the likes of Apple, Amazon, and Nvidia.
I also like the fact that the fund provides exposure to large, medium, and small companies (although large companies have the biggest portfolio weights).
One issue to be aware of here is that around 60% of the fund is allocated to the US stock market at the moment.
The US market has a great track record but this does add risk. If US shares tanked, this fund would most likely underperform.
Overall though, I like this product a lot.
Exposure to China and India
If I was looking for a little more geographic diversification, however, I’d consider the Emerging Markets Stock Index Fund. This provides exposure to around 1,500 large- and mid-sized companies in emerging markets.
This product has a lot of appeal right now, in my view.
For a start, it has quite a bit of exposure to China (about 30% of the fund). And Chinese stocks are well off their highs at the moment.
Secondly, it has significant exposure to India (about 15%). And the Indian economy is booming at present.
It’s worth pointing out that this fund is higher-risk. Vanguard gives it a risk rating of 6/7 versus 5/7 for the FTSE Global All Cap Index. So, it’s probably not a good fit for risk-averse investors.
In a long-term diversified portfolio, however, I think it could complement a global tracker nicely.
Small caps for rate cuts
Another Vanguard product that I think could complement a global tracker is the Global Small-Cap Index Fund. This product – which also has a risk rating of 6/7 – provides exposure to around 4,300 smaller companies in developed markets.
I reckon this fund might outperform in 2024.
The reason I say this is that the shares of smaller companies tend to do well when interest rates are falling (because these companies are generally quite sensitive to rates).
And next year, there’s a good chance that interest rates in the US and other countries will be cut.
Of course, a major recession could throw a spanner in the works here. In this scenario, small-caps might underperform.
I think having some exposure to smaller companies is smart though. Over the long term, small-cap stocks tend to outperform large-cap shares due to their higher level of growth.
