Over the last three years, investors put in $823 billion into Vanguard funds and scooped up around 8.5 times of all the peers. By any measure, these are astounding figures, with the company witnessing the best quarterly inflow in the first three months of the year.
Vanguard's asset under management (AUM) skyrocketed in the last seven years, with its cheaper index funds outperforming the more expensive mutual funds that rely on smart portfolio managers to pick stocks. With Vanguard growing by leaps and bounds, we suggest funds that recorded the highest returns in the first quarter and are worth a bet.
Vanguard Attracts $121 Billion in Q1
Vanguard drew $121 billion in the first quarter of this year, reflecting a whopping 64% increase from a year ago. The world's largest mutual fund company garnered $48 billion in January, $33 billion in February and $40 billion in March. In fact, January and February turned out to be the months with the highest cash flow in the company's history.
Vanguard emerged as one of the top players in the money management industry as investors focused more on low-cost mutual funds rather than actively managed funds. According to data from Morningstar, passive funds attracted $614 billion, while active funds suffered redemptions or sale of units in a mutual fund to the tune of about $307 billion.
Vanguard Top 5 Selling Funds
The company thrived across the board, with almost all its categories, including stock funds, bond funds, domestic funds, international funds, taxable funds and municipal bond funds, registering significant growth in the first quarter of 2017. Among the five most popular funds during the first quarter, four of them have "total" in their names. The fifth one, the Vanguard 500 Index Fund Inv (MUTF:VFINX), isn't far behind. The following table shows the estimated net inflows in the first quarter for the Vanguard's top 5 selling funds:
Vanguard's Top 5 Selling Funds
Estimated Net Flows, Jan-Mar 2017
Total Stock Market
Total International Stock Market
Total International Bond
Total Bond Market
On the contrary, the top non-Vanguard selling fund, the PIMCO Income Fund Inst's (MUTF:PIMIX), estimated net inflows for the first quarter came in at only $6.8 billion. Vanguard itself has built a brand which extends across all investment types. Unlike others, it neither relies on a handful of star funds nor on the reputation of one asset class. In 2014, the company attracted more than $200 billion into U.S.-based mutual funds, $230 billion the next year and $277 billion in 2016.
5 Best-Ranked Vanguard Mutual Funds of Q1
Vanguard stands out among other mutual fund companies, as it is owned by the funds themselves. The company believes that this structure helps management focus better on shareholder interest. Typical investment management companies are owned by outside stockholders. These companies have to charge fees to pay their owners, which can dent investors' returns.
With the $4 trillion mutual fund giant growing at a stellar pace, let's take a look at the five best-performing Vanguard mutual funds that made a mark in the first quarter of 2017. Such funds boast a Zacks Mutual Fund Rank #1 (Strong Buy) and have yielded the best returns. They also offer a minimum initial investment within $5,000 and carry a low expense ratio. Investors can click here to see the complete list of Vanguard funds, their Zacks Rank and past performance.
Vanguard International Growth Fund Inv (MUTF:VWIGX) invests predominantly in the stocks of companies located outside the U.S. and is expected to diversify its assets in countries across developed and emerging markets.
Its first-quarter return for this year is 12.65%. The annual expense ratio of 0.46% is lower than the category average of 1.23%. VWIGX's performance when compared to funds in its category, as of the last filing, was in the top 18% in the past one year.
Vanguard Emerging Markets Select Stock Investor Fund Inv (MUTF:VMMSX) invests mainly in equity securities of companies located in emerging markets. It invests in small-, mid-, and large-capitalization companies and is expected to diversify its assets among companies in emerging markets.
The fund's first-quarter return is pegged at 11.81%. Its annual expense ratio of 0.9% is lower than the category average of 1.47%. VMMSX's performance when compared to funds in its category, as of the last filing, was in the top 4% in the past one year.
Vanguard Emerging Markets Stock Index Fund Inv (MUTF:VEIEX) employs an indexing investment approach designed to track the performance of the FTSE Emerging Markets All Cap China A Inclusion Index, a market capitalization-weighted index that is made up of approximately 3,658 common stocks of large-, mid-, and small-cap companies located in emerging markets around the world.
The fund's first-quarter return for this year is 10.67%. The annual expense ratio of 0.32% is lower than the category average of 1.47%. VEIEX's performance when compared to funds in its category, as of the last filing, was in the top 17% in the past one year.
Vanguard Precious Metals and Mining Fund Inv (MUTF:VGPMX) invests the majority of its assets in the stocks of foreign and U.S. companies, principally engaged in the exploration, mining, development, fabrication, processing, marketing or distribution of metals or minerals.
Its first-quarter return for this year is 10.52%. The annual expense ratio of 0.43% is lower than the category average of 1.4%. VGPMX's performance when compared to funds in its category, as of the last filing, was in the top 4% in one year.
Vanguard International Explorer Fund Inv (MUTF:VINEX) invests primarily in the equity securities of small-capitalization companies located in countries outside the U.S. that an advisor believes offer the potential for capital appreciation.
Its first quarter return for this year is 10.28%. The annual expense ratio of 0.41% is lower than the category average of 1.39%. VINEX's performance, as of the last filing, when compared to funds in its category was in the top 9% in 5 years.