How to Buy Vanguard Index Funds

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Contributor, Benzinga
January 7, 2022

It's hard to beat Vanguard if you're a long-term investor or ready to make early moves toward retirement.

With over 4,000 commission-free funds and expense ratios well below industry averages, Vanguard is a great option for low-cost investing. Vanguard popularized the index fund. Company founder Jack Bogle created the world's 1st-ever index fund in 1976, so it's safe to say that the financial powerhouse knows how to create profitable index funds.

5 Vanguard Index Funds to Check Out

Take a look at the 5 Vanguard index funds we think you should check out:

  • Vanguard 500 Index Fund. The quintessential index fund and Vanguard’s second in line behind the Vanguard Total Stock Market Index in total assets, the Vanguard 500 Index Fund was the first of its kind when it was invented in the 1970s. Today, the index fund consistently produces great returns and its low minimum and expense ratio ($3,000 and 0.14% respectively) make it a great "starter fund" for anyone who opens a retirement account for the first time.
  • Vanguard Dividend Appreciation ETF. The Vanguard Dividend Appreciation ETF tracks the NASDAQ U.S. Dividend Achievers Select Index, a collection of about 180 companies which have consistently increased their dividend payouts to investors. The fund has a low expense ratio of 0.06% and returns an average of 1.9% in dividends annually.
  • Vanguard Information Technology ETF. Very few industries have permeated our lives quite as thoroughly and quickly as the tech sector, and the Vanguard Information Technology ETF seeks to capitalize on this growing trend. This fund invests in about 350 companies classified as IT firms, and its largest holdings are in Apple, Alphabet (Google's parent company) and Microsoft.
  • Vanguard Real Estate ETF. Real estate investment trusts (REITs) are a special type of corporate structures that enjoy special tax breaks so long as they payout at least 90% of their income back to shareholders. The Vanguard Real Estate ETF holds over $30 billion worth of assets in REITs, and pays out unusually high returns. The fund is a great choice for dividend hunters who can stomach the high risk that comes along with investing in a single industry.
  • Vanguard Total International Stock ETF. Looking to add international diversity to your portfolio? The Vanguard Total International Stock ETF boasts a whopping 6,350 international stock holdings, with the majority of assets held in secure Pacific countries and Europe. However, about 21% of the index fund's holdings are in emerging markets, so it's possible that this fund may increase in value significantly as these countries secure a more stable GDP.

Get Ready to Invest Today

Ready to invest? Here’s how to get started.

  1. Open an account with Vanguard

    If you're not investing though a company-sponsored 401(k), the best way to invest in Vanguard's offerings is to invest directly though Vanguard's site.

    Choose the type of account you're interested in (Vanguard currently supports multiple types of retirement accounts, ranging from traditional and Roth IRAs to SEP IRAs) and open an account.

    You'll need your personal and banking information handy, and you can open an account in as little as half an hour. There are no account minimums required to open a Vanguard account, though many of Vanguard’s index funds add a minimum investment amount.

  2. Link your banking information

    After you've opened an account, you'll need to link your bank account to your Vanguard profile. Enter your bank account number, your bank's unique routing number and select whether the account is a checking or other bank account.

    Over the course of the next week, Vanguard will have you verify your bank information. Vanguard will make two small deposits to the linked account (both less than $1) and then immediately withdraw them.

    Before you can purchase Vanguard equities, you'll need to confirm that you've linked the correct account by entering the amount in cents that Vanguard deposited to your account. This process can take a few days, so don't panic and assume that you've entered the information incorrectly if you don't immediately see the micro-deposits in your account.

  3. Request a buy

    After you've confirmed your banking information, you're ready to buy! To get started, click on the link titled "Buy and Sell" and click "Buy Vanguard Funds" to be redirected to Vanguard's buying page.

    If you’ve never purchased a Vanguard index fund holding before, you’ll need to search for the fund you’re looking for.

    Click the tab titled “Add another Vanguard mutual fund” and enter the ticker, name or symbol of the fund you’re looking to invest in. If you choose to invest in this fund again, it will appear automatically on the buy page (like the “500 Index” seen on the example) and you won’t have to search. Enter the amount of money you'd like to invest in dollars, and click "continue."

    Next, click on the dropdown funding selection and choose the banking information that you confirmed in step 2. You can also add a new bank account from this page. Click “continue,” double-check that the information shown is correct, and initiate the buy.

    Though the holdings will appear almost instantly in your Vanguard account, it may take up to 3 days to see the contribution withdrawn from your bank account.

  4. Check back in on your account at least annually

    Vanguard deals largely in individual retirement accounts, which have an annual contribution limit of either $5,500 or $6,500, depending on your age. After you've maxed out your contribution, make sure to check back in on your money at least annually.

    The most hands-off investors can also set regular contributions through Vanguard's site to max out their accounts without lifting a finger. Decide if you would rather manually invest your money each year (through fund diversification) or if you'd like to invest largely in 1 or 2 funds and let Vanguard take care of the heavy lifting. Either way, monitor your investments regularly and make sure everything looks correct on your bank's end.

Request a Buy Visual Representation

Invest in Vanguard Index Funds

Disclosure: Vanguard Digital Advisor's services are provided by Vanguard Advisers, Inc. ("VAI"), a federally registered investment advisor. VAI is a subsidiary of VGI and an affiliate ofVanguard Marketing Corporation (“VMC”). Neither VAI, Digital Advisor, VGI, nor VMC guarantees profits or protection from losses.

Low-fee investors love Vanguard's rock-bottom expense ratios. Take a look at Vanguard Index Funds for long-term investment, fewer fees and lower taxes.

If you're looking for more investment options, check out Benzinga's list of the best online brokers for beginners.