Continuing with our analysis of top performers from the country’s biggest fund families, we will be looking into Vanguard this time. Last time we had reported about the 3 Top Performing Fidelity Mutual Funds in 2014.

Benchmarks largely continued their winning momentum through this year, tackling most of the international concerns. As of Dec 18, the year-to-date returns of Dow, Standard & Poor 500 (.INX) and Nasdaq Composite (.IXIC) stand at 7.3%, 11.5% and 13.7%, respectively. They boast 1-year returns of 12.8%, 16.1% and 18.7%.

International Concerns vs Domestic Strength

These gains have come amidst several global concerns, thanks to the strength in our country. From the very beginning of the year, geopolitical tensions looked threatening as the Russia-Ukraine crisis led to standoff with the Western countries and sanctions were imposed on Russia. Violence in the Middle East followed later, intensifying the political concerns. Election turmoil in Greece was also a headwind earlier this year. Meanwhile, key economies like China and the Eurozone have disappointed investor sentiment on many occasions because of their dismal economic reports. Japan too has failed to cheer investor mood as it entered into a technical recession.

However, the US has outperformed and tackled all these concerns. Economic data on most fronts have mostly been positive. The GDP looked fairly strong and so did the labor market. GDP shrunk 2.9% in the first quarter of 2014, the worst performance in five years. However, GDP increased by 4.6% in the second quarter and 3.9% in the third quarter, according to the second estimate. The economy also added a minimum of 200,000 jobs for 10 straight-months in November. This is the longest stretch in more than 30 years. Unemployment rate remained at a six-year low of 5.8%. An improvement in the employment situation led to the US Federal Reserve ending its third round of bond buying. Also through the year, investors kept a watch on what the Fed decides regarding the rate hike. In a statement on Wednesday, the Fed said once again that they would be “patient” before raising rates, and added that the overall outlook hadn’t much changed from their earlier assurances that rates would stay low for a “considerable time.” This statement boosted markets to their best gains in 2014.

US Mutual Funds are Favored Option

The US mutual funds too have enjoyed solid gains. More interestingly, mutual funds dominate a significant portion of investment choices by US households. According to the recently published annual survey by the Investment Company Institute, about 53.2 million U.S. households and 90.4 million individual investors were the owners of mutual funds in mid-2014.

What is more promising for mutual funds is that its popularity has remained on the higher side. The popularity of mutual funds is reemphasized by the fact that favorability rating among shareholders for mutual fund companies has remained at 68% in mid-2014. (Read: Mutual Funds Enjoy Very Favorable Impression)

Fund Family: Vanguard

Now, we will be looking at a fund family, Vanguard this time, and which funds are its top performers.

Keep reading our Mutual Fund Commentary section, where we are reporting on performances and best picks from fund families and other categories.

Vanguard is among the world’s largest mutual fund companies and has a robust $2.4 trillion invested in the U.S. Vanguard commenced its business in 1975 and had launched the first index mutual fund for individual investors in 1976, named Vanguard 500 Index Fund. Traded as Vanguard 500 Index Investor (VFINX), the fund uses an indexing investment approach to track the performance of S&P 500. Vanguard was also focused on lower costs and thus eliminated sales load in 1976. The company claims to offer funds at less than one-fifth the industry average. Vanguard also started providing retirement plans from 1982, while it launched the first bond index fund for individual investors and first international stock index mutual funds in 1986 and 1990, respectively.

Last year, Vanguard Total Stock Market Index fund overtook Pimco Total Return fund to become the world's largest mutual fund. Vanguard Total Stock Market Index Investor (VTSMX) has total assets worth $379.84 billion.

Top Vanguard Funds

Here we will list the top 15 funds based on their year-to-date returns (as of Dec 17). The data is taken from Vanguard website. However along side, we will mention the Zacks Mutual Fund Rank for each of these funds.
 

 
The highest return is thus from Vanguard REIT Index Admiral (VGSLX), belonging to the Real Estate sector, which managed to beat the overall US mutual fund real estate industry return of 27.7%. However, the Vanguard Health Care Investor (VGHCX) failed to beat the Healthcare industry return of 30.2%.
 

 
3 Vanguard Funds to Buy

Here we will be suggesting 3 top-ranked mutual funds from Vanguard. Apart from having high year-to-date returns (as of Dec 18), these funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy). Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund.

They also relatively low expense ratio and none of these funds carry sales load. A maximum of $5000 is required as the minimum initial investment for these funds.

Vanguard Long-Term Treasury Investor (VUSTX - MF report) seeks a high level of current income which is sustainable. The fund invests a large share of its assets in U.S. Treasury securities such as bills and bonds. It aims to have an average weighted maturity period between 15 to 30 years.

The fund has returned 26.6% year to date. It carries an expense ratio of 0.20% as compared to category average of 0.67%.

Vanguard PRIMECAP Core Investor (VPCCX - MF report) invests in stocks that are believed to have a balance of reasonable valuations and attractive growth prospects in comparison to their peers. These stocks are believed to have high earnings growth potentials, which are yet to be reflected in the stock prices. The fund invests in stocks irrespective of their market caps and industries.

The fund has returned 15.7% year to date. It carries an expense ratio of 0.50% as compared to category average of 1.20%.

Vanguard Capital Opportunity Investor (VHCOX - MF report) seeks capital growth over the long term. The fund mostly invests in domestic stocks with the potential of accelerated earnings growth, irrespective of their market cap. Using fundamental research, the fund invests in stocks that may outperform in three- to five-year period and available currently at attractive prices.

The fund has returned 14.9% year to date. It carries an expense ratio of 0.47% as compared to category average of 1.20%.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank in our Mutual Fund Center.