Tips for choosing funds

Consider a Target Retirement Fund

The easiest way to create a diversified mix of assets that’s right for you is to consider investing in a Vanguard Target Retirement Fund. Rather than investing in individual securities, a Target Retirement Fund invests in a predetermined mix of Vanguard funds—giving you a complete, diversified asset mix in a single mutual fund. In fact, one fund may be all you need. Keep in mind that whenever you invest, there's a chance you could lose the money, and that diversifying means having different types of investments. It doesn’t guarantee you’ll make a profit or that you won’t lose money.

Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. The Income Fund has a fixed investment allocation and is designed for investors who are already retired. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the target date.

Look for low costs

If you’re choosing funds on your own, remember that costs have a substantial impact on long-term net returns. Fund costs are subtracted, dollar for dollar, from investment returns. The lower your costs, the more of your investment returns you can keep. One measure of a fund’s cost to own is its expense ratio.* The lower the expense ratio, the less it costs to own the fund.

*The expense ratio is what you pay each year to cover the cost of running the fund. To calculate it, fund operating costs are divided by the total amount of money in the fund. The expense ratio is deducted from the fund’s return. You can find it in the current prospectus. With some funds, you may pay additional charges.

Consider an index fund

An index fund aims to track the performance of a certain index, such as the Standard & Poor’s 500 Index. Index funds generally have low expense ratios because they don’t employ costly fund managers or analysts.

Before you invest, get the details. Consider the fund’s objective, risks, charges, and expenses. The fund’s prospectus (or summary prospectus, if available) will tell you these important facts and more. So read it carefully. Call Vanguard at 800-523-1188 to get one. Or you can find one at vanguard.com.