The Top 5 Index Funds to Own Now

Can you tolerate some market volatility? Is investing in passively-managed index funds still part of your diversification strategy? Hang in there if it is, because index funds are still a good choice.

If you're hot on the trail for index funds to invest in, here are the top five index funds to own right now.

1. Vanguard High Dividend Yield Index Fund Investor Shares (VHDYX)

Morningstar rating: 5 stars

This large capitalization fund was designed for investors seeking long-term growth and those who can withstand greater volatility. This is an income-focused fund that invests in large U.S. companies that tend to pay higher dividends. Some of its holdings include ExxonMobil, Proctor & Gamble, and JP Morgan Chase, to name a few.

2. Vanguard PRIMECAP Fund Investor Shares (VPMCX)

Morningstar rating: 5 stars

A long-term capital appreciation fund that invests in large and mid-cap companies with an emphasis on the technology and health care sectors. The fund follows a well-established investment strategy of dividing its portfolio amongst several fund managers for diversity of thought. Its holdings include Texas Instruments, Inc., Eli Lily & Co., FedEx Corp., and many others.

3. Vanguard PRIMECAP Core Fund (VPCCX)

Morningstar rating: 5 stars

The PRIMECAP Core Fund is very similar to its younger sibling, PRIMECAP Investor Shares. This is a large cap fund that invests using the investment strategies of multiple fund managers. The key difference is the fund has both value and growth perspectives. Some of its holdings include Texas Instruments, Inc., Eli Lily & Co., Google, and Johnson & Johnson.

4. Vanguard U.S. Value Fund (VUVLX)

Morningstar rating: 4 stars

This is a large to mid capitalization fund that remains vested in about 200 companies using a qualitative approach that seeks to identify undervalued stock. Due to its broad-market exposure, investors should expect greater volatility and therefore invest with a long-term investment horizon. Some of the fund's major players are Pfizer, Inc., AT&T, Chevron, ExxonMobil, and Wells Fargo & Co.

5. Vanguard Consumer Staples Index Admiral Shares (VCSAX)

Morningstar rating: 4 stars

This fund is comprised of U.S. consumer staples, such as Wal-Mart, Costco, Coca-Cola Co., and PepsiCo. As a result, the fund will realize volatility consistent with consumer behavior, and investors should expect greater fluctuations. This is a very high-risk investment and it's advisable that it is used to hedge an already well-balanced portfolio.

Are index funds part of your portfolio? Which?

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Guest's picture

Not all of the funds listed are index funds. Primecap is actively managed.

Guest's picture

Some of these funds are closed to new investors.