The Best Vanguard Index Funds to Buy in 2023: A Comprehensive Guide

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Investing in index funds is a crucial strategy for both beginner investors and those with decades of experience. These funds offer a diversified approach to investing, allowing individuals to own a slice of various large businesses from all over the world. In this article, we will discuss the best Vanguard index funds available in the UK for the year 2023.

1. FTSE All-World ETF

If you aspire to own a piece of the global market, the FTSE All-World ETF is an excellent choice. This fund includes 3,744 companies from all around the world and has ongoing costs of 0.22%. While fees are not the sole factor to consider, they can significantly affect long-term returns. It’s important to note that the fund is market-weighted, meaning larger companies hold a higher share. For example, Apple currently accounts for 3.75% of the fund.

Pro tip: The FTSE All-World ETF has two versions available: VWRL, which pays dividends, and VWRP, which automatically reinvests them. Unfortunately, VWRP is not offered directly on Vanguard’s platform, but it can be accessed through other platforms like Invest Engine or Trading 212.

2. S&P 500 Index Funds

The S&P 500, consisting of 500 of the largest US companies, is another essential index fund to consider. These funds offer exposure to the largest market in the world, with ongoing costs as low as 0.07%. As with the FTSE All-World ETF, the S&P 500 Index Funds have two versions available, VUSA (with dividend payouts) and VUAG (automatic dividend reinvestment).

3. Developed World Fund

For investors looking to spread their investments more globally, the Developed World Fund is an excellent choice. This fund includes companies from various regions such as the US, Europe, Japan, and the Pacific region. It offers 2,205 stocks and has ongoing costs of 0.12%. The Developed World Fund can be found under the ticker symbols VEVE (with dividends) and VHBG (automatic dividend reinvestment) on platforms like Invest Engine and Trading 212.

4. FTSE 100 Index Fund

Investors seeking opportunities closer to home may consider the FTSE 100 Index Fund. This fund includes the largest 100 companies based in the UK. While not as exciting as the US market, the FTSE 100 Index Fund often pays reliable dividends. It’s important to remember that the FTSE 100 represents only about 4% of the global economy, so diversification is crucial. The fund has 102 holdings and ongoing costs of 0.09% per year. On Vanguard’s platform, it is available under the ticker symbol VUKE (dividends). Automatic dividend reinvestment can be found on other platforms with the ticker symbol VUKG.

5. Emerging Markets Fund

The Emerging Markets Fund focuses on countries like China, India, and Africa, which have shown significant potential for growth. While these markets currently make up a small portion of the global economy, their growth rates suggest future opportunities for investors. The fund includes 1,985 stocks and has ongoing costs of 0.22% per year. China dominates this fund, with Taiwan also being a significant contributor. It’s important to recognize the additional risks associated with investing in foreign markets. The Emerging Markets Fund has two versions available, VFEM (pays dividends) and VFEG (automatic dividend reinvestment).

In conclusion, investing in Vanguard index funds provides investors with a diversified approach to growing their wealth. The aforementioned funds offer exposure to various markets, allowing individuals to own shares in both global and regional companies. Remember to do your own research and consider your investment goals before making any decisions.