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All Contents © 2019The Kiplinger Washington Editors
By Kent Thune
| August 1, 2017
Stocks are due for a correction but the bull market still has legs and this makes now a good time to consider the best Vanguard funds to buy on the next dip.
The market typically sees two or three 5% corrections per year but stocks haven’t seen such a decline in prices in over a year. It’s a good bet that we’ll see a correction soon.
Another good bet is that this bull market will continue to run after the next correction; therefore buying on dips can be a good idea for tactical investors. And in this type of environment, where the market has momentum to continue after a dip, the best general market mantra to recall is “the trend is your friend to the end.”
Now that the stage is set, I present to you the three best Vanguard funds to buy on the next dip:
Prices and data are from the original InvestorPlace story published on July 28, 2017. Click on ticker-symbol links in each slide for current prices and more.
Expenses: 0.37%, or $37 annually per every $10,000 invested
Minimum Initial Investment: $3,000
The health sector is a market leader now and this makes Vanguard Health Care Fund Investor Shares (VGHCX) one of the best Vanguard funds to buy to capture that momentum.
VGHCX is one of the best actively-managed health care funds on the market and it’s a smart way to get low-cost exposure to top health stocks like Bristol-Myers Squibb Co. (BMY), Allergan Ordinary Shares (AGN), and UnitedHealth Group Inc. (UNH).
The portfolio is widely diversified across the health sector and it isn’t too heavy in biotech stocks, which can be volatile in transitional markets.
Large-cap growth stocks are beating the broader market indices year-to-date, which makes Vanguard Growth Index Fund Investor Shares (VIGRX) one of the best Vanguard funds to buy on the next dip.
VIGRX tracks the CRSP US Large Cap Growth Index, which is full of large-cap U.S. growth stocks like top holdings Apple Inc. (AAPL), Alphabet Inc. (GOOG, GOOGL), and Amazon.com, Inc. (AMZN).
Although growth stocks tend to get hit harder than their value counterparts during bear markets, they generally outperform in bull markets, particularly the late phase of the business cycle, as we are arguably in now.
Growth stocks are hot and international companies have returned to favor. This combination makes Vanguard International Growth Fund Investor Shares (VWIGX) a good candidate for a fund to own before and after the next correction.
The performance for VWIGX makes it a smart holding now and for the long run. Performance ranks for every time period, from year-to-date return to the 15-year annualized return, place this actively-managed foreign growth fund ahead of at least 62% of its category peers.
To pull this off, the fund holds mostly holds stocks of companies with high growth potential, such as top holdings Tencent Holdings (TCEHY), Alibaba Group Holding (BABA), and AIA Group (AAGIY).
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