Tips for choosing funds

Consider a Target Retirement Fund
One way to create a diversified mix of assets is to consider investing in a Target Retirement Fund. Rather than investing in individual securities, a Target Retirement Fund invests in a predetermined mix of Vanguard funds—giving you a diversified asset mix in a single mutual fund.

Whenever you invest, there's a chance you could lose the 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 effect 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.*

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 lower expense ratios than actively managed funds 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.

*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. For Target Retirement Funds, the expense ratio has been restated to reflect expenses currently being deducted from fund assets. This figure is an average weighted expense ratio, based on expenses incurred by the Vanguard funds that make up each Target Retirement Fund. This data is as of the most recent prospectus for the funds, dated [month, day, year]. Source: Morningstar, Inc.