Vanguard Star Fund: A Smart Investment Strategy?

The Vanguard STAR Fund is a balanced fund between stocks and fixed income, with a focus on providing both long-term capital appreciation and current income for investors. With assets totaling $20.68 billion as of November 27, 2023, the fund has a low expense ratio of 0.32% and requires a $1,000 minimum investment. Vanguard is known for its low-cost funds, and the STAR Fund is no exception, with an expense ratio of 0.34% and no sales load or redemption fees. The fund's performance has been strong, with an average annual return of 6.3% over the past 15 years, outperforming the average balanced fund. The fund's officers and trustees manage the allocation, with oversight from William Coleman and Walter Nejman, who have been with the fund since 2013. Considering its strong performance, low costs, and Vanguard's reputation, the Vanguard STAR Fund is an attractive option for investors seeking a balanced approach.

Vanguard Star Fund's performance

The Vanguard STAR Fund has produced reasonably good long-term returns for retirement investors. As of 28 April 2024, the fund's best 1-year total return was 24.85%. Its 5-year average return is 7.28%.

Over the past 15 years, the fund has produced an average annual return of 6.3%, outperforming the average balanced fund. The fund's 15-year performance puts it among the top 17% of funds in its category, and Vanguard STAR Fund has also posted three-year and ten-year returns that put the fund in the top quarter of all similar funds.

The fund has returned 6.24% over the past year, 1.72% over the past three years, 5.80% over the past five years, and 6.10% over the past decade.

The Vanguard STAR Fund's performance is considered above average compared to its peers.

Fees and expenses

When considering investing in the Vanguard STAR Fund, it is important to understand the fees and expenses associated with the fund. Here is a detailed overview:

Vanguard is known for its low-cost investment approach, and the Vanguard STAR Fund is no exception. The fund's fees and expenses are relatively low, providing a cost-effective option for investors. Here is a breakdown of the key fees and expenses:

• Annual Expenses: The Vanguard STAR Fund's annual expenses are quite reasonable, with an expense ratio of 0.34%, which is less than half the average among balanced funds. This expense ratio is also slightly higher than the average for Vanguard funds, which is 0.08% as of December 31, 2023.
• No 12b-1 Marketing Fees: The fund does not charge any 12b-1 marketing fees, which are fees paid by a mutual fund out of fund assets to cover distribution and sometimes shareholder service expenses.
• No Sales Load: Like all Vanguard funds, the Vanguard STAR Fund does not charge a sales load or commission when buying or selling.
• No Purchase or Redemption Fees: The fund also does not charge any purchase or redemption fees, which are fees charged when buying or selling shares of a mutual fund.
• Account Service Fees: There is an account service fee for accounts with balances of less than $10,000 in the fund. However, this fee can be avoided by signing up for electronic delivery of account-related materials.
• Minimum Investment: The Vanguard STAR Fund requires a minimum initial investment of $1,000, which is lower than many other Vanguard funds.
• Other Costs: There may be other costs associated with investing in the fund, such as bid-ask spreads, which are the difference between the bid and ask prices of an ETF and can vary depending on supply and demand. For Vanguard ETFs, these spreads typically range from $0.01 to $0.25.

Overall, the Vanguard STAR Fund offers a cost-effective option for investors, with low fees and expenses compared to the industry average. It is important to carefully review the fund's prospectus for a detailed understanding of all fees and expenses before investing.

What Vanguard Star Fund owns

The Vanguard STAR Fund is invested in 11 other Vanguard funds to achieve its asset allocation objective. These include:

• Vanguard Windsor Fund
• Vanguard Windsor II Fund
• Vanguard Long-Term Investment Grade Fund Investor Shares
• Vanguard Short-Term Investment Grade Fund Investor Shares
• Vanguard U.S. Growth Fund
• Vanguard International Value Fund
• Vanguard International Growth Fund
• Vanguard Primecap Fund
• Vanguard Explorer Fund
• Vanguard Market Liquidity Fund

As of November 27, 2023, the fund had assets totalling almost $20.68 billion invested in 12 different holdings.

Who manages Vanguard Star Fund

The Vanguard STAR Fund is managed by William Coleman and Walter Nejman, who have both been with the fund since 2013 and are veteran Vanguard employees. They also manage a number of other funds for the firm.

The fund's officers and trustees manage the allocation of the fund. The Vanguard Equity Index Group, led by Joseph Brennan, is responsible for the equity funds that Vanguard STAR owns. Meanwhile, Chief Investment Officer Mortimer Buckley oversees the company's Fixed Income Group.

Is Vanguard Star Fund a smart buy right now?

The Vanguard STAR Fund is a balanced fund between stocks and fixed income, with a roughly 60-40 split between stocks and bonds. It falls into Morningstar's allocation of 50 to 70 percent equity, with a current expense ratio of 0.31% to 0.34% and a minimum investment of $1,000. The fund's risk is considered average when compared to other funds in its category, while its level of return is deemed above average.

The fund has produced reasonably good long-term returns, outperforming the average balanced fund. Over the past 15 years, the fund has returned an average of 6.3% annually, and its three- and 10-year returns place it in the top quarter of similar funds. The fund's performance has benefited from the strong performance in the bond market. However, the recent gains in the bond market also mean that a reversal could produce capital losses on the bond side of the portfolio.

The Vanguard STAR Fund is a good option for investors seeking a balanced approach and broad diversification across asset classes. It is also a good choice for those who want exposure to stocks but are uncomfortable with the volatility of pure stock funds. The fund's rock-bottom costs are also attractive, although the fees are slightly higher than the average for Vanguard.

However, the Vanguard STAR Fund's set allocation may not always be appropriate for investors. The 60-40 split may not be aggressive enough for younger investors, and it may be too aggressive for those in retirement. Therefore, some investors may prefer a target retirement fund that automatically adjusts as they get older.

Overall, while the Vanguard STAR Fund has delivered solid performance, its fixed allocation means it won't always be suitable for all investors. Nevertheless, it can still play a useful role in providing balanced exposure as part of a broader retirement portfolio.

Frequently asked questions