Vanguard Mutual Funds
The Vanguard mutual fund family is one of the largest and most recognized fund families in the financial industry. As of Nov. 30, 2024, Vanguard had 428 mutual funds and $10.4 trillion of assets under management.
Its funds are considered extremely liquid. The large number of shares traded day-to-day is an indicator of the substantial liquidity of the market for its mutual funds. In other words, an investor could easily buy shares or sell their holdings.
Vanguard manages dozens of funds with varying investment objectives to fit any investor profile. Its offerings range from managed funds to index funds that track specific indexes such as the S&P 500.
Vanguard also offers exchange-traded funds (ETFs) that can meet additional investor needs.
Key Takeaways
- Liquidity refers to how easily a security can be bought or sold.
- Mutual fund liquidity can be indicated by the number of fund shares that trade daily and the liquidity of underlying securities.
- Vanguard manages well-capitalized funds; they are considered some of the most liquid on the market.
- All buy and sell orders are executed at the end of the trading day, after a fund recalculates its net asset value.
- Mutual funds will never be as liquid as stocks or ETFs that trade continuously on the open market. However, Vanguard’s funds are about as liquid as they come.
Understanding Liquidity
Liquidity refers to how quickly and easily an asset can be bought or sold. When buying, the concern is whether the market for the security is liquid enough to execute an order at the investor’s desired price or near the current market price.
When selling, the question is how easily the security that the investor owns can be exchanged for cash.
With mutual funds, liquidity can be sized up by the number of shares that trade daily as well as the liquidity of the securities in a fund’s portfolio.
For Specifics About a Particular Vanguard Fund’s Liquidity
Look to the fund prospectus for information about:
- How easy it is to buy and sell shares
- The liquidity of the securities in its portfolio
- Indications about liquidity in the investment strategy
- Any restrictions on redeeming shares
Pressure on Mutual Fund Liquidity
When the market is particularly volatility, more mutual fund investors may decide to sell some or all of their mutual fund shares. This greater redemption demand could cause problems, depending on a fund’s liquidity.
To address this scenario, fund managers regularly analyze their funds’ liquidity profile. They consider the allocation of its holdings among highly liquid and less liquid securities. The greater number of highly liquid investments, the more easily a fund can meet customer redemption demands during times of market stress.
Vanguard Fee Cuts
In February 2025, Vanguard announced major reductions in costs to invest in its domestic and international equity mutual funds and money market funds. These also apply to its ETFs and bond mutual funds.
Trading, NAV, and Liquidity
Like all mutual funds, Vanguard fund shares are priced at the net asset value NAV. This price is set once the NAV is recalculated each day. This is when orders to buy and sell shares are executed by a Vanguard fund.
If the market experiences high volatility, investors will quickly understand the lack of control they have over the prices and times at which they can redeem (or buy) mutual fund shares.
Though you have to settle for a sale price that is the NAV, you should bear in mind that mutual funds usually hold very liquid securities to meet redemption requests. This diversification also provides a portfolio with stability in volatile times, which is an advantage for those who remain invested.
Once shares in a mutual fund are sold, it generally takes just a few days for an investor to receive their money.
Fees
One thing investors need to watch for is fees associated with buying and selling shares in a Vanguard mutual fund.
All funds, even the passively managed index funds, have expense ratios associated with them. But some also come with purchase fees, redemption fees or in some cases, both.
The average Vanguard mutual fund expense ratio was 0.08% as of December 2023. According to Vanguard, this is 82% less than the industry average.
Most Vanguard funds have zero commission fees. The costs of the few with fees range from 0.25 to 1% of the transaction amount. Others may charge a redemption fee of 0.25%.
So, despite Vanguard funds being very liquid, it can be costly to trade in and out of these types of funds often.
Advisor Insight
Rebecca Dawson
Dawson Capital, Los Angeles, CA
All mutual funds are liquid in the sense that they are easy to buy and sell. At the end of each trading day, all mutual fund orders are executed at the fund’s net asset value. Vanguard or any other mutual fund will be just as liquid as stock.
The only difference is that a stock is sold at different prices over the course of a trading day, whereas mutual fund orders are cleared only once per day. There are different redemption fees according to which share class of the fund you buy, and this will determine what and how much you pay in sales charges.
Additionally, mutual funds are required to maintain liquidity and the capacity to accommodate withdrawals. Funds typically have to keep a portion (around 8%) of their portfolio as cash.
Are Mutual Funds Obligated to Meet Investors’ Redemption Requests?
According to the Securities and Exchange Commission (SEC), “A mutual fund company generally must pay redemption proceeds to a shareholder within seven days of receiving a redemption request from the shareholder. Exceptions apply on days when the New York Stock Exchange is closed, during certain emergencies, or when the SEC issues an order delaying redemptions to protect shareholders in the fund.”
How Long Has Vanguard Offered Mutual Funds?
Vanguard was established in 1975. It introduced the first index mutual fund available to retail investors in 1976. It assumed management of the mutual fund industry’s oldest balanced mutual fund in the U.S., the Wellington Fund, introduced in 1929.
Does Vanguard Mutual Fund Liquidity Matter?
Yes, it does, as it would for any mutual fund company. Investors want to feel assured that they can get their money out of a Vanguard mutual fund quickly, when they need or want it. That requires that a mutual fund have liquidity. Some mutual funds might have redemption restrictions that could reduce liquidity. Investors agree to these restrictions when they purchase shares.
The Bottom Line
Vanguard mutual funds on the whole are known to be popular and highly liquid mutual funds. Liquidity relates to how quickly and easily an investor can buy or sell a security.
For mutual funds, liquidity is determined by the number of shares that are executed daily, the liquidity of a fund’s underlying securities, and the allocation of its portfolio to liquid securities.
To be sure that you understand the liquidity profile of any Vanguard mutual fund, read the information provided by the fund’s prospectus.
