Vanguard Balanced Index Fund Institutional Shares VBAIX

Vanguard Balanced Index provides a low-cost 60% US stock/40% US bond portfolio that reflects the firm’s disciplined approach to index and allocation management.

Vanguard’s equity and fixed-income indexing teams bring deep experience and robust resources to this fund, continually refining their sampling and trading methods to produce faithful reflections of the fund’s underlying indexes. A July 2025 firm restructuring to help accommodate Vanguard’s growth led to portfolio manager Gerald O’Reilly stepping off the fund to focus on equity index strategies. The team-based approach and the depth of expertise across both the equity and fixed-income groups ensured a smooth transition. Seasoned professionals Michael Roach and Aurelie Denis continue to lead the fund’s equity side, while Joshua Barrickman and Tara Talone focus on bonds.

The equity sleeve tracks the CRSP US Total Market Index, giving investors exposure to nearly every investable US stock, from large-cap to small-cap companies. The bond sleeve tracks the Bloomberg US Aggregate Float Adjusted Bond Index, providing broad access to taxable, investment-grade US bonds. This allocation consists almost entirely of investment-grade securities. Eschewing high-yield bonds—the typical peer had an 8.5% allocation as of September 2025—has helped protect against equity market selloffs, as investors often move to higher-quality US bonds for safety.

The fund also maintains a longer duration profile than many moderate-allocation Morningstar Category peers. As of September 2025, the fund’s average effective duration of 5.8 years sat above the category average of 4.9 years, which increases sensitivity to interest rate changes and can be a liability in rising rate environments.

Sticking to its disciplined approach has allowed the fund to rise above its peers over the long term: Over the trailing 10 years through September 2025, the fund’s institutional shares gained 9.7% annualized, placing it in the top quintile of its category. The fund’s US-only focus can create a headwind when international markets outperform, as has been the case in 2025. Still, for the year to date through September 2025, the fund’s 11.5% gain ranks in its group’s top third.

On Sept. 23, 2025, Morningstar said it would acquire the Center for Research in Security Prices, including a CRSP index that this fund tracks. The transaction is expected to close in the fourth quarter of 2025, subject to customary closing conditions, including regulatory approval.

Vanguard’s straightforward asset allocation approach and robust indexing methods result in a simple but effective strategy, helping the fund retain its Above Average Process Pillar rating.

The equity sleeve resembles Vanguard Total Stock Market Index, and the fixed-income sleeve resembles Vanguard Total Bond Market Index, which have High and Above Average Process ratings, respectively. Both sleeves are broadly diversified within their respective universes and reflect the indexes’ key attributes without holding every security in their respective benchmarks. Instead, the indexing groups use statistical sampling techniques, which help reduce transaction costs and create small but exploitable opportunities for sector specialists to take tiny positions to potentially eke out additional gains. The fund’s use of securities lending also seeks to provide incremental value.

Both indexing groups have established a reliable track record of continuously working to enhance their portfolio construction techniques by seeking more effective sampling, tracking, and trading techniques. For example, the firm updated the asset allocation rebalancing policy in 2021 for multi-asset strategies in the wake of 2020’s volatility. The wider guardrails have so far resulted in less trading and therefore lower trading costs, as intended. The balanced strategy’s equity exposure consistently hovers around 60% of the portfolio, roughly in line with the moderate-allocation category average and the Morningstar Moderate Target Risk Index.

This fund’s equity sleeve tracks the CRSP US Total Market Index, which provides exposure to nearly every investable US stock. With respect to style, size, and sector weightings, this strategy’s profile closely parallels those of the average moderate-allocation category peer and Morningstar US Moderate Target Allocation Index category benchmark. The equity portfolio excludes international exposure, whereas the typical peer group constituent and category index held roughly 8.4% and 7.8% of assets in foreign stocks, respectively, as of September 2025. The decade-long outperformance of US stocks has provided a long-running tailwind for this fund.

The bond sleeve tracks the Bloomberg US Aggregate Float Adjusted Bond Index, which provides broad exposure to the taxable, investment-grade US fixed-income market. This strategy buys only investment-grade bonds, whereas its typical peer allocated about 8.5% of its bond portfolio to unrated bonds or bonds rated BB or lower as of September 2025. The index-tracking nature of the strategy has generally resulted in a longer duration profile compared with peers; this was especially true in recent years when many active managers were wary of rising interest rates. As of September 2025, this fund’s average effective duration was 5.8 years, roughly 0.9 years longer than its typical peer. Longer duration means greater sensitivity to changes in interest rates.

Despite a series of changes, Vanguard Balanced Index’s deep resources and team-based approach support a continued People Pillar rating of Above Average.

This fund’s management team has seen periodic changes over the years, with the latest occurring in June 2025, when equity manager Gerald O’Reilly stepped down from the fund. He remains with Vanguard; his move supported the firm’s broader restructuring efforts to accommodate its growth. Equity managers Michael Roach and Aurelie Denis continue as managers and joined the roster in 2023 as replacements for William Coleman when he was promoted to head the firm’s US exchange-traded fund efforts. Roach has more than 25 years at Vanguard and serves as head of multi-asset portfolio management. Denis was promoted for her prior contributions to the strategy, and they have support from Vanguard’s exceptionally well-resourced equity group.

On the fixed-income side, Joshua Barrickman started with Vanguard in 1998, assumed the role of head of fixed-income indexing in the Americas in 2013, and joined this strategy that same year. Tara Talone was named to the strategy in September 2022 after roughly six years on Vanguard’s global bond index team and 16 years at the firm. Barrickman and Talone oversee the bond portfolio’s construction, which is driven by the fundamental views and sampling methods employed by Vanguard’s deep fixed-income group.

Vanguard maintains its High Parent Pillar rating as it continues to grow under new leadership.

CEO Salim Ramji has had a busy first year captaining Vanguard’s crew, and the ship remains pointed in the right direction. The firm made its largest round of fee cuts in early 2025, which came at an estimated cost of USD 350 million. It established a separate division dedicated to its advice and wealth management efforts, a sign that it wants to seriously compete within those lines of business. Asset growth has continued to be a huge success. Only BlackRock’s inflows rival the money Vanguard is taking in. Likewise, the number of clients it serves has more than doubled since 2015.

Despite that success, an ever-growing number of clients has presented a challenge: Vanguard can’t grow its services fast enough to keep up with demand. In some instances, it has had to curb certain services and capabilities or raise fees on others to cope, causing some loyal clients to criticize what they perceive as deteriorating services.

Vanguard has ambitions to bring its disruptive legacy to the bond market. It created roughly a dozen low-cost bond exchange-traded funds for US investors and several others abroad over the 12 months through June 2025. All have low fees in their respective categories, and the actively managed strategies align with Vanguard’s philosophy. They are relatively easy to understand and are conservatively managed.

Vanguard has another opportunity to prove that clients are still its priority. On the surface, its endeavor into the high-fee deal-making world of private assets alongside Wellington and Blackstone looks like a cultural mismatch. So far, the collaboration hasn’t produced anything that’s concerning.

Over the trailing 10-year period ended September 2025, the strategy’s institutional share class generated a 9.7% annualized return that places it in the best-performing quintile of its moderate-allocation category peer group and 1.8 percentage points ahead of its Morningstar Moderate Target Risk Index category benchmark. On a risk-adjusted basis (as measured by Sharpe ratio), the strategy outpaced or matched almost 90% of category constituents and beat the category index over the same time frame.

This strategy invests only in US stocks and bonds, resulting in an underweighting in international securities relative to its category peers and benchmark. Non-US stocks have generally trounced their US counterparts so far in 2025. Despite this headwind, the fund’s year-to-date gain through September 2025 of 11.5% ranked in its group’s top third, thanks largely to a top-heavy portfolio that has become characteristic of index-based strategies dominated by high-performing technology firms like Nvidia (4.2% of holdings as of September 2025) and Microsoft (3.7%).

The fund struggled more in recent markets that saw rising interest rates and soaring inflation. For example, this strategy lost 19.1% during 2022’s Jan. 4-June 16 market correction, placing it in the worst-performing quintile of its peer group. The portfolio’s longer-than-average duration profile (a measure of interest rate risk) weighed down returns.

Vanguard Balanced Index I's Prospectus Adjusted Expense Ratio is 0.04% per year. It places it in the cheapest quintile of the Morningstar US Fund Moderate Allocation Category, where the median fee is 0.9% per year. This cost positioning translates into a Medalist Rating Price Score of 2.48, which reflects its relative price positioning within the category. The Price Score ranges from -2.50 (most expensive) to +2.50 (cheapest), with higher scores indicating better cost competitiveness.