Vanguard US Equity Index: June 2026 update

• Vanguard is a pioneer of passive investing

• This fund invests in a broad range of US companies

• It provides a simple way to track the wider US stock market

• This fund doesn’t feature on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The Vanguard US Equity Index fund invests in company shares of all sizes in the US. This includes smaller companies, which are higher risk than their larger counterparts.

This fund provides broad exposure to the US market and could be a simple low-cost way to form the US portion of an investment portfolio aiming to deliver long-term growth. It could also help diversify a portfolio focused on other regions.

The fund doesn’t feature on our Wealth Shortlist as there are cheaper ways to track the US stock market, and we have a US tracker fund already on the list that we rate highly.

Manager

Vanguard is a pioneer when it comes to passive investing, having created the first retail index fund 50 years ago. It now runs some of the largest index funds in the world. Given its size, it has a big investment team with the expertise and resources to help its funds track indices and markets as closely as possible, while having scale to keep costs down.

Vanguard funds are run by a large, global team. They’re spread across three investment hubs around the world – the US, UK and Australia. This team-based approach means there’s no named manager on the fund. As a collective team, Vanguard has run this fund for 17 years.

Vanguard also has a trading analytics team, which is responsible for ensuring the funds buy and sell investments efficiently and at a competitive cost. This involves analysing data from different brokers and banks. Lower costs should help the funds track their benchmarks as closely as possible.

Process

This fund aims to track the performance of the Standard and Poor’s (S&P) Total Market Index. It does this by investing in most of the companies in the benchmark, but not all of them. At the end of May 2026 it had 3,492 holdings versus 3,796 in the index. This is known as partial replication and helps keep performance close to the index while keeping costs low.

The fund invests a large amount in the technology sector which accounts for 33.1% as of 30 April 2026. This is followed by financials, communication services and industrials which make up 12.4%, 10.2% and 10.2% of the fund respectively.

Reducing costs is a key part of keeping the tracking difference between the fund and the benchmark to a minimum. In any tracker fund, factors like taxes, dealing commissions and spreads, and the cost of running the fund all drag on performance. To help keep these costs down, the team aims to make large investments in companies instead of lots of small transactions.

Vanguard will also lend some of the investments in the fund to other providers in exchange for a fee, which can be used to offset some of the costs. It will only lend securities to a limited number of high-quality approved dealers. Vanguard indemnifies the fund against any loss from this process, meaning there should be no negative impact on investors. However, stock lending adds risk.

Culture

Vanguard is currently the second largest asset manager in the world and runs around $12trn of assets globally. The group aims to put the client at the forefront of everything it does, which drives its focus on quality, low-cost index products.

John Bogle founded Vanguard in 1975, and it’s owned by investors. This allows Vanguard to redirect its profits back to investors in the form of lower fees, instead of paying dividends to external shareholders. Bogle believed in creating products that simply track the performance of a market rather than taking a shot at picking individual companies which may beat them.

The team running this fund works closely with other equity research and risk departments across the business. They have daily and weekly meetings to discuss ongoing strategy which could add good support and challenge on how to run the fund effectively.

ESG Integration

Vanguard is predominantly a passive fund house. While it’s offered exclusions-based passive funds for many years, it’s lagged peers in offering passive funds that explicitly integrate ESG criteria by tracking indices that tilt towards companies with positive ESG characteristics, and away from those that don’t.

Vanguard’s Investment Stewardship team carries out most of the firm’s voting and engagement activity. Its stewardship activity is grounded in the firm’s four pillars of corporate governance: board composition and effectiveness, board oversight of strategy and risk, executive pay and shareholder rights.

Investors can access fund-by-fund proxy voting records, although voting rationales are not provided. That said, voting and engagement case studies can be found in the firm’s annual Investment Stewardship report and quarterly Engagement and Voting reports.

Vanguard courted controversy in 2022 when it left the Net Zero Asset Managers’ Initiative, a group of asset managers that have committed to achieving net zero carbon emissions by 2050. It claimed its decision would improve clarity for investors and allow it to speak independently. We viewed this as a disappointing backward step. Furthermore, in 2024 and 2025, it was reported that Vanguard failed to support a single shareholder proposal requiring more action from investee companies on environmental and social matters.

The Vanguard US Equity Index fund tracks an index that doesn’t specifically integrate ESG considerations into its process. The fund can therefore invest in shares issued by companies in any sector in line with the benchmark.

Cost

The fund has an ongoing annual fund charge of 0.10%. Our platform charge of up to 0.35% per annum also applies, except in the HL Junior ISA, where no platform fee applies.

Performance

Since launch in 2009, this fund has done a good job of tracking the performance of the S&P Total Market Index. Over the last 10 years, it’s gained 326.23%*. As expected of tracker funds, it’s behind the benchmark over the long term because of the costs involved in running it. However, the tools used by the managers have helped to keep performance close to the index. Remember, past performance isn’t a guide to future returns.

Over the past 12 months, the fund has returned 29.57%. Technology was the best performing sector and made the largest contribution to the fund’s returns over the year.

Despite positive returns, the US stock market has been volatile as investors continue to assess the long-term implications of artificial intelligence (AI), particularly for the largest technology companies. Semiconductor companies, like Micron and Advanced Micro Devices (AMD), have performed strongly over the past year, driven by increased demand for the chips that power AI.

But earlier this year investors became more cautious about how AI could disrupt some companies and potentially make them less relevant. Software companies saw sharp share price falls, due to concerns that AI could replace some of the products they develop and sell. Although the software sector has rebounded since the falls, it remains behind the wider US stock market so far in 2026.

Given Vanguard’s size, experience and expertise running index tracker funds, we expect the fund to continue to track the index closely in the future, though there are no guarantees.