This low-risk, low-fee fund has had the same manager -- and has returned 12% annualized -- since its launch 20 years ago. By Andrew Tanzer, Senior Associate Editor December 7, 2006 Editor's note: This is part of a continuing series of articles looking at the 20 biggest no-load stock funds. Like most of us, you're probably looking for a fund that consistently beats the market, takes on relatively low risk and charges modest fees for its fund-management services. Vanguard Windsor II, the largest actively managed fund in the Vanguard stable, is such a fund. Over the past 20 years, Windsor II has returned 12% annualized, placing it in the top 20% of large-cap value funds. Annual fees are an easy 0.35%. If you note consistency in Windsor II, it's for a good reason: James Barrow, of sub-adviser Barrow, Hanley, Merwhinney & Strauss in Dallas, has been at the helm since the fund's launch in 1985 (Barrow runs about 60% of the fund's assets; five other managers invest the balance). "I've run it the same way for 20 years," Barrow tells us. Like most true value managers, Barrow says that when he studies a stock, he focuses more on preserving capital on the way down than earning big gains on the way up. He favors stocks with handsome yields, less for the annual income than for the tendency of high-yielders to hold up better in bear markets. "This allows portfolio managers to sleep at night," he says dryly. Also to dampen risk, he gravitates to industries that are not overly exposed to the economic cycle, such as tobacco (he's held Altria, formerly Philip Morris, for 20 years), insurance (Allstate is a large holding), health care and utilities. Because he thinks nuclear power will make a comeback in the U.S., he likes utilities with nuclear exposure, including Entergy, Exelon and Duke. One thing you won't find Barrow chasing is technology shares. "The very definition of technology is rapid obsolescence," he says. Barrow adds that he pretty much ignores sector benchmarks in the market when constructing his portfolio. Another thing about Barrow is that he tends to buy and hold. His average holding period for a stock is four years. Says Barrow, "If you have a value manager with 100% turnover, he's a trader, not a value manager." Windsor II remains a BUY. FUND FACTS Vanguard Windsor II (VWNFX) Assets: $31 billion Managers: James Barrow (1985) and team Return (vs. S&P 500) Year to date: 15.1% (14.2%) One year: 15.9% (14.2%) Three years annualized: 15.7% (11.8%) Five years annualized: 10.1% (6.1%) Ten years annualized: 9.8% (8.1%) Twenty years annualized: 12.1% (11.5%) Expense ratio: 0.35% Portfolio turnover: 28% Minimum investment: $10,000 Phone: 800-635-1511 Web site: www.vanguard.com Returns through Nov. 30 Fund Fact sources: Standard & Poor's, Morningstar View updated data for this fund and compare the performance of the 20 biggest no-load stock funds. Go to A Close Look at the 20 Biggest No-Load Stock Funds.