Kip 25

The Stodgy Vanguard Wellington Fund Still Delights Investors

Wellington, a balanced fund, is almost 100 years old.

The world has changed considerably since Vanguard Wellington (VWELX) opened to investors in July 1929, months before the stock market crashed. But the fund’s objective, to provide growth and income with a mix of 65% stocks and 35% bonds, has remained constant. It's a member of the Kiplinger 25, the list of favorite low-fee funds.

Assessing the performance of a balanced fund is tricky. You can’t directly compare Wellington’s returns with those of Standard & Poor’s 500-stock index, and a professionally managed index consisting of 65% U.S. stocks and 35% U.S. bonds doesn’t exist. The best measure, then, is to pit Wellington against its peer group, the lyrically named (by Morningstar) “allocation—50% to 70% equity” category. Over the past year, Wellington outpaced its average rival by 1.7 percentage points.

Edward Bousa picks Wellington’s stocks. Big gains in Wellington’s financial holdings, particularly in the early stretch of the period, boosted results, as did shares of some industrial, consumer, energy and materials companies. At last report, the fund had 25% of its assets in financial stocks, well above their 14% weight in the S&P 500.

Wellington’s bond holdings, chosen by John Keogh, Loren Moran and Michael Stack, consist mostly of high-quality corporate and government debt. Rising interest rates over the past 12 months (the benchmark 10-year Treasury bond, which yielded as little as 1.5% in September 2016, paid 2.1% on August 31) posed a “huge headwind” for Wellington’s fixed-income holdings, says Moran. She and her colleagues buy mostly government-backed bonds and corporate debt rated single-A or better. But Wellington got a boost over the past year from a healthy dose of corporates rated triple-B (the lowest investment-grade rating), which benefited from an improving economy. The fund recently had 18% of its bond holdings in triple-Bs.

Discovery discovery. Several readers have told us that when they tried to invest in T. Rowe Price International Discovery through their Schwab accounts, they were told that the fund was closed. In fact, the fund is open to new individual investors but closed to advisers who want to buy the fund for the first time. Individual investors who want to make an initial investment in Discovery through Schwab must call 800-435-4000 to buy shares.

Most Popular

Planning to Sell Your Home in Retirement? Downsize Costs Along With Space
Budgeting

Planning to Sell Your Home in Retirement? Downsize Costs Along With Space

In this hot real estate market, consider the costs of buying and selling a house along with the expenses associated with your new digs.
November 13, 2020
What Biden Will Do: 24 Policy Plays to Expect From the Next Administration
Politics

What Biden Will Do: 24 Policy Plays to Expect From the Next Administration

The Kiplinger Letter forecasts President-Elect Joe Biden’s biggest priorities -- and the likelihood of progress on them.
November 19, 2020
The 13 Best Healthcare Stocks to Buy for 2021
Kiplinger's Investing Outlook

The 13 Best Healthcare Stocks to Buy for 2021

Most of the best healthcare stocks for 2021 will have some sort of ties to COVID, whether it's producing a vaccine or cure, or benefiting from the vir…
November 20, 2020

Recommended

Where to Invest in 2021
Economic Forecasts

Where to Invest in 2021

With the election in the rearview mirror, investors can turn their full attention to the economic recovery and progress on the pandemic.
November 28, 2020
The Best T. Rowe Price Funds for 401(k) Retirement Savers
Kiplinger's Investing Outlook

The Best T. Rowe Price Funds for 401(k) Retirement Savers

A dozen T. Rowe Price mutual funds also have a place among the nation's most popular 401(k) retirement products. Find out which funds belong in your r…
November 27, 2020
The Best Fidelity Funds for 401(k) Retirement Savers
Investing for Income

The Best Fidelity Funds for 401(k) Retirement Savers

Fidelity funds are renowned for their managers' stock-picking prowess. We rate Fidelity's best actively managed funds that are popular in 401(k) plans…
November 27, 2020
The Best Vanguard Funds for 401(k) Retirement Savers
mutual funds

The Best Vanguard Funds for 401(k) Retirement Savers

Vanguard funds account for a third of the 100 most popular 401(k) retirement products. We rank Vanguard's best actively managed funds, including its t…
November 27, 2020