In the ever-changing world of investing, the Vanguard Wellington fund is a true survivor. Founded in 1929, it was the first balanced mutual fund in the United States. From an initial investment of $100,000, the Vanguard Wellington fund has grown to over $112 billion of assets under management (AUM).
The fund managers practice active management by allocating 60% to 70% of the portfolio to stocks, while the remainder is invested in primary fixed-income instruments like bonds. The fund emphasizes high quality in its equity and bond picks and prefers the stocks of large-cap companies that have a consistent history of paying dividends.
The fund is administered by the Vanguard Group and managed by Wellington Management Company.
VWELX Investment Philosophy
Vanguard’s managers have adhered to a fairly consistent investment strategy over the last 30 years. The Wellington fund puts equal weight on reasonable current income, capital growth, and capital preservation. True to Vanguard's reputation, the fund focuses on high-profile, dividend-paying companies with strong economic moats, whose stocks possess value and growth characteristics.
Meanwhile, VWELX's bond portfolio concentrates on high-quality corporate bonds and mortgage-backed securities that can withstand market turbulence. In short, Vanguard's Wellington Fund uses a conservative approach that makes it an "all-weather" fund with competitive returns in certain market cycles.
As of Feb. 2020, the fund allocated 65.64% of its portfolio to stocks, 33.25% to bonds, and 1.11% to short-term reserves. Its top holdings included Microsoft, JPMorgan Chase, Verizon, Bank of America, and Alphabet.
The fixed-income portion of its portfolio is invested heavily in corporate bonds of short, intermediate, and long-term capabilities. In fact, more than a third of the total allocation is in industrial companies, and a quarter is allocated to financial services companies. Still, the fixed-income portion has some exposure to U.S. Treasury, government agency, and mortgage-backed securities. More than 90% of the bond holdings are of investment-grade, and the average duration stands at seven years, making this fund somewhat sensitive to interest rate changes.
The fund has been managed by Edward P. Bousa since 2000, along with three other relatively newer managers: Michael Stack, Loren Moran, and Daniel Pozen. Bousa, who has more than 35 years of investment experience, oversees the equity portion of the fund's portfolio but is set to retire sometime in 2020. Stack and Moran began managing the fund in 2017, while Pozen started in 2019.
As of Jan. 31, 2020, the fund had an average annual return of 17.73% over a one-year period. For the three-year period ending Jan. 31, 2020, Vanguard's VWELX showed an average annual return of 10.51%, For the five-year period, it had an average annual return of 8.74%. Over 10 years, the Vanguard Wellington fund returned 10.12% and averaged about 8.33% in returns since its inception in 1929.
For the Vanguard Wellington Fund Investor Shares' consistent history of strong risk-adjusted returns and competent management, Morningstar awarded it a five-star overall rating. The fund also earned five-star ratings over the three-, five-, and 10-year periods.
As for fees, the Vanguard Wellington Fund Investor Shares is one of the most inexpensive mutual funds in the moderate allocation category. It has a net expense ratio of 0.25%, which is significantly lower than the average expense ratio of 0.90% for its investment category. The fund also offers qualified investors Admiral Shares that have even lower expense ratios but require higher investments. The fund has no load fees and comes with an initial investment requirement of $3,000.