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 May 1, 2023, the fund allocated 65.01% of its portfolio to stocks, 34.08% to bonds, and 0.91% to short-term reserves. Its top holdings included Microsoft Corp., Alphabet Inc. Class A, Apple Inc., Amazon.com Inc., and Progressive Corp.
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 invested 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 securities, 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 two senior managing directors. Loren L. Moran has advised the fund since 2017 and has worked in investment management since 2006. Daniel J. Pozen has advised the fund since 2019 and has worked in investment management since 1999.
As of May 1, 2023, the Wellington Fund had an average annual return of 3% over a one-year period. For the three-year period, VWELX showed an average annual return of 7.42%, For the five-year period, it had an average annual return of 7.42%. Over 10 years, the Vanguard Wellington fund returned 7.97%. It has averaged 8.23% in annual 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 0.82% 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.
Is There a Minimum Investment in the Vanguard Wellington Fund?
VWELX requires a minimum investment of $3,000.
Is the Vanguard Wellington Fund a Risky Investment?
On a risk scale of one to five, the Vanguard Wellington Fund rates a 3. It is a “moderate” and “balanced” fund. This is reflected in its mix of assets: about 65% stocks, 35% bonds, and less than 1% cash. It invests in a wide range of industries from consumer staples to information technology. It is, therefore, broadly diversified so that a bumpy year in one sector does not drag down the performance of the whole.
What Was the Worst Performance Ever for the Vanguard Wellington Fund?
The Vanguard Wellington Fund was introduced in 1929, and stock market records don’t go back that far. However, Yahoo Finance records a three-year return of 1.75% as the worst ever for VWELX. Its best-ever three-year return was 22.51%. The years are not indicated for either period.
The Bottom Line
The Vanguard Wellington Fund was the first balance mutual fund when it was created in 1929 and it’s still going strong in 2023 with more than 112 billion in assets under management. In an era when much of the individual investor money is going to exchange-traded funds (ETFs), this actively managed fund holds its own among investors who are looking for a moderate level of risk, wide diversification in holdings, and a reasonable fee basis.