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This Fund Proves the Best Offense Is a Good Defense

Alec Lucas, Ph.D.

Alec Lucas: Gold-rated Vanguard Wellesley (VWINX) is a proven option for investors who want to preserve and grow their capital. This allocation fund started in 1970 and is named for Arthur Wellesley, a British general who helped to defeat Napoleon and was known for his defensive style of warfare. 

The fund embodies its namesake by taking a defensive approach to investing. Fixed-income manager John Keogh stashes between 60% and 65% of the fund's assets in investment-grade corporate bonds, agency mortgage-backed securities, and Treasuries. He also eschews big interest-rate bests. 

Meanwhile, equity manager Michael Reckmeyer invests the remaining 35% to 40% of assets in stocks that pay above-average dividends, which he tries to buy when they're out of favor. 

Unlike many conservative-allocation peers, the fund doesn't make tactical shifts between stocks and bonds. Instead, Keogh and Reckmeyer use the market's fluctuations to rebalance the fund's mix of stocks and bonds, and they rely primarily on security selection to come out ahead. 

They've consistently done that, which makes this fund one of its category's best options.