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Vanguard Wellington: More Than a Fair-Weather Fund

Alec Lucas, Ph.D.

Alec Lucas: Gold-rated Vanguard Wellington (VWELX) is a great option for investors who want to participate in the growth of the market while protecting on the downside. The fund got its start just before the great depression, and it's the oldest balanced fund in existence.

The current management team of Edward Busa, who heads up the equity side, and John Keogh, who heads up the fixed-income side, has a shared tenure of 8-plus years, and they work very well together.

Busa keeps equity exposure centered at 65% of the fund's assets. He invests in a mix of large-cap stocks with strong competitive positions and above-average yields relative to the S&P 500 Index. Stocks poised to benefit from supply-and-demand dynamics like rising oil prices and growth names bought on dips. The result is a fairly all-weather equity portfolio. Keogh, meanwhile, invests his roughly 35% fixed-income stake in higher-quality issues and keeps duration within a year of Barclays U.S. Credit A or Better benchmark.

The fund has been a top performer in the moderate-allocation category over the short and long term--plus, its 10- and 15-year returns through late September 2014 have beaten the S&P 500 Indexes.