Personal Finance

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.

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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.

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