Vanguard Wellesley® Income Fund

Scorecard
5 / 5 Stars
Lipper
5 5 5 5 2
Zacks Investment Research
1 (Strong Buy)
Standard & Poor's
5 / 5 Stars
TheStreet.com
B- (Buy)

#2 in Conservative Allocation

U.S. News evaluated 189 Conservative Allocation Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

See all Vanguard funds

See full Conservative Allocation rankings

See more fund rankings

Performance

The fund has returned 7.75 percent over the past year, 9.60 percent over the past three years, 13.21 percent over the past five years, and 7.19 percent over the past decade.

Trailing Returns Updated 03.31.2014
Year to date 2.6%
1 Year 7.8%
3 Years (Annualized) 9.6%
5 Years (Annualized) 13.2%
10 Years (Annualized) 7.2%

See more VWINX performance

Summary

With its time-tested conservative approach, the Vanguard Wellesley Income fund has been able to weather almost any downturn in its almost 40 years. The fund has posted an annualized return of more than 10 percent since its inception in 1970.

As of April 22, 2014, the fund has assets totaling $36.54 billion. Its portfolio normally consists of at least 60 percent bonds, with the remainder in stocks of U.S. and foreign companies.

The Wellesley fund is the more conservative and bond-heavy sister fund to the well-known, stock-focused Vanguard Wellington fund. Wellesley’s managers search for value in dividend-paying stocks, which often leads them into the financial sector. As of the end of 2009, the fund has had to dump some of those picks because of their low dividend payouts, but the managers have held on to names like Hong Kong and Shanghai Banking Corporation (HSBC). On the bond side, the fund's managers prefer investment-grade corporates. The fund has returned 7.75 percent over the past year and 9.60 percent over the past three years.

Co-manager John Keogh says the fund's goal is to protect its clients on the downside. "When the bond markets really like risk...we're probably going to underperform a little bit because we're [investing in] higher-quality [bonds], and higher-quality underperforms in that environment, but in 2008, being a little higher-quality is exactly what you wanted," he says. The fund returned 16 percent in 2009, 4 percentage points lower than the category average. But it outperformed its peers in 2008 when it only lost 10 percent, while the average fund in the category lost about 19 percent. In 2010, the fund has seen flattish performance through the third quarter. The fund has returned 13.21 percent over the past five years and 7.19 percent over the past decade.

Investment Strategy

The fund is a conservative balanced fund that normally invests about 60 percent of its assets in investment-grade bonds and the rest in dividend-paying stocks.

Role in Portfolio

Morningstar assigns it a “core” role and says, “Given the portfolio’s pronounced value tilt and large sector bets versus the S&P 500, many investors will want to pair it with a fund that has more growth exposure.”

Management

W. Michael Reckmeyer III runs the equity portion of the fund, and John Keogh of Wellington Management runs the bond side of the Wellesley and the Wellington funds. Both started in June 2008.

Fees

Vanguard Wellesley® Income Fund has an expense ratio of 0.25 percent.

See more VWINX fees

Risk

The fund is vulnerable to rising interest rates because of its long-term bond holdings. On the equity side, the managers pursue a fairly strict value strategy, which can cause the fund to lag behind peers during big rallies.

See more VWINX risk

Fund Opinions

The fund's Value Line Overall Rank, a measure of risk-adjusted performance and relative growth in fund returns, is 3 on a scale of 1 to 5, with 1 being the best and 5 the worst.

Value Line 2014-04-10

The fund's Value Line Growth Persistence rank, which awards funds that consistently outperform their broad universes, is 4 for one year, 3 for five years, and 3 for 10 years. Scores are on a 1 to 5 scale, with 1 being the best and 5 the worst.

Value Line 2014-04-10

The fund's Value Line Risk Rank, a measure of volatility, is 1 on a scale of 1 to 5, with 1 being the least volatile and 5 the most.

Value Line 2014-04-10

In the July 2010 edition of The Independent Adviser for Vanguard Investors, Dan Wiener says, "Wellesley Income is a terrific fund for those more interested in income than growth. That being said, I'd almost always take Wellington's greater equity stake over this fund's greater income allocation. With interest rates more surely poised to rise, rather than fall, I'd double that motion."

2010-08-05

In the annual Lipper/Barron’s Fund Families Survey for 2009, Vanguard ranks 40th out of 61 fund families surveyed.

Lipper

The November 2009 edition of the No-Load Mutual Fund Investor says, "While Wellesley Income's managers do not make aggressive moves, they have demonstrated their flexibility over the past year. Since 2008, the stock portfolio has become much more broadly diversified by sector, as many financial-services stocks were jettisoned from the portfolio because of declining or eliminated dividends, or simply poor performance."

2010-02-17

In the annual Lipper/Barron’s Fund Families Survey for 2009, Vanguard ranks 40th out of 61 fund families surveyed.

Lipper

Conservative Allocations

Highest Returns (10-year)

See More Funds