Vanguard Wellesley Income Fund (VWINX)

Well known for its index funds, Vanguard also has several actively managed flagship funds such as Vanguard Wellesley Income, Vanguard Wellington, Vanguard Windsor, Vanguard STAR, PRIMCECAP Core etc. These funds also have impressive performance for the past decade.  This next article will discuss in details about Vanguard Wellesley Income fund. This fund is part of balanced fund with conservative allocation asset. This means this fund will invest in bonds and stocks. Most of the asset will be diversified into bonds and some are in stocks.

This type of fund will fit long term investor and short term investor with lower appetite to investment risk. This fund may provide instant asset diversification into fixed incomes and equities market. During the ups and downs market, this Vanguard fund has performed better. It is also has the highest rating from Morningstar. Details about this fund can be found below.

Top Balanced Fund

As one of the oldest mutual fund, this Vanguard Wellesley Income fund seeks to provide long-term income growth and a high and sustainable level of current income, along with moderate long-term capital appreciation. The fund invests most of its asset (60-65%) in investment-grade corporate, U.S. Treasury, and government agency bonds, and mortgage-backed securities (MBS). The rest of its assets (35% to 45%) are invested in companies’ common stocks that have a history of above-average dividends or expectations of increasing dividends.

Vanguard Wellesley Income 

VWINX Fund Details

• Fund Inception Date: July 1970
• Ticker Symbol: VWINX
• CUSIP: 921938106
• Beta (3yr): 0.62
• Rank in category: 11
• Fund Class: Investor Class
• Category: Conservative Allocation
• Dividend Yield: 3.56%
• Capital Gains: 0.13% (last distributed in March 2011)
• Number of Years Up: 34 years
• Number of Years Down: 6 years

Since June 2008, John C. Keogh has been the manager of this actively managed Vanguard fund. He is also served as the senior vice president and partner of Wellington Management Company. The minimum balance to invest in this fund is $3,000 for either brokerage account or IRA account. The minimum subsequent investment for both accounts is $100. As part of no load fund, this VWINX fund doesn’t have any 12b1 fee and any sales load (i.e. no front end sales load and no deferred sales load). The fund total net asset is $21.74 billion. This fund currently has 3.53% dividend yield. The last dividend distributed was 0.13% in March 2011.  The annual turnover rate is 30%.

The average expense ratio in the category is 0.86%, while the expense ratio of this VWINX is 0.28%. It is about 67% lower than the average expense ratio of funds with similar holdings. Morningstar has rated 5-stars rating for this fund. As explained, this is the highest rating for any mutual fund. This fund also has outstanding performance with 34 positive years and only 6 negative years. The best achievement of this VWINX was in 1997 with 20.19% and the worst was in 2008 with -9.84%. The fund has returned 11.71% over the past one year and 7.03% over the past three years.

Vanguard Wellesley Income Inv (Ticker: VWINX)

The fund can be purchased from 87 brokerages include JP Mogan, T Rowe Price, Schwab Retail, Scottrade TF, Firstrade, EP Fee Small, E Trade Financial, etc. The best way to invest in Vangaurd funds I by opening Vanguard Brokerage Service (VBS) account. You can also invest in other index funds or exchange traded funds (ETF). Another class of this Vanguard fund is VWIAX (Admin Class). This VWIAX only have 0.21% annual expense ratio. You may choose this VWIAX fund if you are part of institutional investor and have a 401k or IRA account.

As of May 2011, the asset allocation of this fund is 38.48% in stocks, 58.14% in bonds and 3.38% in short-term reserves. The top 6 bond sectors are industrial (34%), finance (32%) government mortgage backed (7%), utilities (7%), treasury & agency (5%), and foreign (4.3%). The month-end largest equity holdings of this Vanguard fund are Chevron Corporation, Johnson & Johnson, Pfizer Inc, Home Depot Inc, Merck & Co Inc, Marsh & McLennan Cos Inc, AT&T Inc, Royal Dutch Shell PLC, General Electric Co and Philip Morris International Inc.  These holdings represent 13.6% of the total net assets. 

Fund characteristics

A. Fixed income characteristics

• Number of bonds: 528
• Yield to maturity: 3.4%
• Average duration: 5.7 years
• Average maturity: 9.3 years

B. Equity characteristics

• Number of stocks: 57
• Price / earnings (PE) ratio: 14.1x
• Foreign holdings: 6.3%

As part of balanced fund, this Vanguard Wellesley Income fund is subject to stock and bond market risks such as interest rate risk, income risk, credit risk, call risk, stock market risk, investment style risk, and manager risk.

Disclosure: No Position

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