# 7 Moderate Allocation

U.S. News evaluated 244 Moderate Allocation Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

Summary

Vanguard’s oldest mutual fund, founded in 1929, Vanguard Wellington, offers investors exposure to stocks and bonds in all economic sectors. This fund, though prone to volatility, is for the investor seeking growth within a long-term horizon.

As of February 04, 2015, the fund has assets totaling almost $87.72 billion invested in 2,029 different holdings. Its portfolio consists primarily of U.S. stocks (at about 53 percent of the portfolio) and high-quality bonds (at about 33 percent of the portfolio). The remainder is invested in non-U.S. stocks and in cash, and the fund generally maintains a 65-35 percent split between stocks and bonds. Generally, the fund’s equity manager, Ed Bousa, places an emphasis on finding value stocks. Some of the top stock holdings include the healthcare sector, as well as firms such as Wells Fargo & Co. Merck & Co. Comcast Corporation, Chevron and Verizon Communications. Bond manager John Keogh generally keeps the funds’ fixed-income duration higher than the category average, which worked well in 2014 as interest rates remained low, but a longer duration could make the fund a bit more risky when rates finally do start to rise.

Since 2012, the fund has outperformed its category and the Morningstar Moderate Target Risk benchmark. The fund has returned 9.99 percent over the past year and 12.20 percent over the past three years.

The legendary founder and retired CEO of Vanguard, Jack Bogle, ran the fund for 27 years. Wellington has seen its share of ups and downs in its 80 years, none worse than a period in the 1970s when the fund tried a more aggressive approach and lost badly. Since then, the fund has stayed true to its original mantra of a balanced exposure to stocks and bonds. Because it maintains a balance between relatively conservative stocks and bonds, the fund is designed to weather bear markets, but it may not perform as well as more aggressive funds during market rallies. Generally, the fund appeals to investors with a long-term outlook. The fund has returned 11.33 percent over the past five years and 7.95 percent over the past decade.

Investment Strategy

The fund seeks to provide long-term capital appreciation and reasonable current income. Overall, Morningstar says investors should stay put.With few extra risks to remain competitive and an “out of favor” portfolio, the fund is well positioned should market sentiment shift.

Role in Portfolio

Morningstar describes the fund as filling a “core” role saying, “With a focus on valuations and dividends to steady the stock portion, plus a stake in high-quality bonds, the fund capably fills the core-holding niche.”