Investing: The 7 best Vanguard funds
BY NELLIE S. HUANG Kiplinger News Service
Monday, February 11, 2013
2/11/13 at 3:06 AM
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Vanguard, the nation’s biggest fund family, is known for low costs and index funds. But it also offers 65 actively managed mutual funds, many of which are run by Wellington Management, a separate firm with long-standing ties to Vanguard.
-- Dividend Growth (symbol VDIGX). Wellington’s Donald Kilbride steers this fund, a member of the Kiplinger 25, toward companies with strong balance sheets, predictable and sustainable cash flow, and above-average return on equity (a measure of profitability).
-- Equity Income (VEIPX). The fund outpaced the average large-company value fund in eight of the past ten calendar years. Wellington’s W. Michael Reckmeyer runs two-thirds of the portfolio, and three of Vanguard’s own stock pickers manage the rest. All of the managers hunt for undervalued securities with dividend yields higher than that of Standard & Poor’s 500-stock index.
-- GNMA (VFIIX). Wellington’s Michael Garrett zeros in on mortgage securities guaranteed by the Government National Mortgage Association with a low risk of prepayment. In nine of the past ten calendar years, Vanguard GNMA outpaced 60 percent or more of its competitors in its category (intermediate-maturity government bond funds).
-- Intermediate-Term Investment-Grade (VFICX). This taxable bond fund puts about 75 percent of its assets in investment-grade corporate debt (bonds rated at least triple-B) and the rest in government bonds, mortgage-backed and asset-backed securities, municipal bonds, and cash. Manager Greg Nassour leans toward the lower end of investment-grade; at last word, his fund had two-thirds of its assets in single-A and triple-B bonds. In every calendar year over the past decade except 2008, Intermediate-Term beat the average medium-maturity bond fund.
-- Selected Value (VASVX). This midsize-company value fund, a member of the Kiplinger 25, is run by two firms. Barrow, Hanley, Mewhinney & Strauss, in Dallas, manages 75 percent of the fund; Donald Smith & Co., of New York City, controls the rest. Both seek high-quality midsize companies that trade at bargain prices.
-- Wellesley Income (VWINX). Wellesley places about 35 percent of its assets in large-company value stocks with above-average dividend yields, and the rest mostly in investment-grade corporate bonds.
-- Wellington (VWELX). Wellington, the oldest balanced fund in the country, has a history that spans more than eight decades, and the most recent one has been pretty good. Not surprisingly, the fund is run by two Wellington Management partners. John Keogh mans the bond side, which accounts for about 35 percent of the portfolio’s $64 billion in assets, and Edward Bousa controls the stock side, which accounts for the rest. Bousa tilts toward stocks of large companies that pay above-average dividend yields.
Nellie S. Huang is a senior associate editor at Kiplinger’s Personal Finance magazine. To send her a question or comment, go to tulsaworld.com/moneypower.