Vanguard Wellington
Vanguard Wellington Fund (balanced, about 65/35)
Where it stands today
Our calculation, 1926-07 – 2026-09
Growth of $10,000
Where it came from
Walter L. Morgan, a Philadelphia-area accountant born in 1898 and a Princeton graduate (1920), opened his accounting firm Morgan and Company in 1925. By his own account, advising many separate client accounts led him to the idea of pooling them: one large fund could hold a hundred or more securities, be managed by trained professionals, and spare clients the clerical burden of coupons and records. The company was incorporated in Delaware on 27 December 1928 as Industrial and Power Securities Company and began with a little over $100,000 raised from relatives and business associates (Bogle's 75th-birthday tribute, which quotes Morgan; Wikipedia on Morgan). The sources disagree on the operating start: Bogle's introduction says mid-1929; Morgan's own recollection, as quoted, says 1 July 1928; the fund's 1944 history says April 1929; Vanguard's fact sheet gives an inception date of 1 July 1929.
Morgan set three principles from the start: no leverage, an open-end structure, and a balanced rather than all-stock portfolio, so that holding bonds as well as stocks would lower a customer's risk. The fund's three-fold objective, unchanged since 1929, is conservation of capital, reasonable current income and profits without undue risk. The Wellington name was chosen after the Duke of Wellington, whom Morgan admired; the fund took the name Wellington Fund, Inc. on 11 July 1935. The management company, Wellington Management, was incorporated in Philadelphia in 1933. Wellington is widely described as the first balanced mutual fund in the United States; it is one of nine pioneer funds that existed in 1929, all of which still exist.
The fund's start fell just before the 1929 crash, and its record in that episode is the founding story. Its own 1944 history shows managers cutting common stocks from 78.02 % of assets on 30 June 1929 to 33.13 % by 31 July and 41.77 % in early September 1929, with cash at about 38 % and bonds and preferred stocks making up the rest. Morgan later wrote that the fund's asset value showed unusual resistance to decline in the second half of 1929. Assets passed $1 million in 1934, $10 million in 1943, $100 million in 1949 and $1 billion in 1959, peaking near $2 billion in 1965. In the Depression the managers bought discounted bonds and preferred stocks (bonds at 40 to 50 cents on the dollar are mentioned for 1932-33). Over its first decades the cash share varied widely and preferred stocks were a major asset class; since about 1970 neither is significant.
John C. Bogle joined Wellington Management in 1951, hired by Morgan as his successor. In 1965 Morgan gave him responsibility to prepare the firm for the future; in 1966 Bogle merged Wellington Management with Thorndike, Doran, Paine and Lewis of Boston, which ran the aggressive Ivest Fund. Under the new managers the fund 'modernised': the equity ratio rose from 62 % in 1966 to 74 % in 1967 and an all-time high of 77 % in 1971, and the portfolio moved to smaller growth stocks. Bogle later called this a mistake: in 1967-72 the fund lagged balanced-fund peers by almost four points a year (5.6 % vs 9.1 %), and in 1973-78 by about two points a year (2 % vs 4 %). A dividend-payout policy that paid capital gains and paid-in surplus as 'dividends' also ran out of road in 1970-71, and shareholders redeemed heavily; assets fell about 75 % from the 1965 peak to $470 million in 1981.
In January 1974 the Boston managers fired Bogle as chief executive of Wellington Management. He stayed on as chairman and president of the funds, and after eight months persuaded the fund directors to create a new company owned by the funds themselves and run at cost, which he named Vanguard; The Vanguard Group was incorporated in 1974 and opened for business in 1975. Wellington became a charter member of the Vanguard family; Wellington Management stayed on as the fund's investment adviser. In 1978 the board, with help from Princeton professor Burton Malkiel (who joined the fund boards in 1977), restored the old policy: keep stocks between 60 % and 69 % of assets, favour large blue-chip stocks balanced between value and growth, and raise dividend income by shifting to higher-yielding stocks. The 1978 annual report put the then stock/bond ratio at 68 % and said it would stay within 60 % to 70 %. Since then the stock share has rarely strayed far from 65 %. Shares have been sold directly to investors since 1977.
From 1978 the fund's results improved markedly. Bogle's 2003 tribute reports a 1978-2003 average of +13.1 % a year against +10.5 % for the average balanced fund. Equity managers over the years were Vincent Bajakian (from 1973 until his death in 1995), Ernst von Metzsch (to 2002) and Edward Bousa; the 2026 fact sheet names Loren Moran (since 2017) and Daniel Pozen (since 2019) of Wellington Management as portfolio managers. The current policy is 60 % to 70 % in dividend-paying value-oriented stocks of medium and large companies and the rest mainly in investment-grade corporate bonds, with some Treasuries, agencies and mortgage-backed securities; the benchmark is 65 % S&P 500 and 35 % Bloomberg US Credit A or better (previously a long AA-or-better credit index until February 2000).
What is in it
| Common stocks (target range 60 % to 70 %; policy centre about 65 %) | 65% | Actual 30 Sept 2026: 66.4 % stocks |
| Bonds, mainly investment-grade corporate, plus Treasuries, agencies, mortgage-backed (range 30 % to 40 %) | 35% | Actual 30 Sept 2026: 32.7 % bonds, 0.9 % short-term reserves; inside the bond part about 63 percent are corporate issuers (industrial, finance, utilities), 26 percent Treasury and agency, about 5 percent mortgage-backed, asset-backed and foreign |
How we model it
| US large companies (S&P 500) | 65% |
| Corporate bonds | 35% |
For a euro investor
How to build it with European funds
| Part | Share | Example funds (ISIN) |
|---|---|---|
| US large companies (S&P 500) | 65% | iShares Core S&P 500 UCITS ETF USD (Acc) IE00B5BMR087Vanguard S&P 500 UCITS ETF (USD) Distributing IE00B3XXRP09 |
| Corporate bonds | 35% | iShares USD Corporate Bond UCITS ETF (Dist) IE0032895942 |
The idea
Morgan's idea was balance: a single diversified pool that cuts risk by holding bonds as well as stocks, preserves capital in bad markets and pays a steady income, rather than chasing the highest return. Bogle's restored policy of 1978 kept the stock share within a fixed band and emphasised dividend income and quality.
How people buy it
The fund itself: Vanguard Wellington Fund (Investor Shares VWELX, Admiral Shares VWENX), actively managed by Wellington Management with Vanguard as administrator. There is no index version; a rough do-it-yourself substitute is a 65/35 mix of a dividend or value stock fund and an investment-grade corporate bond fund. Vanguard's Wellesley Income Fund is a sister fund with a lower stock share (not modelled here).
Rebalancing as published
No fixed calendar rule. Management keeps stocks within a 60 % to 70 % band (since the 1978 policy), so the allocation is a range managed by the adviser, not a periodic rebalance back to exact weights.
Variants
- Value-tilt version: 40% us_large plus 25% us_large_value for stocks, 35% bond_corp; this fits the decades when Bogle describes a value and dividend emphasis (1978-2003) better than the present fund, whose stock part is now heavy in large technology companies (fact sheet, 2026).
- Pre-1978 equity-heavy regime: 72-77 % stocks (1967-1971), per Bogle.
- Wellesley Income (sister fund, about 40 % stocks / 60 % bonds) is the lower-risk Vanguard/Wellington balanced alternative; not modelled.
Criticism
- Bogle himself documented the 1967-1978 failure: the fund abandoned its conservative style for growth stocks and lagged peers badly; he took responsibility for the 1966 merger and the 'modernisation'.
- Over the 1960s the dividend policy of paying out capital gains and paid-in surplus as 'dividends' eroded assets; competitors complained, and the NASD banned lumping such distributions together in 1950 (Bogle).
- It has lagged the S&P 500 over the last decade because growth stocks led the market, and it costs more than an index fund (Inquirer, 2019; the 2026 fact sheet shows 9.84 % a year over ten years against 10.54 % for its benchmark).
- Active management: expense ratio 0.24 % and turnover 62.5 %, which is high for a balanced fund and well above a pure index mix.
- In 2026 the largest holdings are mega-cap technology names (NVIDIA, Microsoft, Apple), with information technology 39.4 % of stocks, a very different profile from the dividend-value history.
Through the eras
| Era | Dates | Total | Per year | Worst drop | S&P 500 |
|---|---|---|---|---|---|
| Roaring Twenties boom | 1926-07 – 1929-08 | +95.1 % | +23.5 % | −3.7 % | +153.7 % |
| Wall Street crash and Great Contraction | 1929-09 – 1932-07 | −59.0 % | −26.3 % | −65.1 % | −78.2 % |
| New Deal recovery | 1932-08 – 1937-02 | +159.0 % | +23.1 % | −18.6 % | +268.7 % |
| Recession within the Depression | 1937-03 – 1938-03 | −32.9 % | −30.8 % | −32.9 % | −49.5 % |
| Rearmament and World War II | 1938-04 – 1945-09 | +125.4 % | +11.4 % | −18.4 % | +205.8 % |
| Postwar expansion | 1945-10 – 1965-12 | +576.1 % | +9.9 % | −16.2 % | +1212.9 % |
| Golden age of the 1950s | 1950-01 – 1959-12 | +228.2 % | +12.6 % | −9.4 % | +438.8 % |
| Go-go years and nifty-fifty | 1966-01 – 1968-12 | +24.1 % | +7.5 % | −10.6 % | +34.0 % |
| The Great Inflation (stagflation) | 1969-01 – 1982-07 | +99.2 % | +5.2 % | −31.3 % | +84.6 % |
| 1973-74 oil shock and bear market | 1973-01 – 1974-12 | −26.1 % | −14.1 % | −31.3 % | −41.7 % |
| Second oil shock and the Volcker disinflation | 1979-01 – 1982-08 | +48.3 % | +11.3 % | −10.7 % | +59.2 % |
| Great bull market in stocks and bonds | 1982-08 – 1999-12 | +1344.0 % | +16.6 % | −21.1 % | +2060.4 % |
| Black Monday | 1987-08 – 1987-12 | −14.9 % | — | −21.1 % | −21.8 % |
| Savings-and-loan crisis and 1990 recession | 1990-07 – 1991-03 | +8.5 % | — | −10.3 % | +7.4 % |
| 1994 bond market massacre | 1994-02 – 1994-12 | −4.3 % | — | −7.4 % | −3.2 % |
| Asian and Russian financial crises | 1997-07 – 1998-10 | +20.1 % | +14.7 % | −11.4 % | +22.4 % |
| Dot-com bubble and crash | 2000-03 – 2002-10 | −16.5 % | −6.6 % | −24.0 % | −37.2 % |
| Recovery and housing boom | 2002-11 – 2007-09 | +72.2 % | +11.7 % | −4.0 % | +97.0 % |
| Global financial crisis | 2007-10 – 2009-03 | −30.8 % | −21.8 % | −35.7 % | −44.7 % |
| The decade after the crisis | 2009-04 – 2019-12 | +279.6 % | +13.2 % | −10.5 % | +411.2 % |
| Fourth-quarter 2018 sell-off | 2018-09 – 2018-12 | −10.0 % | — | −10.1 % | −14.4 % |
| Covid crash and stimulus boom | 2020-02 – 2021-12 | +36.1 % | +17.4 % | −14.9 % | +53.6 % |
| Inflation shock and rate hikes | 2022-01 – 2022-12 | −19.2 % | −19.2 % | −23.6 % | −19.9 % |
Calendar years
Any N-year period
| Any N-year period | Worst | 10 % worse than | Median | 10 % better than | Best |
|---|---|---|---|---|---|
| 1 y (1192) | −45.7 % | −7.1 % | +11.2 % | +25.9 % | +87.3 % |
| 3 y (1168) | −27.5 % | −0.8 % | +9.3 % | +17.6 % | +30.2 % |
| 5 y (1144) | −10.2 % | +2.6 % | +9.2 % | +15.2 % | +24.7 % |
| 10 y (1084) | −0.9 % | +4.6 % | +9.0 % | +14.2 % | +17.0 % |
| 15 y (1024) | +1.8 % | +5.8 % | +9.3 % | +13.5 % | +16.7 % |
| 20 y (964) | +3.1 % | +6.5 % | +9.1 % | +12.8 % | +15.8 % |
| 30 y (844) | +6.4 % | +8.0 % | +9.4 % | +11.4 % | +12.7 % |
How it behaved in history
- 1929-1933 (crash and Depression). The fund reduced stocks and held large cash before the crash, then rebuilt cash again in 1931 (28 % of assets at end-1931, from 3 % at end-1930) and bought discounted bonds in 1932-33. Assets still grew: $195,000 after the first year and $1 million in 1934. johncbogle.com
- 1934-1938. 1934: outperformed the market by about 20 % thanks to discounted bonds and preferred stocks. 1935-36: +73.7 % including dividends vs +79 % for the Dow Jones composite. 1937: fell about as much as the market despite stocks under 50 % for seven months. 1938: only +18 % vs +27.6 % for the market because cash was too high. johncbogle.com
- 1945-1964. Post-war bull market; balanced funds lagged stock funds but investors kept coming; assets reached $1 billion in 1959 and $2 billion in 1965. johncbogle.com
- 1965-1972 (go-go years). Equity ratio 62 % in 1966, 74 % in 1967, 77 % in 1971; growth stocks replaced blue chips; relative performance fell. johncbogle.com
- 1973-1974 (bear market). Stocks fell about 50 % from the January 1973 high to the October 1974 low; the fund's assets fell as shareholders left. The Inquirer notes big losses in 1974. johncbogle.com
- 1975-1981. Decade of 1970s stocks averaged only 5.8 % a year; long bond yields peaked near 16 % in 1981. Fund assets reached their trough of $470 million in the third quarter of 1981 / mid-1982 (the speech gives both). johncbogle.com
- 1978-2003 (restored policy). Stock share held in 60-69 % band with value/dividend emphasis; beat the average balanced fund in 18 of 25 years, equalled in two, trailed in five; positive return since the 2000 bull peak up to Dec 2003 (+32 %). johncbogle.com
- 2000-2002. Inquirer: the fund gave downside protection in the 2000-2002 bear market. Annual numbers for 2000-2002 differ among secondary sources and were not verified. www.inquirer.com
- 2008. -25.59 % for the fiscal year ended Nov 2008 against a -28.00 % composite benchmark. www.sec.gov
- 2022. -14.32 % for the year vs -16.64 % for its benchmark. workplace.vanguard.com
- Fiscal 2024 (year to 30 November 2024). The fund returned 21.47 percent against 24.15 percent for its composite benchmark; the report attributes the gap to the stock part trailing the S&P 500 by more than 4 points, while the bond part beat its credit index. www.sec.gov
Published results (by others)
- Wellington returned about 8.4 % a year from 1929 to 2003 vs 8.0 % for the average balanced fund (nominal, before inflation and taxes); $10,000 at inception would have become $3.83 million vs $3.02 million (1929-2003): 8.4 % a year johncbogle.com
- From 1978 to 2003 Wellington averaged +13.1 % a year vs +10.5 % for the average balanced fund (1978-2003): +13.1 % vs +10.5 % a year johncbogle.com
- Balanced-fund peers beat Wellington in 1963-66 and again in 1967-72 and 1973-78 (1963-1978): 1963-66: 5.1 % vs 9.3 %; 1967-72: 5.6 % vs 9.1 %; 1973-78: 2 % vs 4 % a year johncbogle.com
- Stock share was cut sharply in summer 1929 (1929): Common stocks 78.02 % of assets on 30 June 1929, 33.13 % on 31 July, 41.77 % on 3 Sept; cash 39.31 % on 31 July johncbogle.com
- Assets fell about 75 % from the 1965 peak (about $2 billion) to a trough of $470 million in 1981 (1965-1981): -75 % in assets (including redemptions) johncbogle.com
- Fiscal year ended 30 November 2008: fund -25.59 % vs its composite benchmark -28.00 % (Dec 2007-Nov 2008): -25.59 % vs -28.00 % www.sec.gov
- Average return since 1930 about 8.24 % a year (Vanguard spokesperson); drawdown of roughly 32.5 % in 2008-09, recovered within two years (1930-2019): 8.24 % a year; about -32.5 % peak-to-trough 2008-09 www.inquirer.com
- Calendar-year returns 2016-2025 (fund vs benchmark) (2016-2025): 11.01, 14.72, -3.42, 22.51, 10.60, 19.01, -14.32, 14.33, 14.76, 16.48 % vs 9.22, 15.76, -3.09, 24.40, 15.80, 17.34, -16.64, 19.36, 16.35, 14.31 % workplace.vanguard.com
- Average annual returns to 30 Sept 2026 (to 2026-09-30): Ten years 9.84 % (benchmark 10.54 %), five years 8.22 % (8.71 %) workplace.vanguard.com
- Portfolio composition of the fund as a share of net assets (31 May 2026): common stocks 65.3 percent, corporate bonds 21.3, US government and agency 9.2, other bonds about 2.7, other assets net 1.5; fund net assets 124.7 billion dollars across share classes www.sec.gov
- Fiscal-year return versus composite benchmark (year to 30 November 2024): 21.47 percent (Investor Shares) versus 24.15 percent www.sec.gov
What we could not verify
- Operating start date: 1 July 1928 (Morgan's recollection, quoted by Bogle), April 1929 (1944 company history), mid-1929 (Bogle's introduction), 1 July 1929 (Vanguard fact sheet).
- The Wikipedia page on Wellington Fund is very short; the 'first balanced mutual fund in the US' claim comes from Wikipedia and Vanguard/Bogle material, not an independent academic source.
- Annual returns of the fund for 2000-2002 and for calendar 2008 differ among secondary sources and were not verified against a Vanguard primary document; I cite the SEC annual report for the fiscal year to Nov 2008 instead.
- Who manages the bond portion: the fact sheet names two Wellington Management portfolio managers (Loren Moran since 2017, Daniel Pozen since 2019) without saying which part each runs, and the shareholder report names Wellington Management as the advisor.
- Date Bogle became chairman of the fund: Bogle's tribute says 1972 (Morgan chaired for 42 years before handing over); a search snippet of Wikipedia says 1970. The 1966 merger date is taken from Bogle ('as 1966 began').
- The 1929-2003 return of 8.4 % comes from Bogle's chart and counts nominal dollars, before taxes; it is the fund's own history, not an index.
- The prospectus was not opened; the 60-70 and 30-40 percent ranges are as printed on the fact sheet, and the bond credit-quality and duration statistics were not found in the documents read.
Sources
- johncbogle.com
https://johncbogle.com/speeches/JCB_WMC1203.pdf - workplace.vanguard.com
https://workplace.vanguard.com/assets/corp/fund_communications/pdf_publish/us-products/fact-sheet/F0021.pdf - www.inquirer.com
https://www.inquirer.com/business/vanguard-oldest-fund-wellington-average-annual-return-20190707.html - en.wikipedia.org
https://en.wikipedia.org/wiki/Walter_L._Morgan - en.wikipedia.org
https://en.wikipedia.org/wiki/Wellington_Fund - www.fundinguniverse.com
https://www.fundinguniverse.com/company-histories/the-vanguard-group-inc-history/ - www.sec.gov
https://www.sec.gov/Archives/edgar/data/0000105563/000093247109000085/wellingtonfinal.htm - www.sec.gov
https://www.sec.gov/Archives/edgar/data/0000105563/000110465926089047/tm2617999d1_ncsrs.htm - www.sec.gov
https://www.sec.gov/Archives/edgar/data/105563/000110465925007837/tm252266d1_ncsr.htm
Calculated on historical data. Past results do not predict the future. Models before the 1990s use stand-ins for classes that had no index yet; fees, taxes and fund costs are not included. This is mathematics, not an investment recommendation.