Here's a question recently left by a reader:
I have money in the Vanguard Wellington fund. Its performance the last 1, 5 and 10 years is:
- 1 yr - 4.26
- 5 yr - 12.23
- 10 yr - 7.53
The expense ratio is 0.27%
The Vanguard Balanced Index fund performance over the same time period:
- 1 yr - 0.49
- 5 yr - 9.45
- 10 yr - 5.37
The expense ratio is 0.19%
Now these funds are not exactly the same, as Wellington's stated goal is a stock portfolio of 60-70% all in mid and large cap US stocks (my prospectus says the stock allocation can vary between 45-65). The bond portfolio is mostly in corporates with some exposure to US treasuries.
The balanced index fund's goal is 60% in the Vanguard Total Stock Market index (so you get some exposure to small caps) and 40% in the Vanguard Total Bond index.
My question is whether it makes sense to move from Wellington to Balanced Index. Do you think they are comparable funds? And if so, the track record suggests Wellington has better performance. Or do you think they are not comparable because of the small cap component in the index fund?
My goal in choosing Wellington many years ago was a 60/40 asset allocation. It looked to have better performance than the comparable index funds offered by Vanguard and with such a low expense ratio I thought it would be a cheap way to get some professional management and...............beat the market.
He and I discussed the issue back and forth a bit but didn't really come to a resolution. What's your take on the issue?