Why The Vanguard Wellington Fund is the Only Investment You Need For Retirement

Vanguard Wellington Fund

How many times have you heard people say “stop trying to beat the market!”  Have you listened?  How often do you hear the term “asset allocation?”  Do you listen?  What about the word “diversify.”  I’m sure you’ve heard the term “index fund” have you not?  The reality is that all of us are freaked out (and in reality for no reason other than we’re mentally trained to be freaked out) about our retirements.  How much will I need?  How much do I need to put away?  And most importantly, where do I put my money?  But if you’re like me, you might ask yourself a question like this:  “Can’t I just put away my money into something that will earn 5-7% a year and pay me dividends?  Something that won’t be too volatile?  Something I can just count on?”  What’s funny is that we’re made to believe that in order to achieve that we need some amazingly crazy mixed bag of stocks, bonds, FX currency, commodities, foreign investments, real estate, and the list goes on.

The reality and one constant we all strive for in investing has always been (at least for me), consistency.  We want something we can rely on in the short term and even long term.   We know money markets pay nothing.  Individually picking stocks is always a losing proposition.   Index funds are the right way to go but people always seem to get greedy.  So today I’m going to talk about one fund, just one fund that I personally own and will be the ONLY fund I own well into my retirement.  It’s the Wellington Fund from Vanguard (VWELX).  I personally own the admiral shares which you can have once you’ve reached $50,000.  The admiral fund has an expense ratio of .18% to Wellington’s standard fund at .27%.   Let me explain why I’m never getting rid of the fund in three reasons.

It’s incredibly boring, old, and consistent

These words are music to my ears.  I want boring.  I want a fund with a history (try the 1920s) and I certainly want consistent.  Wellington has never had a huge drop year (never more than 20%) and it’s never had a crazy blowout year either.  But one thing it’s done?  Make its investors money.  It’s averaged over a 7% return since it’s inception.    Frankly I don’t care if I have a blowout year.   It means nothing to me to gain 50% if I’m going to lose 70%.  I don’t have that kind of risk tolerance.  Just give me SOMETHING.  And 5-7% is something, something that builds quite well over time.

Covers all diversification in one shot

People worry so much about diversification when they really just ought to go with consistency and “boring.”  But if you want diversity the Wellington Fund has it.  65% stocks and 35% bonds.  A very “safe” split to any financial expert.  10% of its stocks are foreign.  Some might argue that’s too small an allocation but realistically we’ve got some foreign in there period so that’s a good thing.  Plus the TYPES of stocks in the portfolio offset the non foreign risk.  The largest holdings are, you guessed it, blue chip dividend payers.  The cream of the crop.  Companies with incredibly good credit, history of paying dividends, and business models that should stand the test of time.  Does Wellington hold commodities and foreign currency?  No.  Do I care?   No.  Not even remotely.  It’s one less thing to worry about.   There’s plenty in there that protects me from huge risk.

The Yield

If you own the admiral you’re currently getting a very respectable 2.56% annual yield on dividends which are paid quarterly. So if you have $100,000 you get $2,500 a year for basically doing nothing.  I simply reinvest my dividends so my payouts get larger and larger.

And honestly folks, that’s it.  The stock market and the financial industry as a whole is one big con.  99% of it is sales and hype.  It’s people trying to get you to do this and that so they can make a commission and scare you into buying more.  How many times do you have to hear that’s all garbage?  You want consistency?  You want to just sit back and not worry?  Drop your money into the Vanguard Wellington Fund and stop worrying.  Seriously, stop.

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