(PUB) Investing 2016

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7 Morningstar FundInvestor February 2016
Data through January 31, 2016 FINRA members: For internal or institutional use only.
Vanguard Wellesley® Income Inv Ticker
VWINX
Yield
3.0%
Total Assets
$40,928 mil
Mstar Category
Conservative Allocation
Benchmark 1: Morningstar Mod Con Tgt Risk TR USD
Benchmark 2: Morningstar Mod Tgt Risk TR USD
Morningstar Analyst Rating 01-06-16
Œ
Morningstar Pillars
Process ∞ Positive
Performance ∞ Positive
People ∞ Positive
Parent ∞ Positive
Price ∞ Positive
Morningstar Analyst Rating
Morningstar evaluates mutual funds based on five key pillars, which its
analysts believe lead to funds that are more likely to outperform over the
long term on a risk-adjusted basis.
Analyst Rating Spectrum
Œ „ ´ ‰ Á
Pillar Spectrum
∞ Positive § Negative ¶ Neutral
10.0
12.0
14.0
16.0
18.0
20.0
Historical Profile
Return
Risk
Rating
High
Below Avg
QQQQQ
Highest
1 1 1 1 1 1 1 1 Investment Style
Equity
Growth of $10,000
Investment Values of
Fund
Investment Values of
Benchmark 1
& * & ) * & * * & & & Performance Quartile
(within Category)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 01-16 History
21.81 21.82 18.40 20.37 21.70 22.93 24.11 24.85 25.57 24.52 24.47 NAV
11.28 5.61 -9.84 16.02 10.65 9.63 10.06 9.19 8.07 1.28 -0.20 Total Return %
1.56 -2.40 3.21 0.71 0.99 7.03 0.39 0.36 3.77 2.31 1.49 +/- Bmark 1
-1.67 -3.03 12.35 -5.75 -1.69 9.04 -1.99 -5.12 3.18 3.07 2.97 +/- Bmark 2
4.42 4.38 4.60 4.93 4.00 3.84 3.39 3.18 3.29 3.02 0.00 Income Return %
6.86 1.23 -14.44 11.10 6.65 5.79 6.67 6.00 4.78 -1.74 -0.20 Capital Return %
10 34 10 79 40 2 44 32 6 2 2 Total Rtn % Rank Cat
0.92 0.94 0.99 0.89 0.80 0.82 0.77 0.76 0.81 0.76 0.00 Income $
0.67 0.26 0.32 0.00 0.00 0.00 0.34 0.68 0.45 0.61 0.00 Capital Gains $
0.25 0.25 0.25 0.31 0.28 0.25 0.25 0.25 0.25 0.23 . Expense Ratio %
4.21 4.21 4.60 5.00 3.99 3.76 3.39 3.03 3.19 2.96 . Income Ratio %
19 21 27 53 30 48 33 36 109 59 . Turnover Rate %
7,743 7,941 6,876 8,478 8,323 10,279 11,647 11,363 12,324 11,941 12,004 Net Assets $mil
Performance 01-31-16
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total
2011 2.68 2.34 -1.68 6.11 9.63
2012 3.66 1.48 3.88 0.72 10.06
2013 3.99 -0.53 1.76 3.73 9.19
2014 2.63 3.21 -0.30 2.33 8.07
2015 1.27 -1.68 -0.84 2.58 1.28
Trailing Total
Return%
+/- Bmark
1
+/- Bmark
2
%Rank
Cat
Growth of
$10,000
3 Mo -0.99 2.06 3.92 2 9,901
6 Mo 0.27 3.93 6.50 1 10,027
1 Yr 0.52 3.09 4.71 1 10,052
3 Yr Avg 5.54 2.80 2.07 2 11,755
5 Yr Avg 7.41 3.15 2.50 2 14,296
10 Yr Avg 6.85 2.11 1.85 1 19,405
15 Yr Avg 6.79 1.70 1.52 2 26,779
Tax Analysis Tax Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat
3 Yr (estimated) 3.62 4 1.81 79
5 Yr (estimated) 5.79 2 1.51 78
10 Yr (estimated) 5.29 1 1.46 79
Potential Capital Gain Exposure: 10% of assets
Rating and Risk
Time
Period
Load-Adj
Return %
Morningstar
Rtn vs Cat
Morningstar
Risk vs Cat
Morningstar
Risk-Adj Rating
1 Yr 0.52
3 Yr 5.54 High Avg QQQQQ
5 Yr 7.41 High -Avg QQQQQ
10 Yr 6.85 High -Avg QQQQQ
Incept 9.83
Other Measures Standard Index Best Fit Index
Alpha 3.3 3.0
Beta 0.60 0.90
R-Squared 76 83
Standard Deviation 4.58
Mean 5.54
Sharpe Ratio 1.19
Portfolio Analysis 09-30-15
Total Stocks: 58
Share change since 06-30-15 Sector YTD Ret % % Assets
TMicrosoft Corp Technology -0.70 1.64
TWells Fargo & Co Finan Svcs -7.60 1.61
TJPMorgan Chase & Co Finan Svcs -9.22 1.36
TMerck & Co Inc Hlth Care -4.07 1.31
TJohnson & Johnson Hlth Care 1.67 1.27
TExxon Mobil Corporation Energy -0.13 1.19
TGeneral Electric Co Industrl -6.58 1.13
YVerizon Communications In Comm Svcs 9.34 1.13
TCisco Systems Inc Technology -11.62 1.07
Total Fixed Income: 1285
Date of
Maturity Amount 000
Value
$000
%
Assets
US Treasury Note 1.75% 09-30-19 665,000 679,131 1.72
US Treasury Note 1.375% 09-30-18 616,100 624,183 1.59
US Treasury Note 1% 09-15-17 553,000 556,976 1.41
US Treasury Note 2% 02-15-25 450,700 449,082 1.14
US Treasury Bond 2.875% 05-15-43 416,960 415,851 1.06
US Treasury Bond 3.375% 05-15-44 376,000 412,893 1.05
Fed Natl Mort Assc 4.5% 10-15-43 282,950 -306,735 0.78
US Treasury Note 0.625% 07-31-17 298,000 298,140 0.76
Equity Style
Style: Value
Size: Large-Cap
Fixed-Income Style
Duration: Moderate
Quality: Medium
Value Measures Rel Category
Price/Earnings 16.89 0.98
Price/Book 2.09 1.05
Price/Sales 1.67 1.15
Price/Cash Flow 8.57 1.03
Dividend Yield % 3.74 1.23
Growth Measures % Rel Category
Long-Term Erngs 8.19 0.86
Book Value 5.14 1.54
Sales 1.88 -0.96
Cash Flow 0.65 -1.16
Historical Erngs 1.54 -0.42
Market Cap %
Giant 69.0 Small 0.0
Large 28.8 Micro 0.0
Mid 2.2 Avg $mil: 89,561
Composition - Net
Cash 2.0
Stocks 36.1
Bonds 61.4
Other 0.5
Foreign 16.5
(% of Stock)
Avg Eff Duration1 6.4 Yrs
Avg Eff Maturity 9.3 Yrs
Avg Credit Quality A
Avg Wtd Coupon 3.61%
1 figure provided by fund as of 09-30-15
Sector
Weightings
% of
Stocks
Rel
Bmark 1
h Cyclical 21.12 0.56
r BasicMat 2.78 0.64
t CnsmrCyc 3.22 0.28
y FinanSvcs 15.12 0.88
u Real Est 0.00 0.00
j Sensitive 41.52 1.13
i CommSrvs 4.32 1.10
o Energy 11.26 1.75
p Industrl 11.35 0.95
a Technlgy 14.59 1.01
k Defensive 37.35 1.44
s CnsmrDef 13.54 1.38
d Hlthcare 14.48 1.22
f Utilities 9.33 2.24
Morningstar's Take by Alec Lucas 01-06-16
Vanguard Wellesley’s outperformance in 2015
epitomizes why it receives a Morningstar Analyst Rating
of Gold. In a rough market, the fund's 1.3% gain doubled
the return of its customized benchmark (weighted 65%
in the Barclays U.S. Credit A or Better Index, 35% in the
FTSE High Dividend Yield Index) and placed in the
conservative-allocation Morningstar Category's top
percentile. The fund's longer-term record is also superior.
Since the shared tenure of fixed-income manager John
Keogh and equity manager Michael Reckmeyer began in
July 2008, the fund’s 7% annualized gain through
December 2015 places second out of about 140 peers,
while its Morningstar Risk-Adjusted Return places first.
A conservative process has helped here. Reckmeyer
invests the roughly 35% equity sleeve in above-average
dividend-payers, likeCaterpillarCAT,whichhetriestobuy
whenthey’reoutof favor.Meanwhile,Keoghtiltsthe65%
bond portion toward corporates rated in the A range,
which offer a better payout than more highly rated
securities but still have little default risk. He eschews big
interest-rate bets, but the fund usually sports a longer-
than-average duration because he keeps interest-rate
sensitivity close to the index's. In late 2015, that index
had a 6.6-year duration versus 6.3 years for the fund. In
contrast, the category median was 4.4 years.
The Fed's late 2015 interest-rate increase of 25 basis
points, even if the first of many, shouldn't impair the fund.
Granted, it's not immune to interest-rate spikes. When
the 10-year Treasury yield shot up about 130 basis points
from mid- to late 2013, the fund's 2.7% loss modestly
trailed the category norm. Over multiyear periods,
however, the fund can still come out ahead. Between
June 2004 and May 2007, the Fed raised rates by 25
basis points on 17 separate occasions, hiking the
overnight lending rate from 1.00% to 5.25%. During that
three-year stretch, the fund's 9% annualized gain beat the
category norm by nearly 2 percentage points.
Although it is more rate-sensitive than most peers,
the fund's management and proven strategy inspire
confidence for the long term.
Address: Vanguard Wellesley Income Fund Minimum Purchase: $3000 Add: $1 IRA: —
Valley Forge PA 19482 Min Auto Inv Plan: $3000 Add: —
800-662-7447 Sales Fees: No-load
Web Address: Management Fee: 0.21%
Inception: 07-01-70 Actual Fees: Mgt:0.21% Dist:—
Advisor: Wellington Management Company LLP Expense Projections: 3Yr:$74 5Yr:$130 10Yr:$293
Subadvisor: None Income Distribution: Quarterly
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