Did you know that Vanguard has one of the oldest mutual funds still in existence? It’s called the Vanguard Wellington Fund Investor Shares (VWELX), and it debuted all the way back in 1929.
Since then, it has survived nearly every major financial shock you can think of, including the Great Depression, the inflationary period of the 1970s and 1980s, the dot-com crash, the 2008 financial crisis, and the COVID-19 pandemic.
Despite all that, it has delivered a very competitive 8.35% annualized total return since inception, with dividends reinvested and after fees. Today, you can access the fund at a 0.24% expense ratio, though it comes with a $3,000 minimum investment. It also pays a respectable 2.22% 30-day SEC yield, making it a popular choice for balanced, income-oriented investors.
That said, much of Wellington’s “secret sauce” comes down to a fairly straightforward mix of stocks and bonds. If you break it apart, you can replicate something very similar using low-cost ETFs. That’s what today’s article will try and do.
The idea is to decompose Wellington into its stock and bond components, find suitable ETF substitutes, and see how a simple two-ETF portfolio stacks up using backtest data from testfolio.io.
Vanguard Wellington’s stock allocation
Vanguard Wellington allocates roughly two-thirds, or about 67%, of its portfolio to equities. According to Vanguard, the fund focuses on high-quality large- and mid-cap companies, often in out-of-favor industries. The strategy emphasizes above-average dividend yields, reasonable valuations, and improving fundamentals.
Right now, that translates into a relatively concentrated portfolio of 79 stocks, with an average earnings growth rate of 25.9%, a price-to-earnings ratio of 26.2 times, and a return on equity of just over 30%.
If you want an ETF that captures a similar idea, I think the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) is a strong candidate. It tracks the S&P U.S. Dividend Growers Index, which requires companies to have at least 10 consecutive years of dividend growth. It also excludes real estate investment trusts and caps individual holdings at 4% during each rebalance.
The result is a broadly diversified portfolio of 300-plus companies with strong profitability and consistent dividend growth. While it is less concentrated than Wellington, it still tilts toward quality. Currently, it offers a 1.66% 30-day SEC yield and trades at a similar valuation range, though with a more rules-based approach.
Vanguard Wellington’s bond allocation
On the fixed income side, Wellington allocates the remaining one-third of its portfolio to bonds, targeting an intermediate duration. While it does hold a mix of Treasuries, agency debt, and mortgage-backed securities, a large portion is invested in investment-grade corporate bonds rated BBB or higher.
To replicate this, an aggregate bond ETF may be too broad. A more targeted option is the Vanguard Total Corporate Bond ETF (NASDAQ: VTC), which focuses specifically on investment-grade corporate debt.
This ETF holds nearly 5,000 bonds with an average duration of around 6.6 years, placing it firmly in the intermediate range. Most of the portfolio is rated A or BBB, which aligns closely with Wellington’s credit profile. In exchange for taking on that credit risk, investors are currently compensated with a 5.08% 30-day SEC yield.
Putting the portfolio together
To mirror Wellington’s structure, you can combine these two ETFs in a 67% allocation to VIG and 33% to VTC, rebalancing once a year. This creates a simple, rules-based version of Wellington’s balanced approach.
Using testfolio.io backtesting data over an 8.44-year period from November 2017 to April 2026, this ETF combination delivered a 9.37% annualized return. Over the same period, Wellington slightly outperformed at 9.45%.
Risk metrics were also very close. The ETF portfolio posted annualized volatility of 12.36%, while Wellington came in slightly lower at 12.28%. That translated into a marginally lower risk adjusted return, with a Sharpe ratio of 0.58 versus 0.59 for Wellington.
So yes, Wellington still edged out the ETF version. In some cases, a skilled manager can add incremental value over time through security selection and portfolio adjustments. That said, the ETF version comes with lower costs and more flexibility.
Wellington charges 0.24%, while VIG and VTC cost just 0.04% and 0.03%, respectively. The weighted average fee for the ETF portfolio ends up significantly lower, and there is no minimum investment requirement.
If you can access Wellington and are comfortable with active management, it remains a solid option. But if you prefer a low-cost, transparent, and flexible alternative, this two-ETF combination gets you very close using simple building blocks.
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