Someone asks:
I’ve read that you should not hold Wellington (VWENX) or Wellesley in a taxable brokerage account because of the dividends and capital gains. Would VTMFX be a better choice if I do not want to hold a total stock fund? Thanks in advance.
VTMFX (Vanguard Tax-Managed Balanced Fund) has municipal bonds, focuses less on paying capital gains, and has a 50/50 approach. I would consider it in a taxable account for moderate risk compared to the other.
VWENX (Vanguard Wellington Fund) is better for a retirement account since it has corporate bonds, pays capital gains, and is more growth-oriented.
VWENX vs. VTMFX: At a Glance
| Funds | Vanguard Wellington Fund | Vanguard Tax-Managed Balanced Fund |
|---|---|---|
| 3-year total return | +11.68% | +9.87% |
| 3-year standard deviation | 11.84% | 9.55% |
| Min. initial investment | 50,000.00 USD | 10,000.00 USD |
| Net expense ratio | 0.16% | 0.09% |
| Total net assets | 103.17bn USD | 8.53bn USD |
| Morningstar category | Allocation–50% to 70% Equity | Allocation–30% to 50% Equity |
VWENX vs. VTMFX: Annual Return
| Funds | Vanguard Wellington Fund | Vanguard Tax-Managed Balanced Fund |
|---|---|---|
| 1 month | +0.50% | +0.26% |
| 3 months | -6.37% | -5.27% |
| 6 months | +0.30% | -0.48% |
| 1 year | +7.70% | +4.41% |
| 3 years | +11.68% | +9.87% |
| 5 years | +10.18% | +8.96% |
Wellingtons’ got great history (and better returns 8.37% vs. 6.78% compounded annually), but their allocations are slightly different.
If you go back 10-20 years, both funds dropped on 11/07 and recovered within six months of each other in 2010.
Which is Better, VWENX or VTMFX?
Community Comments:
John B:
VTMFX is an older fund that came out before ETFs were widespread, and VG mutual funds couldn’t get rid of capital gains the way they do now. There’s nothing wrong with VTMFX, but the tax-managed part of it has become mostly irrelevant.
You can make your own VTMFX with a 50/50 split of Total Stock Market (VTSAX/VTI) and Intermediate Tax Exempt (VWITX).
Richard W:
I hold both. I have VTMFX in my taxable account, and VWENX is in my Roth (VWENX has poor tax efficiency, so the Roth makes sense).
1 post – 1 participant