3 Incredibly Dull Funds That You Should Buy

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Boring funds are easy to own.

00:00 Introduction

00:21 Vanguard Global Minimum Volatility VMNVX

00:45 Vanguard Wellesley Income VWIAX

01:10 Fidelity Short-Term Bond FSHBX

Russel Kinnel: We recently published an update to our annual look at investor returns titled Mind the Gap. Once again, we found that investors tend to miss out on returns with more volatile funds. High-risk funds require great timing because their returns can happen in short bursts, and they often happen right after investors sell due to a big loss. So, let’s look at three great but boring funds.

Silver-rated Vanguard Global Minimum Volatility is every bit as dull as its name. The fund takes a passive approach, in which it tilts toward less volatile stocks but also tries to build the least volatile portfolio by adding good diversifiers. On top of that, the fund hedges currency exposure to eliminate foreign-exchange volatility, a big source of volatility in global equity funds.

High-quality bonds are a great diversifier for equities, so Vanguard Wellesley Income Fund is much less risky than a pure equity fund. It holds 65% of assets in bonds and 35% in a value stock portfolio. That makes for a smooth ride, but you still get some upside from equities. Run by skilled investors at Wellington and combined with a super cheap expense ratio, this Gold-rated fund is easy to own.

Everyone could use a short-term bond fund. While your big investing goals may be long-term ones like retirement, you’ll also need some money for short- and intermediate-term goals. You want money for emergencies and big-ticket items like cars and furnaces, so something that has a yield but very limited downside is quite useful. Fidelity Short-Term Bond is a nice choice. It’s a very well-run conservative fund run by a deep team. Use this fund as your next fallback after money markets and bank accounts.

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Russel Kinnel https://www.morningstar.com/people/russel-kinnel

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