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Vanguard LifeStrategy Offers Conservative, “Set It And Forget It” Approach

Low-risk Vanguard "fund of funds" offers easy diversification


Looking for a low-risk investment to help you save for the new house, car, graduation or near-term college expense but don’t like the interest rates on bank saving accounts or CDs?  The Vanguard LifeStrategy Income Fund (MUTF: APPLX) may be something to consider.

It’s one of a series of broadly diversified, low-cost IRA or general account funds that attempt to provide a complete portfolio in a single fund to meet investors’ long, short or intermediate investment goals. The LifeStrategy Income Fund is the most conservative of the LifeStrategy series and seeks a high level of current income and some capital appreciation.

Here are the specifics for the Vanguard LifeStrategy Income Fund for today’s mutual fund spotlight:

Investing Strategy: The fund invests in other Vanguard mutual funds according to a fixed formula. Currently 66% of the fund’s assets are in bonds, 22% are in stocks, and 10% are held in cash.

Expense Ratio: With a .18% expense ratio and no transaction fee, the Vanguard LifeStrategy Income Fund is dirt cheap compared to similar funds – with a Morningstar Rating of four stars.

Top 5 Holdings: The top stocks in the Vanguard LifeStrategy Income Fund are Vanguard Total Bond Market II Index Investor Shares (MUTF: VTBIX) 5 at 0.98%, Vanguard Short-Term Investment-Grade Investor Shares (MUTF: VFSTX) at 20.24%, Vanguard Asset Allocation Investment Grade Investor Shares (MUTF: VAAPX) at 20.12%, MT MFESP Total International Stock Market Index at 6.55%, and Vanguard Total Stock Market Index Investor Shares (MUTF: VTSMX) at 2.02%.

Returns: The one-year return of the fund is weak at 7.15% when compared to the approximate 30% return for the broader market over the same period. Its 5-year return of 7.8% also underperformed the Dow Jones Industrial Average’s 12.84% return, but beat the S&P 500’s 5.46% return.

Other Fund Statistics

  • Total Assets: $2.45 billion (as of 7/1/11)
  • Minimum Investment: $3,000
  • Fund manager: No manager
  • Fund Originated: September 1994

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