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Vanguard Fund Offers Reliable Income

Payout IRA seeks to provide inflation protection, preservation of investment capital


The Vanguard Managed Payout Growth and Distribution Fund (MUTF: VPGDX) is an IRA payout fund for retirees or people looking to supplement their income. Payout funds are designed to provide regular monthly payments without exhausting investors’ principal, irrespective of the fund’s performance.

The Growth and Distribution Fund seeks to provide inflation protection and preservation of investment capital. In periods of poor returns, the investment return of the portfolio could be less than the yearly payout, requiring the fund to distribute capital as part of the payout. Potential investors will want to consider their retirement income needs and tax obligations.

Here are the specifics for the Vanguard Managed Payout Growth and Distribution Fund for today’s mutual fund spotlight:

Investing Strategy: The Vanguard Managed Payout Growth and Distribution Fund invests substantially in Vanguard mutual funds and other investments according to a specific asset allocation strategy designed to provide shareholders with regular payments. The fund’s  investment options are broad and include stocks, REITS, bonds, cash and inflation-linked investment. Some 75% of the fund’s assets are invested in stocks, 14% is in bonds and nearly 11% is in cash.

Expense Ratio: With a .24 expense ratio and no transaction fee the fund is very inexpensive, thanks largely to its significant investments in index funds.

Top 5 Holdings: The top five stocks in the Vanguard Managed Payout Growth and Distribution Fund include Vanguard Total Stock Market Index Fund Investor Shares (MUTF: VTSMX) at 35.17%, Vanguard Total International Stock Investor Index (MUTF: VGTSX) at 15.15%, Vanguard Market Neutral Investor Shares (MUTF: VMNFX) at 14.93%, Vanguard REIT Index Fund (MUTF: VGSIX) at 10.05%, and  Vanguard Intermediate -Term Investment Grade (MUTF:VFICX) at 9.94%

Returns: The fund was established in May 2008. Its 12-month return of 13.8% underperformed the Dow Jones Industrial Average’s return of 17% return during the period and the S&P 500s return of 16.4%.

Other Fund Statistics

  • Total Assets: $310.40 million (as of 6/10/11)
  • Minimum Investment: $25,000
  • Fund manager: Michael Buek
  • Manager’s Tenure: Since May 2008

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