As I said last week, the core of your portfolio is where the fundamentals matter most. Stay broadly diversified, keep costs low and spend time in the market with the bulk of your money—that’s the way to win at the investing game. Then, if you wish, you can pursue opportunities—or have a little “fun”—around the edges.
Several of Vanguard’s index funds, which I covered in depth last week, check every box for a core holding. This week, I turn to Vanguard’s actively managed Growth & Income funds.
My conclusion may surprise long-time IVA readers: Despite my long history of partnering with select active managers, times change, and none of the current crop of managers and their funds earn a Buy rating—and none appear in the IVA Portfolios.
My advice: Use an index fund at the core of your portfolio.
Why?
First, index funds set a very high bar for performance and tax efficiency.
Second, Vanguard’s multi-manager structure undermines several of its active funds. Even strong sub-advisers get diluted, leaving investors with something closer to an expensive index portfolio rather than a conviction-driven strategy.
And finally, the core of your portfolio is not where you want to be surprised. I’ll admit it plainly: Dividend Growth (VDIGX)—my longtime go-to core holding—has been surprising me on the downside for three straight years. That experience reinforces a simple rule: Reliability matters more than promise, at the core.
The bottom line: You should steer clear of several of Vanguard’s actively managed Growth & Income funds. Some show potential. But today, none clear the bar for a Buy in my book.
Still, read on. I’ll walk through each fund, explain what works and what doesn’t, and give you the context you need to decide for yourself.