How to invest in this market sell-off, according to a top fund that's survived every crash since 1929

How to invest in this market sell-off, according to a top fund that's survived every crash since 1929

  • 23.03.2025 09:00
  • businessinsider.com
  • Keywords: Market Volatility, Trade Wars

The Vanguard Wellington Fund, with a history spanning over 90 years, advises investors to seek opportunities during market sell-offs by focusing on quality companies and maintaining a long-term perspective. They recommend investing in large-cap banks like Wells Fargo, as regulatory pressures may ease, offering attractive valuations.

Apple NewsMicrosoft NewsAlphabet NewsNvidia NewsMSFTsentiment_neutralNVDAsentiment_neutralAAPLsentiment_neutralGOOGLsentiment_neutralAMZNsentiment_neutralWFC/PYsentiment_satisfiedJPM/PJsentiment_neutral
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Estimated market influence

Vanguard Wellington Fund

Negativesentiment_dissatisfied
Analyst rating: N/A

The fund has survived multiple crashes but is cautious about market volatility and trade wars.

Loren Moran

Positivesentiment_satisfied
Analyst rating: N/A

Moran is confident in the fund's strategy and looks for opportunities during selloffs.

Daniel Pozen

Positivesentiment_satisfied
Analyst rating: N/A

Pozen emphasizes long-term perspective and quality company selection during down markets.

Microsoft

Microsoft

Neutralsentiment_neutral
Analyst rating: Strong buy

One of the fund's top holdings, part of the 'Magnificent Seven' stocks.

Nvidia

Nvidia

Neutralsentiment_neutral
Analyst rating: Strong buy

Part of the fund's top holdings, included for market tracking purposes.

Apple

Apple

Neutralsentiment_neutral
Analyst rating: Buy

Included as a mega-cap growth stock in the fund's portfolio.

Alphabet

Alphabet

Neutralsentiment_neutral
Analyst rating: Buy

Part of the 'Magnificent Seven' stocks held by the fund.

Amazon

Amazon

Neutralsentiment_neutral
Analyst rating: Strong buy

Included as a mega-cap growth stock in the fund's portfolio.

Wells Fargo

Positivesentiment_satisfied
Analyst rating: —

Highlighted by Pozen as a top investment, with confidence in its leadership and potential under reduced regulatory pressure.

JPMorgan

Neutralsentiment_neutral
Analyst rating: —

Mentioned alongside Wells Fargo as a financial giant, part of the fund's strategy to include large-cap banks.

Context

Analysis of Market Insights and Strategic Considerations

Overview of Vanguard Wellington Fund Strategy

  • Fund Performance: The Vanguard Wellington Fund has outperformed 92% of its competitors over the last 15 years, according to Morningstar.
  • Longevity: Established in 1928, it is the third-longest-active mutual fund and has survived major market events, including the Great Depression and multiple financial crises.

Investment Approach During Market Volatility

  • Opportunistic Strategy: Portfolio managers Loren Moran and Daniel Pozen focus on identifying undervalued companies during market sell-offs.
  • Long-Term Perspective: Emphasize patience and long-term investments rather than reacting to short-term market swings.
  • Quality Companies at Discount: Target cyclical companies perceived as weak but offering opportunities for alpha generation.

Sector Focus: Large-Cap Banks

  • Top Holdings: The fund's five largest holdings include mega-cap growth stocks like Microsoft, Nvidia, Apple, Alphabet, and Amazon.
  • Banking Sector Emphasis: Pozen highlights large-cap banks, particularly Wells Fargo (WFC) and JPMorgan Chase (JPM), as attractive investments due to:
    • Regulatory Relief: Anticipated easing of regulatory pressures under Trump's second term.
    • Valuation: Financial firms, especially Wells Fargo, offer cheap valuations relative to the broader market.
    • Leadership Confidence: CEO Charlie Scharf at Wells Fargo is seen as driving positive change post a yearslong slump (shares up 46% since 2024).

Market Dynamics and Regulatory Impact

  • Regulatory Environment: Banks face significant regulatory pressure, including liquidity ratios and capital requirements, suppressing returns.
  • Potential Easing: Expectation that regulatory scrutiny may plateau or ease, benefiting the sector's profitability and stability.

Concentration Risks and Diversification

  • Mega-Cap Dominance: The "Magnificent Seven" stocks (Apple, Microsoft, Amazon, Alphabet, Nvidia, etc.) have driven market returns.
  • Doubts on Future Growth: Pozen questions the sustainability of these mega-caps' dominance, suggesting more divergent paths ahead.

Strategic Allocation and Risk Management

  • Asset Allocation Strategy: The fund maintains a 65-35 stock-bond split to balance risk and return, contrasting with market trends.
  • Avoiding Tunnel Vision: Rejects a purely bottom-up approach, favoring a balanced view of macroeconomic factors and market dynamics.

Competitive Landscape and Market Implications

  • Market Volatility as Opportunity: The fund thrives in volatile markets by identifying mispriced assets.
  • Sector-Specific Growth: Focus on sectors poised for recovery post-regulatory easing, particularly banking and financial services.

Long-Term Effects and Regulatory Considerations

  • Regulatory Shifts Impact: Changes in regulatory frameworks could significantly alter sector profitability and market dynamics.
  • Fund's Historical Resilience: The fund's long history of navigating crises underscores its conservative and resilient investment strategy.

This analysis highlights the strategic focus on undervalued sectors, particularly banking, during market downturns, leveraging regulatory shifts and market volatility for long-term gains.