It’s no secret that millennials, most of whom are now in their 20s and 30s, aren’t big on the stock market. Three-quarters of them don’t invest in stocks at all, recent surveys show.

These folks witnessed their parents go through the dotcom implosion in 2000 and another market crash in 2008. No wonder they want to steer clear of stocks.

#-ad_banner-#But just like every other generation, millenials need to save for retirement and most will have to invest in something to build a sufficient nest egg. My recommendation, which completely flies in the face of conventional retirement planning wisdom: put your money in the Vanguard Wellesley Income Fund (NYSE: VWINX), a $41-billion conservative allocation mutual fund that goes easy on equities and still offers solid returns.

Why Millennials Should Buck Tradition
Most financial advisors would scoff at this advice, since VWINX would typically be considered suitable for investors at or near retirement age. The fund allocates only 35%-to-40% of assets to stocks (37% is currently in equities) and puts the rest in bonds. It also holds cash at various times.

Advisors traditionally want young investors to have portfolios that contain from 60% to 80% in stocks, perhaps even more. The advisors figure these investors won’t be retiring for decades, and stocks usually outperform bonds by a wide margin over long periods. Plus, with so many years until they retire, millennials should have plenty of time to recover from any big market downturns.

It sounds simple enough, but humans are emotional beings. After witnessing at least one huge stock market crash and recent selloffs that have raised fears of another crash, millennials may never accept the notion of putting so much of their savings in stocks. Many may even find VWINX’s conservative equity stake to be daunting.

They shouldn’t, though. This fund achieves just the right balance between risk and reward.

The fund typically owns 50 to 60 stocks with an emphasis on recession-resistant sectors such as healthcare, telecommunications, banking and utilities. In all sectors, the fund focuses on the safest types of companies: solidly-growing, dividend-paying, domestic large-cap firms with yields that are higher than the S&P 500, which currently yields 1.9%.

Examples of the fund’s holdings include financial giant Wells Fargo & Co. (NYSE: WFC), tech stalwart Microsoft Corp. (Nasdaq: MSFT), leading drug manufacturer Merck & Co. Inc. (NYSE: MRK) and telecom major Verizon Communications Inc. (NYSE: VZ). These stocks yield 2.8%, 2.9%, 3.3% and 4.9%, respectively. Between its stock and bond portfolios, VWINX yields 2.9%.

The fund’s value-seeking strategy has led to a somewhat larger-than-average weighting in energy stocks, which currently constitute 12% of assets versus the conservative allocation category average of about 9%. Despite the recent carnage in the energy sector, I expect this to enhance long-term returns as energy prices rebound and enable the high-quality producers in VWINX’s portfolio to increase their dominance.

The bargain energy names that were added to the fund in late 2014 include exploration leaders Occidental Petroleum Corp. (NYSE: OXY) and Suncor Energy Inc. (NYSE: SU). Those purchases came after share prices fell significantly. In addition, VWINX has long held substantial positions in integrated energy giants Exxon Mobil Corporation (NYSE: XOM) and Chevron Corp. (NYSE: CVX), two strong dividend payers yielding 3.8%, and 5.5%, respectively.

Rate Hikes Pose Only A Short-Term Threat
With nearly two-thirds of assets in bonds, VWINX carries substantial interest rate risk and could be jolted if the Federal Reserve starts raising rates soon. Indeed, the fund has suffered periods of underperformance before in rising-rate environments because the duration of its bond portfolio is usually about 6. (Duration is the measure of the price sensitivity of a fixed-income investment to a change in interest rates.) A duration of 6 is above-average for the conservative allocation category and signifies greater price sensitivity to rate hikes.

However, previous rate-related woes were relatively short-lived and didn’t sacrifice long-term results. VWINX returned an annualized 7.2% over the past 15 years, including two periods of rising interest rates — mid-2003 to mid-2006 and the summer of 2013. The fund’s 15-year track record beats 98% of peers.

Management is currently hedging against rate hikes by keeping nearly two thirds of the fixed-income portion of the portfolio in A-rated corporate bonds, “which offer a better payout than more highly rated securities but still have little default risk,” explains Morningstar analyst Alec Lucas. “That can make up for losses suffered from the fund’s above-average duration.”

Thanks to its conservative nature, VWINX was 60% less volatile than the S&P 500 over the past 15 years. You can tell this from its standard deviation, which measures the variation of investment returns from the average. The fund has a 15-year standard deviation of about 6, versus 15 for the S&P 500.

Risks To Consider: Though far safer than the stock market, VWINX can post yearly losses. During the last big crash in 2008, the fund dropped nearly 10% (compared with the S&P 500’s 37% decline).

Action To Take: For millennials and others with a strong aversion to stocks, investing in Vanguard Wellesley Income is an excellent way to gain sufficient equity exposure with a fraction of the risk. The fund barely ever loses money — the aforementioned decline was the only time in the past decade — and like all Vanguard funds it’s dirt cheap to own, with an expense ratio of only 0.25%.

Editor’s Note: Interested in learning more about low-risk ways to build your nest egg? Amy Calistri’s premium advisory The Daily Paycheck has earned over $87,000 in dividend payments since 2010. Find out more here.