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Post by rhythmmethod on Dec 4, 2023 1:44:30 GMT
yogibearbull, If ANY posters here have a problem with ANYTHING you post, I promise you it is their problem. You are and have been one of the most knowledgeable and generous posters on this and other forums. Thank you for all that you do. - RM
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Post by Mustang on Dec 4, 2023 3:15:48 GMT
I was thinking about other allocations. It has often been proposed to use SPY and BND instead of a balanced fund. BND didn't go back far enough so Portfolio Visualizer suggested VBMFX. I used 60% SPY and 40% VBMFX. Right out of the chute the SPY/VBMFX fell behind and it never caught up. Ending balances for FBALX and VWELX were the same as other simulations: $30,400 and $28,500. Ending balance for SPY/VBMFX was a distant $17,800. www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=59m9CscrXJjyxgLEU08AHiAn investor cannot see the future. I think its important to test possible portfolios not only for the best retirement periods but also for the worst. This is possibly the worst retirement period in Portfolio Visualizer's data set. But, changing the dates changes the outcome. These are the same three funds using a 30 year payout period, start date December 31, 1993. www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4gm6Ivo3oJCkCK8i69btjTSPY/VBMFX took an early lead then fell behind in 2001. FBALX's poor performance in the 90s caused it to fall behind. Returns in the 90s gave VWELX the momentum to pass and stay way ahead of FBALX for the remainder of the payout period. For the 30 year payout period ending balances were VWELX $79,800, FBALX $62,200, and SPY/VBMFX $56,800. Now for a period that favors growth stocks, the last 20 years. Starting date December 31, 2003. www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4JY5c8HkTaVAWBG3DjjEJWObviously, the last 20 years were not favorable enough. FBALX $27,800, VWELX $27,000 and SPY/VBFMX $22,000. Last 10 years: www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=uvC1URRLVFRfY8dkreSXuThe homemade balanced portfolio finally beat a balanced fund by $23. FBALX $17,767. SPY/VBFMX $15,960 and VWELX $15,937. I suspect the reason is rebalancing every year. That cancels selective withdrawals. FBALX's advantage has all been within the last 3 years. These last three have been pretty unusual. It's a very good fund but I wouldn't count of the last three years to repeat themselves. They might. No one can see the future. Edit: The more I compare options, the more I like balanced funds.
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Post by archer on Dec 4, 2023 5:46:33 GMT
If you go up to the tools tab and pick portfolio optimization, you can enter all the funds you are backtesting and pick a constraint such as maximizing Sharpe, or minimizing SD, or maximum performance with a chosen restraint of monthly decline, and the results will show the % of each ticker. If you don't specify a minimum % for a ticker, it will eliminate it if not needed. What I find is that it will do away with all but the best funds in a category. Also once you have your results, click on the efficient frontier tab and you can see where all the funds fall. Also you can slide your cursor on the blue dotted line and see the effects of changing the allocation. I know this doesn't make any sense without seeing it, but I just wanted to share an outline of what one can look for if they are not familiar with it.
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Post by retiredat48 on Dec 4, 2023 6:19:14 GMT
at anovice, who posted, asking: "R48, I think that I get your thought of cashing in on some growthy funds. They have done very well. However, for the same reason for selling growthy funds, I do not get your thought of exiting some decades long healthcare funds. I do understand that they have been big performance laggards but isn't that a reason to hold on (reversion to the mean)?"
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One of my four investment pillars is to "use momentum to my advantage."
Healthcare owned for several decades has NOT been a big performance laggard. Very good returns. However, healthcare in last year or more has been lagging. Now, during this last month of a strong rebound, and market shift to rewarding value stocks over growth, healthcare continues to lag. A yellow flag, if not a red flag. I am not a big fan of healthcare now, for various reasons, and am trying to get to the bottom of this lag. But the market speaks.
A reversion to the mean in healthcare would mean a slowdown in performance. Mean is measured to a fund/sector itself, not a comparison to other funds in differing sectors...or the market. Healthcare had a great run; it may be over for the next 5 to 10 years.
Every year of RMDs one has to take it from somewhere. (I have been taking withdrawals now for 30 years). And one should reduce stock fund holdings periodically as well...to maintain desired allocation ratios. (You can't always take withdrawals from bond funds). So by selling some healthcare, I reduce drag (the lower performer) and stay with best momentum funds or sectors, AND satisfy RMD cash needs to withdraw.
IOW...using momentum to my advantage!
Good day...
R48
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Post by chang on Dec 4, 2023 7:22:26 GMT
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Post by yogibearbull on Dec 4, 2023 13:11:47 GMT
For stress-testing, bad periods are chosen deliberately. This then makes the results somewhat comparable to Monte Carlo runs that may randomly test tens of thousands of cases to come with the probabilities for the worst (and the best).
For bond stress-testing, I use total bond market VBMFX (inception 12/11/1986) or inv-grade VFICX (inception 11/1/1993) or HY VWEHX (inception 12/27/1978). There aren't many old bond OEFs.
For most fund families, class - Investor or A (possibly load, but may be load-waived) or I (Institutional) may be the oldest class. But VG Admiral is neither here nor there and most VG Admiral classes have later inceptions than VG Investor or institutional classes. Also, VG doesn't support some Investor class symbols at its website anymore (so, they cannot be bought now), but PV, M*, Yahoo Finance, StockCharts, etc continue to support those (obviously, with VG cooperation).
The paid version of PV offers possible substitutions for full period runs, but free PV requires some trial-and-error for this substitution.
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Post by yogibearbull on Dec 4, 2023 13:47:23 GMT
archer, PV optimization need some care. With stock-bond mix, it may just find risk-parity (low %stock, high %bond) solutions. My PV tests with fixed ratios of separate stocks and bonds (with/without rebalancing) have also been disappointing. But for slicers-and-dicers, there are also several timing strategies built into PV for testing under Tactical Allocation ( I added the link for MA strategies only), Market Valuation » Moving Averages » www.portfoliovisualizer.com/tactical-asset-allocation-model?timingModel=5Momentum Rotation » Dual Momentum » Adaptive Allocation » Target Volatility » Core-Satellite »
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Post by Chahta on Dec 4, 2023 14:04:26 GMT
Chahta , reality is that people doing these withdrawal analyses/studies are least likely to use them. There are people who don't know the differences between savings accounts, T-Bills, mutual funds, etc. They have received a lump-sum from their workplace (layoff or retirement) or inherited some money. They just want something buy-hold-forget, something that they can do now and leave it along for years. Regrettably, in my circle, there are several of relatives and friends like that - they are beyond learning new tricks and have other real life problems to deal with. That is where the value of these analyses lie. A BIG takeaway is to use hybrids, use initial 4-5% w/COLA, and most likely, there won't be a disaster. "Regrettably, in my circle, there are several of relatives and friends like that - they are beyond learning new tricks and have other real life problems to deal with." Very regrettably and seemingly not so bright, when they have a talent like you as a resource. my brother suddenly retired this year with no planning. For several years I told him he needed some less volatile investments than leveraged equity funds. I am sure he has not done anything.
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Post by Chahta on Dec 4, 2023 14:10:51 GMT
Mustang: “ I was thinking about other allocations. It has often been proposed to use SPY and BND instead of a balanced fund.” yogibearbull suggested balanced funds in this thread. In my opinion, and I mean no insults, they are for less knowledgeable investors as a way to diversify easily and with less knowledge and research. This is not to say seasoned investors can use them as well.
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Post by archer on Dec 4, 2023 16:11:17 GMT
yogibearbull, Thanks for the link to the tactical model. I'm not finding it under the "tools" tab. Is it only available for paid subscriptions? Or is it on one of the other tool pages?
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Post by yogibearbull on Dec 4, 2023 16:19:58 GMT
yogibearbull , Thanks for the link to the tactical model. I'm not finding it under the "tools" tab. Is it only available for paid subscriptions? Or is it on one of the other tool pages? It's on Homepage at the lower-right. I have only free PV. www.portfoliovisualizer.com/
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Post by retiredat48 on Dec 4, 2023 16:30:49 GMT
No. Medical Devices have their own backstory. Covid impacted sales as people cancelled elective surgery for things like knee replacements. So expecting a rebound in next five years. Second, the baby boomers are entering an age (75 or above) when medical devices are a strong need. lastly, cost of healthcare is not impacted that much by the device costs. So some pricing power may exist. They seem to be below the political radar as well. The negative is guessing the impact the weight reduction drugs will have on need for fewer devices. Or will people do weight loss drugs, lose some weight, then decide in a year that they want an appetite and start back eating to new weight highs!! And needing more devices?? Always side effects with things. The IHI fund managers should sort out if any specific device company is greatly impacted, and not own it. For now, I keep holding. Also if one owns any small cap stock funds, you likely get some medical device companies exposure, so not a strong need to do a sector specific bet. R48
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Post by chang on Dec 4, 2023 17:02:15 GMT
Thanks retiredat48. Note IHI is an iShares ETF so it holds the index - it cannot make any individual security decisions. I own FSMEX (in an IRA). Normally I’m as big a cheapskate as they come, but I’ve compared FSMEX vs ETFs several times before and always concluded that FSMEX earns its fee and then some.
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Post by Mustang on Dec 4, 2023 19:43:34 GMT
Mustang : “ I was thinking about other allocations. It has often been proposed to use SPY and BND instead of a balanced fund.” yogibearbull suggested balanced funds in this thread. In my opinion, and I mean no insults, they are for less knowledgeable investors as a way to diversify easily and with less knowledge and research. This is not to say seasoned investors can use them as well. Balanced funds are a simpler way to invest and require considerably less effort to maintain and take withdrawals. If they are providing comparable results why not use them? In this thread I've done various comparisons.
First, it is generally understood that index funds outperform managed funds. Is that really true? I read several years ago that it is true for equity funds but not for balanced funds. The first back test included a moderate-allocation index fund. It finished last. It didn't even beat the conservation-allocation fund that was fighting above its category. Conclusion: balanced index funds should not be used.
The test also showed the strength and weakness of the various managed balanced funds. VWINX did very well during down markets. VWENX did well when value stocks were in favor. FBALX did best when growth stocks were in favor, especially since 2020.
The second test compared the best moderate-allocation funds from the first test (FBALX and VWELX) with pure stock funds VTSMX (99.4% equity) and QQQ (99.8%). Basically this is a test between diversification and equity. It is thought that equity will always prevail in the long run. VTSMX was compared both as a standalone fund and 50/50 with QQQ. The test period was not friendly to equity. The S&P 500 started the test with losses. The result is the equity portfolios fell behind and never caught up. They had serious sequence-of return-problems that were compounded by withdrawals. Even after several years of the market favoring equity, they couldn't catch up falling way behind.
The third test was the same funds without withdrawals. The stock funds again fell behind from the start because of the sequence-of-returns. Without withdrawals it was thought that they would quickly catch up. But they didn't. The best VTSMX did was tie the balanced funds at the end of the test. The 50/50 stock portfolio of VTSMS/QQQ took off after 2020 beating the balanced funds. Since VTSMX failed to do this it is unlikely it caused by rising rates although I sure they took their toll. . It was most likely a heavier investment in technology. Conclusion: Early bad sequence-of- returns are almost impossible to overcome even without withdrawals. Since we cannot see the future it is best to plan for both good markets and bad. Withdrawals have an impact greater than the distribution. They deplete the portfolio preventing it from recovering. If withdrawals are based on portfolio performance during good times then it will become depleted faster and possibly never recover The withdrawal phase of investing is different from the accumulation phase. A diversified portfolio is necessary to prepare for both bad times and good.
It is thought that two stand alone funds are better than a balanced fund. The next comparisons were between the balanced funds and a balance portfolio of a stock and bond fund. The two balanced funds were compared with a portfolio 60% SPY and 40% VBFMX. Using the original start date of December 23, 2000 and an initial withdrawal of 3.3% the balanced portfolio fell behind never catching up with the balanced funds. In fact as time pasted it fell further and further behind. This 23 year payout period was a bad one. But, a 20 year payout showed the same results. A 10 year payout was a little different. Around 2020 FBALX took off and the SPY/VBFMX portfolio gathered enough steam to catch VWELX. This is probably because of a heavier investment in growth stocks. Conclusion: The roll-your-own balanced portfolio did not do better. Part of the reason was the annual rebalancing. It wasn't possible to prune back the winning side letting the other side recover. Since everything went back to 60/40 the withdrawal was the same at taking from a balanced fund. Why balanced funds? They have professional managers armed with a staff of analysts making decisions on which companies and which bonds to own. That same staff of professionals also change equity from value to growth and change the asset allocation should forecasts predict changing market conditions. But they do have constrains. Most can't move the fund to 100% equity or 100% cash. Very few fund managers can. Only traders do that. Even though I don't have the ability to analyze it, every article I've read said that buy-and-hold is more successful than trading. Except for the desire to manage details, I do not understand why balanced funds wouldn't be used by even a more knowledgeable investor. If they are successful why not use them.? But, I agree they are especially useful for investors who do not want to manage the details. Or, investors whose skills lie in different areas. After all, even traders call an auto mechanic to fix their car or an electrician and plumber to fix their house. Why shouldn't mechanics, electricians, and plumbers have simpler, reliable portfolios providing their retirement income.
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Post by retiredat48 on Dec 4, 2023 22:49:29 GMT
Mustang,...who posted: First, it is generally understood that index funds outperform managed funds. Is that really true? I read several years ago that it is true for equity funds but not for balanced funds. The first back test included a moderate-allocation index fund. It finished last. It didn't even beat the conservation-allocation fund that was fighting above its category. Conclusion: balanced index funds should not be used. ------------------------------------------- r48 reply. Index funds beat about 60% of active funds. Which means it does not beat 40% of same. The longer the number of years, the more the index funds beat active. Expense ratios of active funds is the culprit. But note some time ago this was true: ALL VANGUARD ACTIVELY MANAGED FUNDS BEAT THEIR INDEX FUND COUNTERPARTS, since fund inception. R48
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Post by retiredat48 on Dec 4, 2023 23:37:06 GMT
@ Mustang ,...some comments on your thoughtworthy lengthy post a few hours ago re balanced funds compared to two separate funds. 1. It is not clear to me why one cannot create a balanced fund equivalent in two or more stock and bond funds, that duplicate a Wellington or Wellesley? And withdrawal schemes can be made identical if withdrawal comparisons made. So not clear why withdrawals have any impact on performance. 2. You start studies in year 12/23/2000. Why this start date? this is just before the stock market collapse of 2001/2 bear market. So naturally results may be far different if start in 12/23, year 2002...when tech stocks have a huge eventual runup. 3. So I decided to look under the hood of VWELX and VWINX. I was surprised the expense ratio is 0.25% and 0.23% respectively. The comparable index fund counterparts have ERs of 0.03% BND and 0.14% VTSMX. Yet you are telling me the higher ER funds beat in the long run? Bogleheads will tend to disagree with this. 4. VWELX has a yield of (per M*) 2.1%. As a stand alone this is scary to some retirees. I am doing a portfolio makeover for my recently retired brother, who had a 0.3% yield, desiring a 3% yield. With a combo of pretty safe stock and bond funds we are at 4+% now and yield going higher. He is much more comfortable than a VWELX 2.1% yld. VWINX yield is 3.23%. So which balanced fund does a retiree choose here? In last ten years, VWINX only grew to $17,859; VWELX grew to $24,743. 5. VWELX stock side makeup is 24% technology; VWINX is 10%. I was surprised at this difference. Which would one choose now going forward? What if high tech goes flat for next decade? So the choice of WHICH balanced fund is more complex than appears. 6. So instead of backtests, I took what I owned last decade for a core stock fund major holding, and a PIMCO actively managed bond fund, and made comparisons . VPCCX Vanguard Cap Appreciation Fund...1% yld, 0.46% ER, now 25% technology, coupled with PIMIX, 0.62% ER, 7.38% current yld, 5 yr duration. PIMIX owned by many on the forums. Here's the total return results per M*: VWELX $10,000 grew to $24,743 VWINX grew to $17859 so which balanced fund does one pick? VPCCX Prime Cap Core grew to $40,577 PIMIX .........................grew to $15804 So a 60/40 portfolio of VPCCX with PIMIX was $40577 x 60% plus $15804 x 40%, or total $30,717. This combination of two funds is far ahead of either Wellington of Wellesley. 7. I have not been following Bogleheads.org forum much lately, but my recollection is they now favor the two fund, total stock market; total bond market with low ERs as the method of choice versus balanced funds. It looks like those two returns bettered balanced funds in last decade (exactly ten years). I get $26,927, 60/40 VTSMX and BND. This beats either VWINX or VWELX. Bottom line: My math could be off. But I don't see how one can conclude balanced funds magically beat separate funds. Especially when one can select bond guru organizations such as Doubleline or PIMCO for the fixed income side. These two have bettered bond managers on the Vanguard side. And the stock side one can use same Vanguard fund manager types for cap appreciation core holdings as balanced fund stock pickers. Lastly, balanced funds are different in makeup, and do require one to choose. Which one does one select today?? I am comfortable with having a portfolio of different stock and fixed income funds as its makeup. And I conclude my daughters will be able to continue managing this into the long run future, after I depart. R48
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Post by Mustang on Dec 5, 2023 1:32:49 GMT
This is fun isn't it. 1. Why would you want to? Why make thing more complicated? The funds with their asset allocations already exist. 2. Yes, they start just before the collapse. Its a way of test for a sequence-of-return problem. The initial withdrawal is a percentage of portfolio value. I used 3.3%. On $1,000,000 portfolio that would be $33,300. If taken at peak value and the market drops 25% to $750,000 then the withdrawal becomes 4.4%. If the market stays down then there won't be enough shares left for the portfolio to recover. Using a spreadsheet I tested Wellington using the 4% Rule and a 1968 start date expecting a 30 year payout. It ran out of money after 25 years. You don't want to stress test a portfolio using it best years. That leads to too high a withdrawal. Testing it during it worst years is better. You can always ratchet up withdrawals, its hard to ratchet them down and live on it after spending at a higher level for several years. 3. Not me, Portfolio Visualizer. But I agree with it. If identical the fund's expense ratio matters but total returns can overcome the expense ratio. The balanced funds are not index funds. Fund manager hand pick securities and bonds. 4. VWELX is not an income fund. A considerable amount of its growth isn't from dividends but from capital gains. That is less true for VWINX which is only 40% equity instead of 65%. Yield doesn't matter. Total return does. 5. Not so complex. Fund managers are free to change sector weighting. Just a few year ago Wellington's equity changed from large cap value to large cap blend as it added more technology. Which to choose? I choose both. Both are diversified but they have different purposes. Wellington's greater equity position does better during bull markets. Wellesley's is better during bear markets. I cannot see the future. Will tech have a 20 year run or will the bubble burst? Is a recession coming or have we already hit bottom? I don't know and even the experts disagree. I believe a retirement portfolio should be prepared for both. 6. There isn't any doubt that the last few years have been great for tech. And I have never said that there might be better combinations. What I pick needs to fit my goals. It has to provide a stable, livable income for my wife and it has to be easy for her to use and maintain. By the way, did you stress test your portfolio during bad times?
7. 10 years is a very short retirement. And you didn't do a stress test. Before you jump on a mix of funds you should know what they do through bad markets and good. Before Portfolio Visualizer I used spread sheets. I used a retirement date of 1968 for the worst case and a retirement date of 1990 for best. I back tested SPY/BND because it has previously been mentioned several time as an alternative to a balanced funds.
Everyone has different goals, needs and risk tolerance. There seems to be a wide variety of systems on this forum that seem to work well for those using them.
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Post by Mustang on Dec 5, 2023 12:45:15 GMT
6. So instead of backtests, I took what I owned last decade for a core stock fund major holding, and a PIMCO actively managed bond fund, and made comparisons . VPCCX Vanguard Cap Appreciation Fund...1% yld, 0.46% ER, now 25% technology, coupled with PIMIX, 0.62% ER, 7.38% current yld, 5 yr duration. PIMIX owned by many on the forums. Here's the total return results per M*: I tried to test that combination with a the December 31,2000 start date. Unfortunately, neither fund has enough history. I had to use a December 31, 2008 start date. This is after the crash entering a period of great returns. Pretty much the longest I could go back is 15 years.
I decided to look at the differences from an earlier balanced portfolio to balanced fund test without taking withdrawals to see performances differences. SPY is a large blend stock fund that is almost all US equities. VPCCP is a large blend stock fund with 15% non-US equity. According to Morningstar 15-year returns are: SPY 14.0% and VPCCX 14.8%. Starting with $10,000 on December 31, 2008 Portfolio Visualizer has ending balances of SPY $67,000 and VPCCP $71,900. Not bad. A $4,900 difference. www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4teLgHyoAr4ClIUGn53jHa
The VPCCX/PIMIX combo is definitely a winner in a good economy. I just wish we could test the other side of the coin. I can't help but wonder how will it hold up during a recession?
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Post by yogibearbull on Dec 5, 2023 13:48:02 GMT
For DIY slice-and-dice, it isn't proper to just apply allocation % to final values of component funds. If it was so simple, all these portfolio analysis tools (M* Portfolio or M* Investor, PV, SR, etc) won't exist or be needed.
In my backtesting of DIY slice-and-dice with stock and bond index funds (VFINX, VBMFX for the longest possible PV runs), they generally UNDERPERFORM comparable active hybrids VWELX, FBALX, ABALX. There aren't many indexed hybrids (excluding TDFs), and the ones out there don't shine (VBINX, FFNOX, AOM, etc). Posters can make own PV runs to verify this.
Once active funds are used for DIY testing, almost any result can be produced.
I use both hybrids and regular stock and bond funds (OEFs, ETFs, CEFs), so I am not committed to any of them for all times.
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Post by racqueteer on Dec 5, 2023 14:18:53 GMT
I've been a proponent of hybrid funds in the past and over a long period of time. In recent years, the weakness of the bond side has made a 'mix and match' approach worthwhile; I've done that myself. As I've noted previously, the obvious positive to a hybrid fund is its simplicity and low volatility; both of which help investors to evade many of the drawbacks of personal active investing. I've tended to ascribe to them one additional benefit: that the entire portfolio nature of the fund can be controlled for overall risk. I have no evidence that this is the case, but separately acting to maximize profit in both bonds and stocks can lead to combo which is a good deal more risky and volatile than a 'normal' hybrid fund; thus negating the benefits of same. We're coming to a time where the bond side may start to be a positive contributor; so perhaps the hybrid fund will have a resurgence in popularity in the coming years.
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Post by yakers on Dec 5, 2023 16:55:33 GMT
My largest single holding in VG Global Wellington VGWAX, I am satisfied with its performance and profile, I could not put together a portfolio of stocks and bonds as effectively although possibly an equally risk/reward portfolio could be constructed with ETFs but would require more management.
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Post by Mustang on Dec 5, 2023 16:56:17 GMT
Amateur investors should check out what retirees did in the 1970’s. I don’t think it gets much worse then that often. Hint: they lived on distributions and in skinflint mode. Depleting principle wasn’t even considered. I saw the key as reliable distributions, as much as I could risk and tried to eliminate or delay skinflint mode well into the future followed by principle depletion. I've read a little about the 70s. A lot more people had pensions back then. My parents didn't retire until the late 80s and they both had pensions, not 401Ks. Reading Bengen's original paper he was unhappy with the way financial advisors were advising retirees, and that was in the early 90s. They were using long term averages and retirees without pensions were running out of money. There are several withdrawal methods. If the portfolio is large enough the retiree can live off of income. If someone only has $250,000 in a 401k I would probably recommend a single payment immediate annuity. For people in the middle different methods might work better.
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Post by rhythmmethod on Dec 5, 2023 16:58:13 GMT
I use VWIAX, VWENX, FMSDX, and JEPI as my balanced group. (JEPI may not belong in that group, but it has similar volatility). I hold a lot of PIMIX (largest holding) and equity ETFs and funds. The balanced group adds vanilla bonds to counter PIMIX and is rebalanced between stocks and bonds more than I would do myself. Also, they serve as a watermark against my performance outside of the balanced group. They control volatility and will never be my best investment, but they are FAR from my worst. As of now, they fill a role. Good luck - RM
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Post by Deleted on Dec 5, 2023 20:52:19 GMT
My largest single holding in VG Global Wellington VGWAX, I am satisfied with its performance and profile, I could not put together a portfolio of stocks and bonds as effectively although possibly an equally risk/reward portfolio could be constructed with ETFs but would require more management. I have been using American Funds New Perspective as my global fund and give me some international exposure. I am on fidelity so I assume VGWAX is not an option for me.
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Post by Mustang on Dec 5, 2023 22:43:30 GMT
Enough stress testing. Let's race those ponies in a long cross country race. Start date December 31, 1986. The horses are VWENX, FBALX, 60/40 VFINX/VFSMX and VWINX. Each starts with $10,000. First race, no withdrawals: www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=2GFenlVcWi3dbrcfZ85R01Summary: Except for a short spell, Wellington led the race. The 60/40 hybrid ran second until 2003 when Fidelity passed it. In 2008 Wellesley passed it for third but fell back in 2013. 2023 finish: Wellington $273k, Fidelity $263k, Hybrid $214k, and Wellesley $170k. Second race, 3.3% initial withdrawal: www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=6ZNLqZtLeEECM5qcJf6k3DSummary: Hybrid mostly held the lead until 2000. Wellington passes and holds the lead to the finish line. Hybrid starts falling back. Fidelity passes it for second in 2004 and holds it to the end. Wellesley passes Hybrid in 2008 and held it to 2013. 2023 finish: Wellington $158k, Federal $145k, Hybrid $119k and Wellesley $90k. Wellington is the clear winner if starting as far back as Portfolio Visualizer can go. Except for my back test using a 1968 start date there doesn’t seem to be a reason to own any other balanced fund than Wellington... or is there?
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Post by Deleted on Dec 5, 2023 23:31:08 GMT
My reason would be backtesting doesn't predict the future. I think it's pratically worthless and is actually dangerous because it gives investors a false sense of security.
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Post by Karen on Dec 5, 2023 23:33:50 GMT
My largest single holding in VG Global Wellington VGWAX, I am satisfied with its performance and profile, I could not put together a portfolio of stocks and bonds as effectively although possibly an equally risk/reward portfolio could be constructed with ETFs but would require more management. I have been using American Funds New Perspective as my global fund and give me some international exposure. I am on fidelity so I assume VGWAX is not an option for me. VGWAX Admiral share class is NOT available via Fido. VGWLX Investor share class IS available via Fido for a $75 TF.
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Post by archer on Dec 6, 2023 0:23:15 GMT
It's good for the other contenders that PRWCX has been turned out to pasture. For those of us that own some, we can proudly enter it in the parades.
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Post by Mustang on Dec 6, 2023 0:58:17 GMT
My reason would be backtesting doesn't predict the future. I think it's pratically worthless and is actually dangerous because it gives investors a false sense of security. Not really. It only gives investors a false sense of security if withdrawals are based on averages. If they are based on the worst case scenario in history the investor should feel pretty safe. Historically, the 4% Rule had a 100% success rate for every 30 year retirement period from 1926-2017. In 2023, using computer simulations and forecasting future returns Morningstar gave and initial 3.8% withdrawal a 90% probability of success. But, a 90% probability of success doesn't mean a 10% probability of failure. It means there is a 10% probability that changes may be needed. (Kitces used 50/50 in his example.)
Withdrawals can always be ratcheted up should the portfolio do better than the worst case.
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Post by Mustang on Dec 6, 2023 1:00:44 GMT
Is Wellington the best of those tested? For a closer look I broke the cross country race into four short sprints: 1987-1996, 1997-2006, 2007-2016 and 2017-2023 (7 years) 1987-1996: www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4pkTT7Qb0pLc7NYDTYKvqqSummary: Close race.1995, Wellington and Fidelity break away and it’s a two horse race with Wellesley and Hybrid fighting for third. 1996 finish, Wellington $24,900, Fidelity $24,500, Wellesley $21,400 and Hybrid $20,700. 1997-2006: www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=5xzmnNTf7qPGO8KjnoaQWaSummary: Hybrid leads 1998-2001. Fidelity second. Wellington briefly takes the lead. 2002, Wellesley moves to second. The race again breaks into two pairs. 2006 finish: Fidelity $23,600. Wellington $22,900, Wellesley and Hybrid have a photo finish for third (approximately $18,700). 2007-2016 link: www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=3J38J2iXgbrfDwpVth0DyySummary: Wellington takes an early lead. 2008, Wellesley move to third, then to second, then takes the lead. Wellesley holds the lead to 2013. Wellington and Wellesley break away fighting for the lead. 2016 finish: Wellington $17,000, Wellesley $15,100, Hybrid $14,200 and Fidelity $13,700. 2017-2023 link: www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=3bj0adtpmD6NbWgfNGP4uBSummary: Wellesley breaks out of the gate first but Wellington takes the lead. It’s a back and forth battle until 2020 when Fidelity breaks away. Fidelity then has a strong run to the finish line. 2023 finish: Fidelity $17,000, Wellington 15,400, Hybrid $15,100 and Wellesley $11,900. Wellington two firsts and two seconds. Fidelity two firsts, one second and one fourth. Wellesley one second, two thirds and one fourth. Hybrid three thirds and one fourth. Wellington is the winner of the short sprints. Fidelity had two firsts but what gave Fidelity its second win. In 2020, the money supply skyrocketed straight up because of excessive government spending. This gave growth stocks a supercharged boost. No one believes that will happen again anytime soon. At least no one who is worried about the impact of inflation wants it to happen. In an earlier stress test both Wellington and Wellesley beat two 100% stock portfolios by a significant amount. I’ll stick with Wellington. It proved best in the long cross country race and best in the sprints. I’ll stick with Wellesley mainly because of the 1971 test. It was a test of the 4% Rulem 30 year payour. During the Stagflation years it beat Wellington $59,900 to $28,700. And this was a time when the annual withdrawal increased from $400 to $1,688 (422%) because of inflation. Its purpose is to stabilize a portfolio and a bit of that showed when it took the lead during the 2007-2016 sprint.
I accept lower returns for the insurance it provides.
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