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Post by chang on Jun 4, 2021 4:48:05 GMT
Interesting: Wellesley's yield is 3.24% and Equity-Income's yield is 3.16% -- nearly the same despite Wellesley's 60% stake in IT/LT bonds! With bonds yielding next to nothing -- arguably not nearly enough to compensate for the risk its holders are carrying -- why do I have Wellesley in my IRA instead of EI? Both funds have the same equity manager, and almost identical portfolios: www.morningstar.com/funds/xnas/vwiax/portfoliowww.morningstar.com/funds/xnas/veirx/portfolioOver the long term, both funds have performed very well. But, specifically regarding bonds, I don't think it is wise now to drive by looking in the rearview mirror. I sold off most of my IT/LT bonds in the 2nd half of 2020, and that was one of my smarter moves. While things have stabilized a bit, I still see no significant upward drivers for IT/LT bonds in the near future. Wellesley is 60% IT corporate bonds with an 8-year average duration. Why shouldn't I replace VWIAX with VEIRX in an IRA that won't be touched for 10 years? rhythmmethod I know you have been selling Wels'y in favor of F***X (I'm not even going to try to remember that one). Mind sharing your analysis and thinking? You've obviously taken this line of thinking further than I have. |
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Post by rhythmmethod on Jun 4, 2021 12:22:20 GMT
Interesting: Wellesley's yield is 3.24% and Equity-Income's yield is 3.16% -- nearly the same despite Wellesley's 60% stake in IT/LT bonds! rhythmmethod I know you have been selling Wels'y in favor of F***X (I'm not even going to try to remember that one). Mind sharing your analysis and thinking? You've obviously taken this line of thinking further than I have. Hey chang, I have been selling SOME of VWIAX. It is still my second largest holding by a long shot. FMSDX is behind it at #5 or so. Reasoning is diversity. FMSDX is much more multi-cap, holds some mining, RE, etc The bonds are much more aggressive, it holds preferreds as well. Most of FMSDX comes from cash. It also has a higher yield and pays monthly, if that ever becomes an issue. I have about a full position and plan to let it ride. I felt FMSDX (I keep typing it for practice) fills a niche in my port. |
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Post by paulr888 on Jun 4, 2021 15:12:56 GMT
Hi Chang ... Let me chime in before I go off to play golf. What you say about doing with "EI" makes sense for you. I know you have a lot more money than I have and I don't think vol bothers you. For me, bonds are still half my portfolio as they reduce vol for me. My goal is average portfolio beta = .50. I am a big fan of allocation funds that I use in my Rollover IRA to hold a pension cash out that I took last December. I also plan to use same funds in my brokerage some day when inheritance is likely. Here are my funds:
35%-40% Equity
PRSIX
MACFX
VSCGX
VWINX
40%-50% Equity
FMSDX (Last I checked, this had 9% long UST. I love that as as strategic position)
USBLX (Note: I use this even in IRA even though tax managed with Federal tax free bonds because it performs well, better than HBLVX/HBLIX.)
HBLVX (I bought this share class when low min. HBLIX is alt. share class)
Just thought I would offer this even though you are not specifically asking for it. Who knows, as you get older you may get more conservative.
Ciao ciao .....
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Post by rhythmmethod on Jun 4, 2021 22:54:00 GMT
chang, adding to paulr888 point. VWIAX is up 4.8% YTD according to M*. I'd say (drummer math) that puts it on track for ~ 10% for the year in a pretty stupid safe investment. Remember people are always looking for reasons why it won't do well, but VWIAX frequently defies the odds. it's a pretty nice checking account, IMO.
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Post by chang on Jun 5, 2021 1:58:49 GMT
Hi Chang ... Let me chime in before I go off to play golf. What you say about doing with "EI" makes sense for you. I know you have a lot more money than I have and I don't think vol bothers you. For me, bonds are still half my portfolio as they reduce vol for me. My goal is average portfolio beta = .50. I am a big fan of allocation funds that I use in my Rollover IRA to hold a pension cash out that I took last December. I also plan to use same funds in my brokerage some day when inheritance is likely. Here are my funds: 35%-40% Equity PRSIX MACFX VSCGX VWINX 40%-50% Equity FMSDX (Last I checked, this had 9% long UST. I love that as as strategic position) USBLX (Note: I use this even in IRA even though tax managed with Federal tax free bonds because it performs well, better than HBLVX/HBLIX.) HBLVX (I bought this share class when low min. HBLIX is alt. share class) Just thought I would offer this even though you are not specifically asking for it. Who knows, as you get older you may get more conservative. Ciao ciao ..... Thanks paulr888 . You have always been a stricter asset allocator and better portfolio monitor than I am. I wouldn't say that volatility "doesn't bother me" -- now that I'm not earning a paycheck, I am none too happy when I see my PV drop! Indeed for that reason I whittled my equity % down last year. Which probably answers my own question: switching from VWIAX -> VEIRX would increase my equity % back up a few %, which is not really what I want to do, from a tree-top level view on portfolio volatility. I'm not a big fan of allocation funds: I tend to prefer letting specialized teams do specialized work. I own VGWAX only because I wanted a Wellington-run Foreign Value fund, and VGWAX is the only place I could find it. (Yes, I know VZICX is another option, but for reasons I won't go into here, it doesn't interest me.) My only other allocation fund is VWIAX, in an IRA, and I am keeping that mainly on the strength of its reputation. It would be plenty easy to replace it with VEIRX plus any one of a number of VG bond funds. As rhythmmethod noted, it has defied expectations before, and has a pretty successful record .... though, having said that, I don't want to assign too much reverence to Wellesley. After all, the past is the past; there are new managers now, new circumstances (especially in bond land), and there's always a first time for everything .... maybe even for Wellesley to fall on its face. Since I'm not a fan of allocation funds, I don't foresee building a stable of them, as you have. Your funds are all very solid, and I think you have minimized the risk of unwanted drama to a degree by what you have done. However, I've been trying (over the last year) to untangle excessive complexity and duplication in my holdings, and allocation funds -- unless I put the whole kit-and-kaboodle into a couple of them -- would only add to it, since I already have a number of core and explore positions that I want to keep. "Know thyself" the Greeks inscribed in the Temple of Apollo at Delphi, and I know myself well enough to know that I am going to keep nibbling and dabbling, whether it's emerging markets, Asia, gold, Canadian stocks, HY bonds, or whatever. It's probably time for me to run X-Ray, and when I do I'm probably going to find that my equity % has inched back up a bit ... and so leaving VWIAX for an all-stock fund might not be the direction I want. I don't mind doing nothing; doing nothing is usually better than doing something where I'm concerned. |
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Post by paulr888 on Jun 5, 2021 4:10:06 GMT
I fully understand your position Chang. Investing involves tradeoffs. My Rollover IRA is a little complex, lots of bond OEFs, bond CEFs, equity funds and alternatives (REITs, BDCs, commodities). This takes time to monitor and rebalance. So I am searching for simplicity in other places. I wanted to put my $100K pension cash out in my Rollover IRA into something safe that I can easily track so allocation funds work good. Also, I have very small Brokerage/Trust now but someday likely inheritance. I want my Trust to be much simpler than my Rollover IRA so I will go with allocation funds. I know they are not tax efficient but I am willing to sacrifice that for simplicity. I will also have a handful of bond OEFs in the Trust which will lower the equity %. As I am single, I want to make sure I don't create too difficult of a portfolio in case someone needs to take over the driving for me. So, everybody is different and we know ourselves best just like you said. Good luck to you.
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Post by chang on Jun 5, 2021 12:25:26 GMT
Having run X-Ray today, I am leaning toward a little reshuffling of deck chairs. And I may indeed shift a little Wellesley into something more equity-heavy, while doing a little compensatory profit-taking in my taxable accounts. Will report trades in BSW.
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Post by steadyeddy on Jun 5, 2021 12:42:15 GMT
Having run X-Ray today, I am leaning toward a little reshuffling of deck chairs. And I may indeed shift a little Wellesley into something more equity-heavy, while doing a little compensatory profit-taking in my taxable accounts. Will report trades in BSW. , your razor focus on portfolio management is admirable. I have moved away from all allocation funds (including Wellesley) primarily because I want funds with unique asset classes that I can rebalance as time goes on. For the time being, I am 100% indexed with allocation to 5 widgets - US total stock, Developed xUS stock, EM stock, and 2 bond funds IT core + ST core. I have the IT/ST bond funds in equal size so the effective duration is close to 4 years rather than the 6+ years of just an IT bond fund. |
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Post by yogibearbull on Jun 5, 2021 13:05:29 GMT
The simple formula of VWINX/VWIAX has held up over decades and posters have been unable to beat it with fund replications (I posted on VYM+VCIT mix years ago). But after giving it a trial run of a few years (not months), replace with another if you don't like it. Possible future candidates VTMFX (in taxable), MA VWELX, multi-asset FMSDX.
Also it is wise not to change allocation by replacing an allocation fund with pure equity fund.
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Deleted
Deleted Member
Posts: 0
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Post by Deleted on Jun 5, 2021 14:06:59 GMT
Hasn't this bond/value stock yield relationship existed for years (more than a decade)? Unfortunately the bond component doesn't increase fund yield nor does it protect against the negative situation bonds face today, high asset prices, tapering, and rate fears.
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Post by rhythmmethod on Jun 5, 2021 14:23:56 GMT
All good points. I think if a yearly 7-10% risk/reward TR is a disappointment, VWIAX is not a good bet. If it falls below that also not so good. I'm hanging on to mine with minor tweaks. Let's reconvene at years's end and see how the cards fall.
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hondo
Commander
Posts: 145
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Post by hondo on Jun 5, 2021 22:45:03 GMT
Isn't comparing Wellesley and Equity Income sort of like comparing apples and oranges? A 40/60 fund compared to a equity fund?
Just another point of view.
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Post by FD1000 on Jun 30, 2021 23:54:43 GMT
Isn't comparing Wellesley and Equity Income sort of like comparing apples and oranges? A 40/60 fund compared to a equity fund? Just another point of view. +1...more. It also depends on someone style. If you want to hold mostly very low ER funds and insist mostly on Vanguard + you don't want trade (or semi trade) + own many funds (several in most categories) then you end up getting exactly that. It's not bad strategy long term, but you would miss market conditions favoring a category or special funds. Many times someone who doesn't trade well end up trading at the wrong time. Examples: 1) I have done over 1% average monthly in bonds YTD. I posted so many times about HY Munis this year instead of "safer" high-rated bonds. While BND+VBILX are down -(1.8-1.9) YTD...NVHAX (shorter duration) made 6.6% and MDYHX 7.4%. Much safer VWALX made only 3.2%. If you realized that Munis are a much better choice you could improve your YTD performance by over 8% just in bonds. I don't know about Vanguard but Schwab let me buy Munis funds in IRA and Fidelity doesn't. 2) PRWCX: is a long term easy choice to have an allocation fund that matches(or close) to the SP500 for long periods. This fund should a bigger portion of your portfolio. I also love owning stocks and bond funds separately, but PRWCX is the exception. I live in the exception world. 3) Would I own VEIRX or Would I own VEIRX+SCHD? nope, I would hold only SCHD, because SCHD performance is better and I hold only the better of the two. Basically, know who you are and stick to your strength. Disclaimer: if I'm gone, what funds I recommended to my wife? only low ER Vanguard funds to hold forever, but as long as I can think, the likelihood I will own VG funds is very low. |
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Post by Mustang on Jul 1, 2021 10:29:07 GMT
Wellesley Income Fund (VWINX) is not one of my favorite funds. Its returns lag quite a bit behind Wellington (VWENX). Current 10-year return is 7.76 compared to 10.46. I was in it years ago, got out because of lower returns compared to my other funds, and am currently back in and buying more. But, the situation is different.
I am not a trader. I don't enjoy analyzing charts or trying to time the market. I prefer to leave that up to professionals. I have been a member of Morningstar since 1996 and read their analyst's reports. From their reports my understanding is that the allocation funds are broken down into teams separating stocks from bonds (American Funds even has multiple teams) so I don't see that as much different than owning separate stock and bond funds. Owning allocation funds lets the professionals (within a specific range) determine the appropriate balance between the two for expected future conditions.
Why am I back in a fund with lower returns? For the very reason that causes lower returns. Stability. Over the past several years I've been transitioning from an accumulation portfolio to a simplified withdrawal portfolio. 10+ funds down to 3 allocation funds. One my wife can manage should the need arise.
Wellesley Income's purpose is to be the fund with lower risk and lower volatility. Bonds usually provide stability but I just don't see bond fund returns being very good as inflation and interest rates rise. Wellesley's stock portion gives it a little more kick. But it is still the fund from which withdrawals will be taken when the market is down. I think pairing Wellesley with Wellington fits my upcoming withdrawal strategy well.
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Post by acksurf on Jul 1, 2021 13:39:26 GMT
I look at Wellesley more like a bond fund than an equity fund. I am moving towards a small amount of cash, some munis, Vanguard Tax Managed Balanced and Wellesley (haven't purchased yet, still thinking about only using the Vanguard Bal fund) for my short term needs (e.g car, home purchase, etc.). But I am also still working so don't have to depend on portfolio for income. While I have some big purchases coming up I am operating on a sort of bucket system: 0-10 year needs, 10+ years needs.
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