The Balance Mutual Fund per Mr Bogle

[Hillbilly]

Mr Bogle states in his book "Bogle on Mutual Funds" (Chp 7), the following:

" In a sense, the balanced mutual fund is the ultimate fund, the ideal manifestation of the fund concept. Combining a stock component, a bond component, and a money market component, the balance fund is a complete investment program in a single portfolio."

After reading this some years ago, I decided to select the DW Vanguard 's Wellington for her IRA. It was one stop shopping for me: the DW has zero interest in investing but knows the rewards. I selected a managed balance fund to have "someone at the wheel" for her especially in my absence. Since the IRA investments, I've sliced/diced, played dirty market timer, day traded, etc with the remainder of monies. Looking back today, funny how that little IRA has grown without any help on my part. DW could not tell anybody the IRA balance today: I can tell you I would have been better off with all monies in that one balanced mutual fund.

To conclude, have any of you felt this way after trying for years to read the right books, asset allocate to perfection, time the market, etc whatever your vice may be? Secondly, would you be willing to invest all your monies in a balanced mutual fund such as a Wellington, Dodge & Cox Balanced, Oakmark E&I, etc and go play golf, fish, etc knowing that your absence may be the best thing going?


Hillbilly

 

[TromboneAl]

If I were starting fresh, I'd choose a Target Retirement fund.

 

[Brat]

The bulk of our IRAs are in Dodge & Cox Balanced and Oakmark E&I. BUT, we also have about 5x withdrawals in cash = and about that much in what I hope will be high beta investments.

The cash= will have a low return but they are there whatever is going on in the market, we can hold off selling equities if bears clawing at the door. The high beta is there to add foreign exposure, and provide a little excitement and a sense of control for this type A personality.

Wellington is an excellent fund, has some foreign bonds as does Wellesley Income.

 

[Texas Proud]

It is funny how things can grow...

My mom bought 100 shares of stock back in 1982 for $3300... reinvested the dividends and with splits etc.. now has $118K... for this ONE stock..

 

[hogtied]

I'm planning on pulling the plug in 2 years, I'll be 58. Currently I have 51% of my 401k in DODBX. I Like Dodge and Cox very much. I also own DODFX, DODIX and OAKBX outside the 401k. I am seriously considering rolling the 401k over to Dodge and Cox at RE. I like to keep things simple. DODBX lacks international exposure, thus my owning of their international fund. My plan is to also keep 3 years expenses in their income fund.

However, that being said, is Dodge and Cox too simple for all my rollover IRA dollars? That is the question I sometimes wrestle with. Would I be better owning the Dodge and Cox funds through Vanguard's brokerage side? This would give me more flexibility but would tack on extra fees. What is the boards recommendation on this? Thanks.

 

[REWahoo]

However, that being said, is Dodge and Cox too simple for all my rollover IRA dollars? That is the question I sometimes wrestle with. Would I be better owning the Dodge and Cox funds through Vanguard's brokerage side? This would give me more flexibility but would tack on extra fees. What is the boards recommendation on this? Thanks.

I don't think Dodge & Cox is too simple for your IRA - simple is good. My rollover IRA (and the bulk of my portfolio) is in three funds: VWIAX, DODBX, & DODFX. I chose to own the D&C funds through Vanguard for the flexibility and convenience it provides me. The fees are very small, especially if you have $250K+ invested with Vanguard.

 

[hogtied]

Thanks REWahoo, yes I'll have approx. $700K to roll over. With Vanguard I could use their MMF also as a place to dump cash.

 

[Spanky]

It is funny how things can grow...

My mom bought 100 shares of stock back in 1982 for $3300... reinvested the dividends and with splits etc.. now has $118K... for this ONE stock..

That's a great return, 15.38% annualized.

 

[yakers]

If I were starting fresh, I'd choose a Target Retirement fund.

Switched to a Target retirement type fund in my retirement account, there were no tax or other charges to make the change within the tax deferred account.

 

[Mwsinron]

How are the retirement target funds? I know I looked at Fidelity and they were trying to stick some dogs in it.

 

[Dude]

How are the retirement target funds? I know I looked at Fidelity and they were trying to stick some dogs in it.

You might want to look at this study:
" Popping the Hood, An Analysis of Major Life Cycle Fund Families, 2005"
http://www.turnstoneag.com/Research.aspx

Second edition supposed to be released soon.

 

[Dude]

You might want to look at this study:
" Popping the Hood, An Analysis of Major Life Cycle Fund Families, 2005"
http://www.turnstoneag.com/Research.aspx

Fill out the form and they will e-mail you a PDF file of the study.....I found it to be very thorough and interesting.

Second edition supposed to be released soon.

 

[Dawg52]

How are the retirement target funds? I know I looked at Fidelity and they were trying to stick some dogs in it.

I would go with a VG Target fund. Hard to beat.

 

[Hillbilly]

Thanks to all that replied.

My first post was to verify through the great people that use this site if I (or you) had made investing just too darn complicated. This observation came to me that that might be the case while filling out our taxes this year. I ran across the DW's IRA to make a contribution decision and saw the balance. The investment just happened to be in the Wellington fund. I asked her how much she thought she had in the IRA, and got a "no". My judgement is that my slice/dice, Dogs of Dow, dirty market timing, etc adventures over the years may have been in vain.

Thus, the question I asked myself back when opening the IRA (and am asking today of myself) after reading Mr Bogle's statement, "Is the DW a portfolio manager?" My answer was "no": she would do well to understand the total monies in the fund and what the fund is trying to do. A "portfolio manager" as I'm defining it would mean a person that manages individual stocks/bonds or you guess it, a portfolio of mutual funds. Again, like most of you, I've read the studies that tell me to slice/dice, roll my own, etc. I don't disagree with those approaches, but with what I know now, the approaches seemed to be making portfolio manager type decisions which I knew the DW would not have a clue (or am I sure I do). Thus, it seems to me that Mr Bogle might have been on to something here in his statement (see first post). A balance mutual fund may be a geat way to go. I find handing a balance fund(s) over to the DW in my absence would be easy and a total program for her to use.

So to close, thanks again to all that replied. I just read Bob Clyatt's "Work Less, Live More" where he refers to a balance fund like a LifeStrategy Fund or Wellington as "The Soda Cracker: Single Mutual Fund". It begs again the questions, are you willing to go 100% with a balance fund(s)? If you've "been there, done that", what are your experiences? Faults? Too easy? Too hard? Or, are you a "portfolio manager" per definition herein, and find this the way to go without question and perhaps balance funds are not worthly of your dollars? If so, why not? Are you comparing yourself to a fund like Wellington or Dodge & Cox Balanced to verify your value added?

Have a great day,
Hillbilly

 

[REWahoo]

It begs again the questions, are you willing to go 100% with a balance fund(s)? If you've "been there, done that", what are your experiences? Faults? Too easy? Too hard? Or, are you a "portfolio manager" per definition herein, and find this the way to go without question and perhaps balance funds are not worthly of your dollars? If so, why not? Are you comparing yourself to a fund like Wellington or Dodge & Cox Balanced to verify your value added?

Someone (Audrey1 maybe?) posted that looking back they would have been better off if they had put all their investments in DODBX over the years rather than trying to slice & dice and be a "portfolio manager". Much less worry and fuss and returns as good or better than they ended up with. I know that's true in my case, and I'm just happy I kept at least a portion of my 401k in DODBX. Wish I had put it all there.

Of course hindsight is 20-20, and the future of that fund and other historically strong balanced funds is unknown. But as I said in an earlier post in this thread, the bulk of my portfolio is in D&C Balanced and Vanguard Wellesley. Add to that a dash of international exposure (DODFX) and I'm done.

 

[unclemick]

1994 - 2006 Vanguard Lifestrategy moderate.
2006 - ? Target Retirement 2015.

Always 80 - 90% balanced index in retirement.

Theoretically impure - should be 100% - BUT it's those pesky hormones and you know as a male - just gotta putz.

Loss of the 'putz' would not derail my retirement - would require a cut back on the wildly frivolous stuff tho.

heh heh heh heh heh heh 8).

 

[audreyh1]

Yep - that's me!

A few years ago I came to regret that I hadn't simply put all my retirement fund in DODBX. You can do all sorts of slicing and dicing, rebalancing, etc. and still not beat a simple approach. Simple is GOOD. Even if theoretically you can outperform a simple approach though active management of your portfolio, it seems that more often than not all the extra work gains you little, or even makes you underperform the simpler approach.

I do have a large chunk of my portfolio in DODBX. The only reason why I am not 100% right now, is that I would realize significant cap gains and pay taxes when I sold other funds. I guess I'm not willing to take the tax hit.

Audrey

 

[Hydroman]

I ran 4% withdrawals (adjusted for 3% inflation. rebalanced annually) 50/50 VG STAR/Wellesley against various S&D index fund portfolios for the period 1997-2006 and STAR/Wellesley beat them all in terms of ending balance. The Coffeehouse portfolio came close though. It was not my intent to data mine either. That period is just the period I had data readily available. Just a data point to consider in the KISS vs S&D debate.

 

[Olav23]

My only issue with the TR funds is that they are only appropriate for tax-sheltered accounts. I would *love* to see a "tax-managed" TR fund family and a "non-tax managed".

Something like:
Target Retirement 2040 Tax Managed
Target Retirement 2040 Unmanaged

Then it would be super simple and easy for me to allocate all my accounts and be done with it. Instead, I have to manually break out the target retirement funds into S&D across accounts to put some of the funds in tax-sheltered, etc.

And also, like you said above, my wife has no interest in investing, so when the time comes for withdrawals, it'll be all the more complicated to explain to her which funds to withdraw first, which accounts to draw from, how to properly re-balance after a withdrawal, etc... Not looking forward to that discussion!

 

[mickeyd]

Here is something on Vanguard Balanced Fund that I put on another forum.

http://www.diehards.org/forum/viewtopic.php?t=1332&highlight=balanced+fund

 

[Bikerdude]

Very shortly I'll have the bulk of my investments in DODBX and Wellington. Cruise control. And I fall asleep when my head hit’s the pillow.

 

[mb]

To conclude, have any of you felt this way after trying for years to read the right books, asset allocate to perfection, time the market, etc whatever your vice may be? Secondly, would you be willing to invest all your monies in a balanced mutual fund such as a Wellington, Dodge & Cox Balanced, Oakmark E&I, etc and go play golf, fish, etc knowing that your absence may be the best thing going?

I consider it every year about the time that I'm doing taxes

MB

 

[Delawaredave]

Of course hindsight is 20-20, and the future of that fund and other historically strong balanced funds is unknown. But as I said in an earlier post in this thread, the bulk of my portfolio is in D&C Balanced and Vanguard Wellesley. Add to that a dash of international exposure (DODFX) and I'm done.

I think these "balanced funds" have done well over long periods is because a balanced portfolio does magic over the years.

The balanced funds just "force the balance". I have several balanced funds - and the rest of my portfolio has similiar "homemade balance" - the performance of both has been similar and outstanding since 1982.

No one can predict the future - but my money is on (literally) this balanced approach.

 

[Hillbilly]

Theoretically impure - should be 100% - BUT it's those pesky hormones and you know as a male - just gotta putz.

It has to be those darn hormones....they have gotten me in more trouble than with investing before but that is another post.

Very shortly I'll have the bulk of my investments in DODBX and Wellington. Cruise control. And I fall asleep when my head hit’s the pillow.

Cruise control is good and I, like you, do enjoy sleep. I had a call from a broker once during my day trading era in which I lost many nights worth.

I ran 4% withdrawals (adjusted for 3% inflation. rebalanced annually) 50/50 VG STAR/Wellesley against various S&D index fund portfolios for the period 1997-2006 and STAR/Wellesley beat them all in terms of ending balance. The Coffeehouse portfolio came close though. It was not my intent to data mine either. That period is just the period I had data readily available. Just a data point to consider in the KISS vs S&D debate.

I've done some of this type analysis in the past against a few balance funds to see how a few investing books that propose a better "mouse trap" really can do. I have found to expose a fad it is best to let time lapse since the book was published before doing the analysis. Sometimes the results can shock.....take a look at your favorite book against a fund or two and enjoy. You may want your money back!

Yep - that's me!

You can do all sorts of slicing and dicing, rebalancing, etc. and still not beat a simple approach. Simple is GOOD. Even if theoretically you can outperform a simple approach though active management of your portfolio, it seems that more often than not all the extra work gains you little, or even makes you underperform the simpler approach.

I do have a large chunk of my portfolio in DODBX. The only reason why I am not 100% right now, is that I would realize significant cap gains and pay taxes when I sold other funds. I guess I'm not willing to take the tax hit.

Audrey

You sound so much like my situation. Having funds outside the balance funds with gains presents a tax problem, but I'm looking for that opening to sneak a sale in there to buy say the DODBX. The simple approach, after 25 years of investing for me, seems like the smart approach! If I could get $5 per hour for each hour I've spent taking on some new way of making money in the market, I would not need to invest. Those hours can not be replaced. However, will the balance fund be perfect and at the top of the performance list every year? No! Will you sleep well at night (like Bikerdude)? Yes!

Someone (Audrey1 maybe?) posted that looking back they would have been better off if they had put all their investments in DODBX over the years rather than trying to slice & dice and be a "portfolio manager". Much less worry and fuss and returns as good or better than they ended up with. I know that's true in my case, and I'm just happy I kept at least a portion of my 401k in DODBX. Wish I had put it all there.

Of course hindsight is 20-20, and the future of that fund and other historically strong balanced funds is unknown. But as I said in an earlier post in this thread, the bulk of my portfolio is in D&C Balanced and Vanguard Wellesley. Add to that a dash of international exposure (DODFX) and I'm done.

Sounds like you are practicing what has been talked about herein. The "portfolio manager" can become yourself very quickly if one doesn't watch it in my experience.

Question: In owning the DODFX, do you not feel that D&C or Wellesley would own international stocks (if need be)? Just trying to understand your reasoning for owning along side these two great balance funds... not try to put you on the spot...

 

[REWahoo]

Question: In owning the DODFX, do you not feel that D&C or Wellesley would own international stocks (if need be)? Just trying to understand your reasoning for owning along side these two great balance funds... not try to put you on the spot...

The short answer is I want more international exposure than the two funds combined provide.

From the D&C Balanced prospectus: The Fund may also invest up to 20% of its total assets in U.S. dollar-denominated securities of foreign issuers traded in the U.S.

From the Vanguard description of Wellesley's investment strategy: The fund may invest up to 20% of its equity assets in securities of foreign companies.

Whereas D&C's "up to 20% of total assets" is fine with me, Wellesley's "up to 20% of its equity assets" falls short, since only 35% of the fund is in equities. That's why I added some DODFX, to get my international exposure up to 15-20% of my portfolio.