Balanced Fund Yields - How Volatile?

[Lawrence of Suburbia]

Heya all ...

Haven't been on here for awhile, but figured this might just the place for this enquiry (Google didn't help.)

This is about Vanguard Wellesley Admiral, but applies to all balanced funds, I suppose. How much do balanced fund yields vary over time? The reason I ask is - I'm looking for a simple, core income fund for my taxable account (about half my total - and very modest - portfolio.) I considered the Vanguard Managed Payout Fund (a fat 3.5% yield) but, the fact it gives out principal along with the dividend to make that 3.5% made me queasy.

Currently, VWIAX's yield on my savings (along with S.S., in about three years) would actually give me nearly enough to pay the bills, allowing me to quit the wage-slavery and annoy the public with my guitar for extra $ (and, let's face it, kicks.)

Those of you retired and living off VWIAX (or other balanced funds) yields, how "reliable" are they? I know that Wellesley's bonds will get killed if interest rates ever revert to the mean, but still. Wellesley is currently almost 3%, not bad.

Thanks,
Aurens

 

[marko]

I'd try Yahoo finance or Morningstar. Yahoo has a tab for historical prices including dividends only. M* charts can tell you the same thing if you click on the 'events' tab. Both go back decades or as long as the fund has been around.

I'm sure other responders will have better, more info on the specific fund. A VERY quick review I did on M* shows steady dividends/interest since inception.

 

[REWahoo]

Yep, what he said. ^

It is an income fund and as such, is managed with the goal of paying a consistent quarterly dividend. That said, the yield has gradually declined over the past few years to reflect the reality of the bond market.

 

[target2019]

I pulled the dividend data from Yahoo into a google sheet for you. You can see the dividend gradually declining.

https://docs.google.com/spreadsheets/d/1uXts1bL7Ek_rtDM_28N_slPpKMkfiE_GDzXXHlhHIyA/edit?usp=sharing

 

[Sittingduck]

I'd try Yahoo finance or Morningstar. Yahoo has a tab for historical prices including dividends only. M* charts can tell you the same thing if you click on the 'events' tab. Both go back decades or as long as the fund has been around.

I'm sure other responders will have better, more info on the specific fund. A VERY quick review I did on M* shows steady dividends/interest since inception.

Thank you for the tip on the "events" tab on M*. It was information I was very interested in but had no idea they provided data that far back. Gotta say it was pretty well hidden. Never clicked on that button.

I am constantly learning useful (and admittedly some not so useful ) things here.

 

[MBSC]

Vanguard shows the last 10 years of VWIAX distributions on their website. Scroll to the bottom for distributions.

https://institutional.vanguard.com/...utional/investments/price?fundId=0527#state=0

 

[ESRwannabe]

Heya all ...

Haven't been on here for awhile, but figured this might just the place for this enquiry (Google didn't help.)

This is about Vanguard Wellesley Admiral, but applies to all balanced funds, I suppose. How much do balanced fund yields vary over time? The reason I ask is - I'm looking for a simple, core income fund for my taxable account (about half my total - and very modest - portfolio.) I considered the Vanguard Managed Payout Fund (a fat 3.5% yield) but, the fact it gives out principal along with the dividend to make that 3.5% made me queasy.

Currently, VWIAX's yield on my savings (along with S.S., in about three years) would actually give me nearly enough to pay the bills, allowing me to quit the wage-slavery and annoy the public with my guitar for extra $ (and, let's face it, kicks.)

Those of you retired and living off VWIAX (or other balanced funds) yields, how "reliable" are they? I know that Wellesley's bonds will get killed if interest rates ever revert to the mean, but still. Wellesley is currently almost 3%, not bad.

Thanks,
Aurens

Its not going to be all that reliable. However, it will be better than a lot of funds as the 60% bond distributions will be consistent as long as interest rates are consistent...

If you want a more consistent income stream using a vanguard fund then I like the managed payout fund. I have 100% of my Roth IRA in that fund.

If you are willing to go outside vanguard you can probably find a lot of CEFs that pay out a consistent income and make descent returns on average.

 

[Lsbcal]

...

This is about Vanguard Wellesley Admiral, but applies to all balanced funds, I suppose. How much do balanced fund yields vary over time? ...

Vanguard supplies a 15 year table for funds like Wellesley which show Capital Return, Income Return, and Total Return in percentages. There is also a quarterly return table for 10 years.

Example is here: https://personal.vanguard.com/us/funds/snapshot?FundId=0027&FundIntExt=INT#tab=1a

You get to it by going to the fund's "Price and Performance" tab. Then click on "see cumulative, yearly, and quarterly returns" on that page. Somewhat obscure way to get there.

 

[Lawrence of Suburbia]

Thanks all ... !!

I don't get why that Vanguard data didn't 'google'; no matter. You have no idea how this has made my day ... !!

To know I'm so close to being able to quit the minimum wage gig is wonderful.

Still, gonna try and 'accumulate' a few more years, see what Wellesley's yield does. I suppose if the Fed keeps rates at zero, I suppose it's possible Wellesley's yield could be headed that way too ...

 

[Lawrence of Suburbia]

Vanguard shows the last 10 years of VWIAX distributions on their website. Scroll to the bottom for distributions.

https://institutional.vanguard.com/...utional/investments/price?fundId=0527#state=0

I noticed just today that the yields on both VWINX and VWELX have gone down ... Continuing, it seems, the downward trajectory of that data.

Is this the inevitable result of the funds having to roll over existing bond holdings, to newer issues with lower coupons? And, if the Fed keeps its rates at zero, will that mean in a few years balanced funds will have yields like money-market funds? (0.01% I think Prime is paying me...)

Maybe my optimism was premature ...

 

[marko]

Is this the inevitable result of the funds having to roll over existing bond holdings, to newer issues with lower coupons? And, if the Fed keeps its rates at zero, will that mean in a few years balanced funds will have yields like money-market funds? (0.01% I think Prime is paying me...)

I'd like an answer to this as well. Anybody?

I think (that means I have no idea) that the fund managers would structure the future holdings to maximize steady returns, meaning they'd take on more risk and/or duration.

It sure was nice to be getting 7% during the Great Recession but as OP notes, those bonds are running out. Now what?

 

[ESRwannabe]

I'd like an answer to this as well. Anybody?

I think (that means I have no idea) that the fund managers would structure the future holdings to maximize steady returns, meaning they'd take on more risk and/or duration.

It sure was nice to be getting 7% during the Great Recession but as OP notes, those bonds are running out. Now what?

Yes most likely the yield will continue to go down as bonds are rolled over, given the current interest rates. For high quality corporate bonds you aren't going to get too much of a premium over treasuries.

I don't think rates are going to go up anytime soon. Look how much angst there is over .25 raise (which IMHO is not going to happen this year). I don't see a reason for rates to go up anytime soon. The US may be doing slightly better... but its still the slowest recovery we have ever seen. More importantly the US doesn't live in a bubble. With issues in Europe and Asia I don't see rates being raised in US.

 

[rbmrtn]

I'd like an answer to this as well. Anybody?

I think (that means I have no idea) that the fund managers would structure the future holdings to maximize steady returns, meaning they'd take on more risk and/or duration.

They probably can't because the funds prospectus doesn't allow them to. I think this is part of the issue that comes up when talking about fund managers under performing an index. The prospectus constrains what the fund manager can do.

 

[fritz]

I just answered the OP on another thread on Asset Allocation outperforming Wellington and/or Wellesley regarding growth with quarterly dividends withdrawn. Although the yield fluctuates (goes up/down) - the total account value fluctuates as well. The dividend income stream would go up/down as the value of the account rises/falls (not always in relation to the fluctuation of the yield). My Wel/Wels dividend payouts have grown since retiring as the accounts have grown with the yield fluctuating (all but one year of capital gains were reinvested). A very complex moving target for an income stream, but beats most out there..

 

[Lawrence of Suburbia]

Today sure informed my perspective ...!

Most of my stash is short-term bonds/cash; maybe if we get a serious correction (say, Dow down to 10 or 11k or so) I shall move most of that into VWELX/VWINX. That should up the yield, what?

 

[fritz]

Today sure informed my perspective ...!

Most of my stash is short-term bonds/cash; maybe if we get a serious correction (say, Dow down to 10 or 11k or so) I shall move most of that into VWELX/VWINX. That should up the yield, what?

If that should happen - we know what we should do, but we don't do it. Investing paralysis normally sets in and we freeze/do nothing. I had this happen the last time around (I have a tendency to not rebalance regularly as well). Gave me real appreciation for my Balanced Funds holdings. They will make the proper moves when required, as they are mandated to do so to stay within the fund's objectives.

 

[clifp]

Today sure informed my perspective ...!

Most of my stash is short-term bonds/cash; maybe if we get a serious correction (say, Dow down to 10 or 11k or so) I shall move most of that into VWELX/VWINX. That should up the yield, what?

Wellington was down 1.92% vs 3.1% for SPY and the Dow
and Wellesley was down a mere .87%. There is a good reason they are so loved on the forum.

 

[mathjak107]

but it is all relative . while more aggressive funds fall more they also go up more so as an example my fidelity blue chip growth well 3.40% but we are still positive for the year.

no doubt wellesley is a less volatile ride but that does not mean in the end you are not down more since the cushion when you fall is smaller .

 

[fritz]

but it is all relative . while more aggressive funds fall more they also go up more so as an example my fidelity blue chip growth well 3.40% but we are still positive for the year.

no doubt wellesley is a less volatile ride but that does not mean in the end you are not down more since the cushion when you fall is smaller .

As for risk/reward - quick Morningstar look for your fund shows 10 year at 9.24% growth, while Wellesley is at 6.91% and Wellington is at 7.5%. Given that Wellesley is +/-60% bonds and Wellington is +/-40% bonds (exp .25%/.18% admiral-both) and your fund is 100% stocks (exp .80%) - I'd say there's a reason that Both Wellesley and Wellington are rated by Moningstar as 5 star gold and yours is bronze (although your fund is still positive for the year - as of today). You also have to sell your funds to live off them in retirement vs. possibly living off dividends with Wel/Wels.

 

[mathjak107]

one fund is not a portfolio so blue chip growth is only one fund in a 50/50 portfolio with other funds . both contra and blue chip growth are positive for the year , my VTI and veu are negative . the bond funds are just barely positive . ..

 

[fritz]

one fund is not a portfolio so blue chip growth is only one fund in a 50/50 portfolio with other funds . both contra and blue chip growth are positive for the year , my VTI and veu are negative . the bond funds are just barely positive . ..

Most Balanced Funds by their very nature could be one's entire investment portfolio. Vanguard and almost every other Mutual Fund company offers them as alternatives to putting together your own mix of stock and bond Funds. Target Date Funds that adjust stock to bond ratios over time have become very successful retirement investment vehicles. As I've said before - Balanced Funds are the most underrated retirement/retiree investment vehicle IMHO.

This thread is about Wellesley and Wellington Balanced Funds' yields - where the OP is questioning if they are viable for a decent retirement income stream. They both currently pay out the highest Balanced Fund yields available at Vanguard, while also providing very good long term growth. One needs to obtain some pretty decent knowledge of financial investing (or pay out some your hard earned money to an advisor) to put together a stock and bond portfolio to duplicate this effortless approach. And you'll still need to do your own rebalancing to maintain stock/bond ratio yourself (or pay an annual management fee on your entire portfolio value, whether their efforts are positive "for you" or not).