W2R
Moderator Emeritus
Maintaining your AA during bad years takes mental fortitude. During the 90's I annually sold shares from stock funds and bought bond funds even though there was lots of hype of a new paradigm and Dow 30,000 etc. It worked well 'cos my losses in 2000 and 2001 were only 2% and 4.5%. However, 2002 was tough to keep re-balancing as I was down 11% that year but the following year was up 20.7%
Around that time I heard an interview with a manager from one of the Pension funds for a megacorp. The interviewer asked him what his secret was because just before the stock melt down he sold $MM's of stocks and bought bonds, then just before stocks came back he sold $MM's of bonds and bought stocks.
His explanation that he was no financial wizard, he was simply following the AA laid down by the trustees of the pension fund. And re-balancing when they got 5% out of kilter.
That's an encouraging story! My asset allocation for ER is pretty conservative (45:55 equities:fixed), and I am hoping that will help me during bad years. During good years, I am thinking that I will be so busy buying Wellesley with the profits from my equity funds, that I won't be tempted to stray. We shall see.
I have been pretty happy with Wellesley myself, though I expected it to perform a bit better with bonds prices having gone up like they have in the past few months. However, not making much money is still better than losing a lot of it. The only thing is that Wellesley has performed so well since October (relative to the rest of my portolio) that I haven't been able to add money to it as per my asset allocation model. It's just too rich right now compared to everything else...
That's true! It has been doing really well compared with my equity funds, and this has been very encouraging to me. My plan has 30% of my portfolio in Wellesley. So, I will be eager to see these dividends at the end of the month, to see some real $$ instead of making wondering projections in Excel of what I might receive.
Wow - - those do vary quite a bit. But even 3.65% would be enough to make me happy. With the economy faltering, I would think that this year dividends could be less.In the 5 years I have been investing in Wellesley I've done the equivalent of 8.8% year on year, but as you can see from my returns it has fluctuated by as much as 9%, although no negative returns on any given year.
2003 10.74%2004 12.60%2005 3.65%2006 11.39%2007 6.00%