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Custom portfolio vs Wellington
Old 08-18-2014, 08:16 AM   #1
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Custom portfolio vs Wellington

Being set to retire in a few months, Im going over every aspect of my AA and portfolio. Like most people, a large amount of my money is in a 457b account that has a limited selection of funds. Ive used my taxable accounts in combination with my 457b accounts to move to a 60/40 split. Ive have about half index funds and half managed funds. All of my managed funds have very long term track records. Im trying to find some comparison between my portfolio and Vanguard Wellington fund as far as total performance and total risk and I love to hear anyone's thoughts. Here is a basic breakdown of my portfolio:

15% Vanguard Total Stock Market Index
5% Fidelity Contrafund
5% Fidelity Low Priced Stock
5% Oakmark Select
10% Vanguard REIT index fund
5% Vanguard Energy Fund
5% Vanguard Health Care Fund
5% Vanguard Small Cap Index
5% Vanguard Emerging Markets
30% Pimco Total Return
10% TCW Emerging Markets Bond Fund.

Results for the past 10 years:
My portfolio...9.1%
Wellington.....8.8%
SP500...........8.4%

Largest drawdown in past 10 years....10/30/07-2/28/09
My portfolio....-29.6%
Wellington.....-32.4%
SP500...........-50.7%

I have a monthly results chart that I couldn't figure out how to post here. It basically shows that my portfolio has been slightly less volatile over the past 4 1/2 yrs. That's as far back as I could find monthly results.

Comments? I know I may be light on International funds, but Im fine with that.
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Old 08-18-2014, 10:02 AM   #2
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You seem to be slightly beating the market over 10 years, a feat that many money managers can't equal. It's hard to argue with success.
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Old 08-18-2014, 10:08 AM   #3
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you are prob saving on expense fees as well. But with Wellington it's a set it and forget it - they maintain the asset allocation. With your mix of funds the balancing is on you....I find that difficult to do some times, if things are going well (want to leave it in) or if the market tanks (concerned about throwing more in). But you are enjoying some good numbers so it's working.
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Old 08-18-2014, 10:14 AM   #4
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Quote:
Originally Posted by utrecht View Post
Results for the past 10 years:
My portfolio...9.1%
Wellington.....8.8%
SP500...........8.4%

I have a monthly results chart that I couldn't figure out how to post here. It basically shows that my portfolio has been slightly less volatile over the past 4 1/2 yrs. That's as far back as I could find monthly results.
If you have a DIY attitude, enjoy managing your own investment, and are not doing too bad a job, then why stop?

However, I have some questions about your performance numbers.

Quote:
Largest drawdown in past 10 years....10/30/07-2/28/09
My portfolio....-22.1%
Wellington.....-22.2%
SP500...........-37.0%
According to Morningstar, a $1 in Wellington Admiral fund on 10/31/2007 became $0.676 on 2/28/2009. That's a loss of -32.4%, even after inclusion of dividends.

Note that the above is based on monthly results, and fails to capture the more terrifying daily movements. According to Yahoo, from 10/12/2007 to 3/9/2009, a $1 of VWENX became $0.5946, for a loss of -41.5% (dividends omitted).

My own daily record of the S&P shows a top of 1565 on 10/9/2007 to a bottom of 677 on 03/09/2009, which turned $1 into $0.43, or a loss of -56.7% (dividends omitted).
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Old 08-18-2014, 11:33 AM   #5
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My "largest drawdown" that you have quoted shouldve been "worst year" which was 2008. I edited the original post which is the actual worst drawdown and covers the period listed in the OP. My numbers are taken from Morningstar. Im not sure if they include dividends or not.

I think Wellington is a great fund, but since I dont have access to it in my 457 account, I came up with a mix of funds that I have access to and like. I was surprised and happy that my mix of funds out perform Wellington by a small margin while not being any more risky. At least not by the measure of worst year or worst drawdown in the past decade.

Ive been using all of these funds for the majority of the past 10 yrs (in different allocations) so I have experience with the way they move. The one thing my numbers dont account for is rebalancing. The numbers I listed are based on Morningstars posted results for the past 10 years, but if I had not rebalanced along the way I would be considerably out of whack in my AA between funds. Im not sure I feel like doing all the calculations necessary to determine my results including yearly rebalancing, but I would hope it would be even a little better than what I have posted here.
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Old 08-18-2014, 12:11 PM   #6
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Looks like you have done an admirable job Utrecht. When I retired I rolled all my retirement accounts into one Vanguard account. That made the job easier and gave me more freedom in selections.

You might want to replace some active funds with comparable indexes to get the ER's down some. I'm not familiar enough with your active funds to make any actual movement suggestions. I do own BOND though, the ETF for Total Return fund. It's done a bit better then PTTRX with similar ER.

Also you might want to do a M* Portfolio X-ray to compare your current portfolio versus the Wellington one. VWELX has a large value tilt. What does yours look like?
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Old 08-18-2014, 12:18 PM   #7
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Before retirement - ran with mostly index finds, but had money in Wellington and Wellesley all along. Retirement had me questioning our approach to money management. My wife has absolutely no interest in managing our funds, and hasn't since the beginning. This told me that leaving things as they were with my current selection of mainly index funds, wasn't going to be "ideal" for her when I'm no longer around to manage things. It also got me evaluating my long term ability to manage the funds as I aged, and most likely started suffering from diminished mental capacity. Retired 5 years now, and at 63 - starting to worry about it

I had noticed that my Wellington and Wellesley investments had done pretty good over the years, and was looking at a (+/-) 50/50 stock/bond target in retirement as a set it and forget it. It's pretty much 50/50 when you put half in Wellington and half in Wellesley, but they do grow at different rates given their 60/40, 40/60 mix (they also don't really overlap in holdings).

To maintain admiral status within all accounts over the years (Roth, IRA, and Taxable) while withdrawing funds in retirement, decided to be more aggressive with the smaller ones and put those investments into 100% Wellington. Required me to create an excel spreadsheet to get the totals to come out to my original 50/50 goal. Ended up settling on 52/48 and have been withdrawing only dividends off joint/taxable accounts and Roth accounts to keep our income within ACA subsidy limits. Rebalancing between Wellington and Wellesley hasn't been necessary as they have held closely to the 52/48 target. Have dividends paid out to our bank accounts (they both have nice dividend payouts), and capital gains reinvested. Will temporarily pull capital gains off taxable accounts at the end of this year to replenish our cash account. Thought I'd share this with you as you'll probably need to do this evaluation of fund management for yourself.
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Old 08-18-2014, 12:19 PM   #8
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Quote:
Originally Posted by utrecht View Post
... I edited the original post which is the actual worst drawdown and covers the period listed in the OP. My numbers are taken from Morningstar. Im not sure if they include dividends or not.

I think Wellington is a great fund, but since I dont have access to it in my 457 account, I came up with a mix of funds that I have access to and like. I was surprised and happy that my mix of funds out perform Wellington by a small margin while not being any more risky. At least not by the measure of worst year or worst drawdown in the past decade...
OK, your revised numbers agree with mine now. And by the way, Morningstar charts show the "growth" of MFs, and that assumes dividend reinvestment.

I see that you hold only MFs (2/3 of my holdings are individual stocks or sectored ETFs), and your MFs look reasonable and diversified. Without digging into the composition of your MFs, I am guessing that perhaps it could be a contribution to the lower volatility and not too shabby long-term performance. I do not know about your trades or rebalancing moves. Much of the long-term performance depends on the execution. Look how many diversified MFs having similar composition having quite different performance numbers. It's all about execution.

A very important aspect of the DIY investment approach is the nimbleness that an individual investor has, relative to a large institutional investor. You also do not have to justify your moves to anybody. Of course, one can hang himself with the same rope!
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Old 08-18-2014, 12:29 PM   #9
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Before retirement - ran with mostly index finds, but had money in Wellington and Wellesley all along. Retirement had me questioning our approach to money management. My wife has absolutely no interest in managing our funds, and hasn't since the beginning. ...
Same here, DW is a great cheerleader though. She's very happy when the portfolio is doing well and she can spend more at her favorite department stores + take more trips. Not that I tell her how to spend on her stuff.

I do try to educate her a bit on investing. Also have a "how one might cope" letter for her in our safe deposit box, just in case I'm incapacitated or worse.

I do track our portfolio versus 2 benchmarks: Wellington and a set of index funds. Keeps me honest about how I view my results. If I find I'm making cognitive errors, I'll try to switch to an easier plan to administer.
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Old 08-18-2014, 02:24 PM   #10
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Interesting thread as I've just been thinking about this as well. Did some rebalancing recently as well as starting paperwork to move the IRA I inherited from my mom earlier this year into VG. Although I've never had money in either Wellington or Wellesley, I decided to put the IRA 100% into Wellesley. We have two more IRAs not currently in VG (DH and I had IRAs from back in the 1970s before 401Ks) and I will be looking to move them over as well this year. The more I look at it, Wellesley and Wellington are becoming more attractive, especially as I'm trying to simplify for DH in case something happens to me before DS is ready to take on managing investments for him.
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Old 08-18-2014, 02:52 PM   #11
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I will guess your portfolio is a bit more volatile vs. Wellington given there is more credit and small cap risk relative to Well. But if you don't mind the little extra up and down, stick to what you have. Or you can cash out a portion and put in Wellington so you have a competition within your portfolio. I personally have Wellington and Wellesley but they are in my roth for tax reason.
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Old 08-18-2014, 03:08 PM   #12
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Same here, DW is a great cheerleader though. She's very happy when the portfolio is doing well and she can spend more at her favorite department stores + take more trips. Not that I tell her how to spend on her stuff.

I do try to educate her a bit on investing. Also have a "how one might cope" letter for her in our safe deposit box, just in case I'm incapacitated or worse.

I do track our portfolio versus 2 benchmarks: Wellington and a set of index funds. Keeps me honest about how I view my results. If I find I'm making cognitive errors, I'll try to switch to an easier plan to administer.
My wife has a thumb drive with accounts, passwords, and a "what to do when I'm no longer around" (3-page document) hidden away. It's also backed up on a disk. While I'm still here - it's up to me to manage the retirement income stream. The document tells her what to do at 70.5 (RMD), where to get funds (what to sell), and to leave the rest of the stuff alone unless she and our daughters determine Vanguard Wellington and Wellesley are no longer working for us (that will be hard to justify). They also have funds with Vanguard Wellington - something I thought would be good for the future for familiarity and easy transfer on death of our assets...

I decided to make the changes to our retirement funds now - as my parents never made it to retirement, and I don't expect a long glide path to a ripe old age. I also wasn't sure that I would recognize a diminished mental capacity in myself. When one of us is no longer around, or when our daughters recognize we're losing it - they and we have agreed to have them step in and help manage our financials to keep the con artists and thieves from our doors (funds).
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Old 08-18-2014, 08:04 PM   #13
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Ive been using all of these funds for the majority of the past 10 yrs (in different allocations) so I have experience with the way they move. The one thing my numbers dont account for is rebalancing. The numbers I listed are based on Morningstars posted results for the past 10 years, but if I had not rebalanced along the way I would be considerably out of whack in my AA between funds. Im not sure I feel like doing all the calculations necessary to determine my results including yearly rebalancing, but I would hope it would be even a little better than what I have posted here.
EZBacktest will compute and chart this for you. I was using a newer version to look at comparison of a corporate bond portfolio with more conventional ideas. It has the features you are looking for.
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Old 08-18-2014, 10:10 PM   #14
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EZBacktest is a really cool tool. However, the results are different than what Morningstar and Yahoo report, so I'm not sure what to think about it.

For example: Results for Wellington for 2013
EZbacktest: 17.3%
Morningstar: 19.76%
Yahoo Finance: 19.76%

Every year is different at EZBacktest than Yahoo and Morningstar
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Old 08-19-2014, 05:46 AM   #15
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Did you use VWELX as the symbol? I'll take a look later.
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Old 08-19-2014, 07:32 AM   #16
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Did you use VWELX as the symbol? I'll take a look later.
I used VWENX which is the Admiral shares
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Old 08-19-2014, 04:05 PM   #17
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I used VWENX which is the Admiral shares
How did you use EZB to get these results for 2013 only? I am not seeing how to do that.
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Old 08-19-2014, 05:39 PM   #18
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I only listed the results for 2013, but I actually got all yearly results for the last 10 years (which are all different than Morningstar reports).

To see the yearly results you have to compare two portfolios. Make up 2 portfolios and save them. Then go to "tools" and then "compare portfolios". I put in 120 months and backtested. It gives you both graphs on the same screen for comparison. Then if you look at the tabs on the top, you will see "yearly returns"
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Old 08-19-2014, 05:50 PM   #19
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You have done a great job.

But is your portfolio as tax efficient as Wellington or S&P 500 Index ETF? I have lot of money on taxable accounts. If I had to rebalance them all the time I would not be doing well
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Old 08-19-2014, 06:28 PM   #20
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Great Job. I'm still building my portfolio and I've thought about putting 5% into the vanguard sector funds and 10% into reits. Nice to know I'm not the only one.
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