I give up! Transferring most of the nest egg into Wellesley

[Cheesehead]

We are conservative investors, don't trust the market, two years from retirement at 57 & 61. We made only 4% in 2014. Our AA is 37% Stocks, 31% short term Bond funds (of which 10% is High Yield so could be considered stocks) and 32% Cash. All are index funds in Fidelity & Vanguard. Using The 4% Rule the Nest Egg would represent about one third of our annual income in retirement so we're not interested in risking it.

Does anyone knowledgeable here have a good reason not to dollar cost average into Vanguard Wellsley and for my wife's 403B Fidelity Asset Manager 40? I realize the market is at a high and the bonds may be longer duration than my short term funds, but are there any pitfalls I don't know? We do not enjoy financial matters yet don't want to pay a fee to a planner. So instead of continuing my do-it-yourself AA we'd like to forget it and use these two funds.

I've learned a lot on this and other boards but I don't enjoy learning any more and would rather use these two funds.

Thank you

 

[REWahoo]

Does anyone knowledgeable here have a good reason not to dollar cost average into Vanguard Wellsley and for my wife's 403B Fidelity Asset Manager 40?

Please explain your definition of "knowledgeable."

 

[target2019]

We are conservative investors, don't trust the market, two years from retirement at 57 & 61. We made only 4% in 2014. Our AA is 37% Stocks, 31% short term Bond funds (of which 10% is High Yield so could be considered stocks) and 32% Cash. All are index funds in Fidelity & Vanguard. Using The 4% Rule the Nest Egg would represent about one third of our annual income in retirement so we're not interested in risking it.

Does anyone knowledgeable here have a good reason not to dollar cost average into Vanguard Wellsley and for my wife's 403B Fidelity Asset Manager 40? I realize the market is at a high and the bonds may be longer duration than my short term funds, but are there any pitfalls I don't know? We do not enjoy financial matters yet don't want to pay a fee to a planner. So instead of continuing my do-it-yourself AA we'd like to forget it and use these two funds.

I've learned a lot on this and other boards but I don't enjoy learning any more and would rather use these two funds.

Thank you

I know a few things, but whether I am knowledgeable can't be proved.

I know some folks say Wellesley is the only fund you need. I know other folks say it is not diversified enough, and you need to cover everything with broad-based index funds that get you into all US Stocks, US Bonds, and Int'l Stock.

Wellesley does have an amazing track record. The managers are top notch. If you start to DCA into it, you can always stop before going 100% in.

Your return was less because of your high allocation to short term bond and cash, knowledgeable folks might say.

 

[Fermion]

I think 4% return was pretty good considering the amount of risk you were taking. You definitely do not want to pay any fee. A 1% fee would be 25% of your returns!

 

[Big_Hitter]

Please explain your definition of "knowledgeable."

good one!

 

[REWahoo]

I know a few things, but whether I am knowledgeable can't be proved.

The above statement is applicable to me as well. Furthermore, I disavow any resemblance to what follows as it may pertain to being "knowledgeable" in any shape, form, or fashion.

Disclosure: 2/3 of my investable assets are in Wellesley and Wellington.

Now that we have the legal mumbo-jumbo out of the way...

I'm curious as to why you are looking at Fidelity Asset Manager 40 with an expense ratio of 0.56% when Vanguard offers similar target retirement funds with an expense ratio 1/3 of that of the Fidelity Fund?

 

[Bikerdude]

I realize the market is at a high and the bonds may be longer duration than my short term funds, but are there any pitfalls I don't know?

Thank you

Past performance is no guarantee of future results. That being said Wellesley has a remarkable record.

 

[Senator]

Here is what I am doing.

I think the S&P is going to be solid for a while longer. The economy is going great, lower gas prices will help. There is no place else to put money. Retail investors are just now getting in.

The S&P has an international component in it, almost by definition. All of the 'international' comparisons use older data. Prior to 20 years ago, the S&P was mostly domestic, not any more.

So, I have a decent cash flow from rentals, and the majority of my investment in the S&P. I use IVV and IVW, both commission free at Fidelity. ~1.75% dividend, which is not much less than any dividend ETFs.

That's my .02.

 

[Cheesehead]

Thanks all. I guess "knowledgeable" is someone with over 1000 posts!

REWahoo: My wife is in a plan at work that only allows her to invest in Fidelity funds, so the Asset Manager 40 is the closest we could get to Wellesley.

Thanks

 

[REWahoo]

Thanks all. I guess "knowledgeable" is someone with over 1000 posts!

Funny, I thought that was the definition of "verbose".

REWahoo: My wife is in a plan at work that only allows her to invest in Fidelity funds, so the Asset Manager 40 is the closest we could get to Wellesley.

Ah. Makes sense to me...

 

[audreyh1]

We are conservative investors, don't trust the market, two years from retirement at 57 & 61. We made only 4% in 2014. Our AA is 37% Stocks, 31% short term Bond funds (of which 10% is High Yield so could be considered stocks) and 32% Cash. All are index funds in Fidelity & Vanguard. Using The 4% Rule the Nest Egg would represent about one third of our annual income in retirement so we're not interested in risking it.

Does anyone knowledgeable here have a good reason not to dollar cost average into Vanguard Wellsley and for my wife's 403B Fidelity Asset Manager 40? I realize the market is at a high and the bonds may be longer duration than my short term funds, but are there any pitfalls I don't know? We do not enjoy financial matters yet don't want to pay a fee to a planner. So instead of continuing my do-it-yourself AA we'd like to forget it and use these two funds.

I've learned a lot on this and other boards but I don't enjoy learning any more and would rather use these two funds.

Thank you

I think you did fine considering your allocation. Intermediate and long-term bonds did better than short-term in 2014, and high yield did poorly.

Certainly direct any new funds to those balanced funds.

And nothing wrong with averaging in to the balanced funds.

 

[2B]

I have a 45% stock and 55% CD/cash. The CD ladder is yielding about 1.5% with it's short term bias. The stocks are 50% Total Stk, 10% Small Cap, 10% REIT and 30% International. The blended annual performance of all this is a nominal 4.8% return for 2014. International was a big drag - down 4.17%. REITs were up over 30%.

Think through your AA. There's nothing wrong with Wellesly but don't assume it is the answer to all of your needs.

 

[Cheesehead]

The CD ladder is yielding about 1.5% with it's short term bias.

Hi 2B,

How and where do you get short term CDs for 1.5%?

Thank you

 

[audreyh1]

It's an answer for his needs if he wants to stop worrying about or managing an AA.

In his bias for 2014, he avoided intermediate and longer bonds, and assumed high yield would be OK. A lot of smart people took that tack. But you never know how an asset class is going to perform each year and there are often surprises (which is why I don't change my asset allocation each year based on what I think I know at the beginning of the year). Letting someone else run the allocation for you is just fine.

 

[NW-Bound]

We are conservative investors, don't trust the market...

If you don't trust the market, then the mattress is the place for your stash.

Wellesley invests in both stock and bond markets, and currently has only 2% in cash.

 

[clifp]

We are conservative investors, don't trust the market, two years from retirement at 57 & 61. We made only 4% in 2014. Our AA is 37% Stocks, 31% short term Bond funds (of which 10% is High Yield so could be considered stocks) and 32% Cash. All are index funds in Fidelity & Vanguard. Using The 4% Rule the Nest Egg would represent about one third of our annual income in retirement so we're not interested in risking it.

Does anyone knowledgeable here have a good reason not to dollar cost average into Vanguard Wellsley and for my wife's 403B Fidelity Asset Manager 40? I realize the market is at a high and the bonds may be longer duration than my short term funds, but are there any pitfalls I don't know? We do not enjoy financial matters yet don't want to pay a fee to a planner. So instead of continuing my do-it-yourself AA we'd like to forget it and use these two funds.

I've learned a lot on this and other boards but I don't enjoy learning any more and would rather use these two funds.

Thank you

I wouldn't necessarily dollar cost average I'd just make the move all at once. I think by any reasonable standard Wellsley and Wellington are in the more than good enough category. I have no opinion on the Fidelity fund.

Yes it is risky to put 1/2 or more your money in a single fund. Yes the stock selection is heavily weighted to Giant companies. Yes it doesn't have any international stocks, Yes it isn't index fund. Yes the bond portfolio has a high duration, and yes it isn't very tax efficient.

Despite that there is a reason it has been 5* Gold fund by Morningstar for as long as I can remember. It has made 10%/year over the last 44 years, and the ride has been amazingly smooth. I believe the worse year was 2008,when VWINX lost 9.8% (What I would have given to only lose 10% that year.).

The Wellesley team made 8% last year you made 4%. I suspect the risk you took was similar to theirs. Nor do I think it's fluke. I consistently have higher returns than Wellesley/Wellington, but I have no illusion that they aren't better money managers than myself. Move the money and sleep well.

 

[prudent_one]

I want to approach the question from a different angle. You said "Using The 4% Rule the Nest Egg would represent about one third of our annual income in retirement so we're not interested in risking it."

VG Wellesley is 40% stocks. Fidelity Asset Manager 40 is 40% stocks.

Stocks may go down and even the most brilliant fund managers can lose money in a down market. Would you be able to handle losses?

 

[braumeister]

prudent_one makes a valid point. There are different kinds of risk. Something to consider.

 

[nwsteve]

Since your wife choices are limited to Fidelity, suggest you look at Fidelity Balance FBALX, also a 5*. Actually on a total return basis outperforms Wellesley 1,3,5 and 10 years. FBALX is a moderate allocation so a bit more risk but at your ages may be more appropriate. I have also found BUBFX another good 5 star moderate allocation balance found but a bit pricer for expenses. On a total return, it also slightly beats Wellesley
Nwsteve

 

[Cheesehead]

Prudent One: I know, I know, I know....But we have to have something in the market, although I feel it is a den of thieves and high speed computers. We lost 40% in The Crash and it took about five years for it to creep up to where it was.

I feel that I got to be fairly adept at doing the AA. I was doing short term bond funds because the conventional wisdom is that if interest rates rise they will go down. I had the correct mix of stock indexes in US, Int, Small Cap & REIT according to my age group. It's just that I didn't have a higher percentage in stock for this past great year, and International dragged the returns down.

So...it seems the folks at Wellesley must know what they're doing and I can't do better than them, right? I'm just fooling myself tweaking the AA. I won't have better returns without more risk, having a bigger exposure to stocks.

 

[ejman]

In 1999 Wellesley's return was a negative 4%. The rest of big name stock funds were up 30 or 40% plus. If you can live with that I guess you'd be Ok. If that comparison would cause you to sell at the bottom thinking how could I possibly make such a dumb move...Not so much.

 

[Helen]

In 1999 Wellesley's return was a negative 4%. The rest of big name stock funds were up 30 or 40% plus. If you can live with that I guess you'd be Ok. If that comparison would cause you to sell at the bottom thinking how could I possibly make such a dumb move...Not so much.

This is a great perspective, on that is often overlooked. The greed factor is what caused me to go off course when I was a fairly new invester and the tech boom was starting to happen.

I have to watch myself. I think I do better with handling loss then I do with missing out on gains. OTOH, I've only been without a paycheck for 20 months so I'll get back to you during the next bear market.

Best of luck to you, OP.

 

[Sue J]

Yes it is risky to put 1/2 or more your money in a single fund. Yes the stock selection is heavily weighted to Giant companies. Yes it doesn't have any international stocks, Yes it isn't index fund. Yes the bond portfolio has a high duration, and yes it isn't very tax efficient.

Related question.....

Wellesley is 40/60 stocks/bonds. What Vanguard stock-only fund would be comparable to just the stock portion of Wellesley? Our HSA offers Windsor II.

 

[2B]

Hi 2B,

How and where do you get short term CDs for 1.5%?

Thank you

I have a CD ladder that goes out 5 years. It's heavily loaded with CDs that will mature in 2015 that were purchased 1 to 2 years ago. These yield on average a little over 1%. I've given up waiting for interest rates to rise. I've been stretching to 5 year CDs in my ladder. These are currently yielding about 2%. The 1.5% is the blended yield of my current CD holdings. CD yields have fallen in the last few months along with the 10 yr treasury.

You can get over 3% but you have to buy out almost 10 years to get it. I buy all of my CDs through Vanguard.

 

[2B]

So...it seems the folks at Wellesley must know what they're doing and I can't do better than them, right? I'm just fooling myself tweaking the AA. I won't have better returns without more risk, having a bigger exposure to stocks.

Buying Wellesley puts your stock allocation primarily into the US large cap market. This years good performance reflects the good performance of US large caps over the poorly performing small cap and international markets. This is not always the case.