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Old 02-22-2013, 07:19 PM   #21
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My DW and I diversify to a degree. DW holds Wellesley and High Yield Bond in her Roth. I hold Wellington and REIT Index's , US and Global Ex, in mine. However our much larger 401k and rollover IRA's contain mostly broad Index stock and bond fund holdings with a good dose of Pimco Total Return Class C Inst.
We plan to keep the Roth's to the end taking the dividends for income and reinvesting any cap gains.
The 401k's and IRA's are treated as a total return investment with future withdrawals on that basis.
I think that you need a total plan to approach this subject.
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Old 02-22-2013, 08:24 PM   #22
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To me a good complement for a risk-averse investor would be the Target Retirement Income fund. It has US and International index funds, so you get the full world stock coverage you lack with Wellesley--about 8,000 more stocks that Wellesley. In the case of inflation, which would presumably hurt Wellesley and your standard of living, TR Income will have 17% of its assets in a short-term TIPS fund, and then another 14% in international hedged bonds, both changes made over the upcoming months. It's also eliminating its 5% stake in the prime money market fund, which has been a drag on returns and yield. The overall stock allocation is 30%, close to Wellesley's 35%, but with much greater diversification and no manager risk. If bond yields rise, the NAV will suffer, but you'll be rewarded with a higher yield, and it should have fairly limited volatility--both lost 10-11% in 2008 (Wellington lost over 22%).

The problem I have with Wellington and Wellesley is that there is substantial overlap in the stock allocation, so you're ending up with two large value funds with corporate bonds and little international allocation. Wellington has also lagged its benchmark the past 3 years, a victim of huge asset bloat as everyone rushed into it.

My own preference would be to avoid balanced funds altogether, since with no possibility of the bond returns that served as tailwinds for funds like Wellesley/Wellington over the past 30 years, it's possible that the bonds will drag down overall fund returns, which is a problem in the distribution phase. You want to withdraw from what's up for the year, but with bonds and stocks locked together, you lose that flexibility. Then there's the question of tax efficiency, such as bonds in IRA/401K accounts, and separation gives you the flexibility to adapt to future tax rates and policy. Some advisors, like Larry Swedroe and Allan Roth on CBSMoneywatch, are advocating using CDs instead of bonds now for fixed income instead of bonds, to avoid capital and NAV losses (there are tons of freaked-out retirees on the Bogleheads forum, wondering why their 'safe' bonds are losing value while stocks are soaring).
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Old 02-22-2013, 08:43 PM   #23
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If you have invested in Wellesley, Wellington and Dodge and Cox Balanced funds then you have been in actively managed funds. (another way of saying I don't understand your comment "I have never had any actively managed stock or bond funds" US Growth performance is difficult to gather from the information presented but the 5 and 10 year performance compared to their recently revised benchmark show not all was well back then. A chart of the performance in the 1999 -2003 time period vs the SP 500 (The benchmark at the time) it would show a less than pretty picture.


Thank you for the good wishes. Maybe the market will dive now, removing any need for me to do anything. It usually happens just as I get ready to do something with my wide rebalance bands.

I was stating that I have not used any actively managed 100% stock or bond funds (like VG US Growth) - prefer stock and bond index funds. On the other hand, I hold actively managed balanced funds (Wellesley and Wellington).

As for US Growth - there will always be periods where a fund does better or worse than it's benchmark. Tough to leave it alone when you're panicked and it's doing lousy. What's kept me going over the years is solid diversification of stocks and bonds, and the feeling that (in the long run) it should all work out for the best.
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Old 02-23-2013, 09:04 AM   #24
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You can screen all the funds to see what might meet your expectations, but they're all arguably underperforming Wellesley & Wellington at present.
STAR is performing between the two, and appears to have characteristics of both managed and index funds -- it is comprised of 11 managed funds, but the allocation of those funds is (AFAIK) stable. Diversification is built-in, and "advisor risk" should be mitigated.

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Old 02-23-2013, 09:12 AM   #25
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Maybe the market will dive now, removing any need for me to do anything. It usually happens just as I get ready to do something with my wide rebalance bands.
Now I don't know whether to suggest you procrastinate rebalancing or go ahead and do it so the market dives and I can reallocate!
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