Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 11-03-2015, 04:34 PM   #81
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,093
Quote:
Originally Posted by statsman View Post
Did you require a blend of the two to achieve your AA? Or was this an availability issue (ie. some 401(k) plans have a limited number of Vanguard funds)?
I'm retired for 10+ years and both funds are in an IRA, selected as you suggest, as a blend to achieve an AA of 45/45/10 (equity/bond/cash).

Yes, there is some overlap but the history of both funds - including their performance during the "market unpleasantness" of 08/09 - works for me.

I understand future performance of these funds may not reflect their past success, but there is certainly no guarantee any other fund choice I made would be better. So, I'm going to keep dancing with who brung me...
__________________

__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-03-2015, 05:05 PM   #82
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Wellesley is Wellington's more conservative cousin and it is more oriented towards income with its 60% bond allocation. Some people don't like these funds because they are actively managed and have slightly higher fees than index funds. But those fees are still far lower than most fund fees. Having everything in a single fund makes things simple, but it also removes the chance to rebalance and play with your money.....and that's something most people on here enjoy.
__________________

__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 11-03-2015, 05:07 PM   #83
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,420
Quote:
Originally Posted by Chuckanut View Post
I've been wondering it that rule always makes sense given the RMD rules many of us will face. It might be wiser to balance spending between taxable money, Reg IRA, and Roth IRA in some situations. Or maybe not?

The idea of being able to use money I have already paid taxes on to help keep me out of a higher tax bracket seems appealing.
I draw from taxable to live on and use Roth conversions to the top of the 15% tax bracket to minimize future RMDs. IMO, that is more tax efficient in the long run than spending tax-deferred funds because the Roth conversions just effectively transfer tax-deferred to tax-free (and the taxes get paid from taxable funds).
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 11-03-2015, 05:12 PM   #84
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,420
Quote:
Originally Posted by rayvt View Post
...Pick an asset allocation, say 30% stocks/70% bonds. In your taxable accounts go 30% VTI and 70% AGG. In your IRA accounts go 30% VTI and 70% AGG. Done and done....
Very suboptimal IMO. Opportunity lost to be more tax efficient and optimize Roth conversions. But I concede it is easy.

IMO it would be much better to go 100% AGG in IRAs and then mix VTI and AGG as needed in taxable to achieve overall AA target.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 11-03-2015, 06:23 PM   #85
Full time employment: Posting here.
 
Join Date: Apr 2015
Posts: 903
Quote:
Originally Posted by statsman View Post
I have read some suggest both Wellesley and Wellington like you have. I also gather there are some here who are not fans of either. I would imagine the two funds have some overlap. Did you require a blend of the two to achieve your AA? Or was this an availability issue (ie. some 401(k) plans have a limited number of Vanguard funds)?
Wellesley is ~35/65 while Wellington is ~65/35. Mix them up to get AA in between those two.

That said, you strike me as pretty risk averse so do consider if you'll be fine with, say, $2M dropping to $1.5M with Wellington or if $2M dropping to $1.8M with Wellesley is more acceptable. Maybe you're okay with something in between.
__________________
hnzw_rui is offline   Reply With Quote
Old 11-03-2015, 06:34 PM   #86
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 1,905
Interesting how after exploring a number of fascinating rabbit holes and much learned discussion we are back at a sensible W/W approach...
__________________
ejman is online now   Reply With Quote
Old 11-03-2015, 07:01 PM   #87
Recycles dryer sheets
 
Join Date: Apr 2008
Posts: 191
Quote:
Originally Posted by hnzw_rui View Post
Wellesley is ~35/65 while Wellington is ~65/35. Mix them up to get AA in between those two.

That said, you strike me as pretty risk averse so do consider if you'll be fine with, say, $2M dropping to $1.5M with Wellington or if $2M dropping to $1.8M with Wellesley is more acceptable. Maybe you're okay with something in between.
I am pretty well convinced if the portfolio can generate a 1% WR without touching principal, at least in the early years of retirement, I would be fine with Wellesley. I believe I would also be fine with something in between the two balanced funds.

I know many have said to consider total returns over income generation. But in order to stomach the volatility swings, I just need to look at what the portfolio generates as far as income and avoid worrying about the "net worth" of the portfolio.

I now need to convince my wife to make the change. As far as she is concerned, investing in the stock market is like taking a trip to the casinos. What money she invested in stock funds within her 401(k) accounts over the years she just assumed wouldn't be there at retirement.

Quote:
Originally Posted by ejman View Post
Interesting how after exploring a number of fascinating rabbit holes and much learned discussion we are back at a sensible W/W approach...
Very true.
__________________
statsman is offline   Reply With Quote
Old 11-03-2015, 09:16 PM   #88
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Quote:
Originally Posted by hnzw_rui View Post

And yes, going bond-heavy means lower returns compared to equities long term but why take the risk if you don't need to?

Here's some interesting reading:

How Do You Know When You Have Enough? - CBS News
Are You Taking Too Much Risk? - CBS News
Are the Rewards Worth the Risks? - CBS News
I just got around to reading those articles and thought they were well written. Thanks for posting.
__________________
Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
daylatedollarshort is offline   Reply With Quote
Old 11-05-2015, 08:14 PM   #89
Recycles dryer sheets
 
Join Date: Apr 2008
Posts: 191
Quote:
Originally Posted by ejman View Post
Interesting how after exploring a number of fascinating rabbit holes and much learned discussion we are back at a sensible W/W approach...
After spending a couple of days backtesting various portfolios with Vanguard index funds vs Wellesley, I can't get close. Using 2000 to the present and picking any time span that includes the late 2007 to mid 2009 recession, with a 35/65 AA using index funds, I see why many recommend Wellesley for the conservative investor.

35% Total Stock Market plus 65% Total Bond Market trailed Wellesley by an average of 2.5% annually for the period of 2000 through 2009. 2007 through 2012, they trailed by 1.25%. 2010 to the present (no recession), they trail by 1.1%.

But I also agree that putting a majority of a portfolio in one fund (or a combination of Wellesley/Wellington) sounds like a risk. I am certainly not one to question whether the portfolio managers at Wellington can continue to top a majority of index-based portfolios going forward.

For those who decided to use Wellesley as a portion of your portfolio (at least 20% but less than 50% of the portfolio), isn't adding index funds to a portfolio along with this fund somewhat conflicting (ie. actively managed vs indexed)?
__________________
statsman is offline   Reply With Quote
Old 11-05-2015, 08:52 PM   #90
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by statsman View Post
But I also agree that putting a majority of a portfolio in one fund (or a combination of Wellesley/Wellington) sounds like a risk. I am certainly not one to question whether the portfolio managers at Wellington can continue to top a majority of index-based portfolios going forward.

For those who decided to use Wellesley as a portion of your portfolio (at least 20% but less than 50% of the portfolio), isn't adding index funds to a portfolio along with this fund somewhat conflicting (ie. actively managed vs indexed)?
Wellington is one of the oldest mutual funds around (about 90 years old) and Wellesley has been around for 40 years. They are both diversified....not as much as a total stock market or total bond index fund though and have low fees. They are the exception that proves the rule for Bogleheads because they are actively managed and don't follow an index, but at least their fees are low. If you are having difficulty putting everything into Wellesley just add the appropriate amounts of Total Bond and Total Stock Index. With your low percentage withdrawal requirement it's hard to go wrong. This isn't the best from a tax point of view, but it gives you a 40/60 overall allocation with almost 50% invested in Wellesley.

Taxable
Total Stock Index $550k
Wellesley $550k

Tax deferred
Total Bond Index $700k
Wellesley $550k
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 11-05-2015, 09:44 PM   #91
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 1,905
For what it's worth, I have been retired living off my portfolio for 12+ years now and started SS a couple years ago. Although Wellesley is my largest holding at 33% it is at my upper limit for an actively managed fund, another 5% in Wellington, 10 % in Vanguard Retirement income, 10% in Vanguard value index for large cap and small cap about 25 % outside of Vanguard (Just my paranoid not all eggs in the same mutual fund company basket) and the balance mostly in vanguard intermediate bond fund index. Overall 50/50 with a wide 10% rebalance band which very rarely gets exercised.
__________________
ejman is online now   Reply With Quote
Old 11-06-2015, 01:35 PM   #92
Recycles dryer sheets
 
Join Date: Apr 2008
Posts: 191
Quote:
Originally Posted by ejman View Post
For what it's worth, I have been retired living off my portfolio for 12+ years now and started SS a couple years ago. Although Wellesley is my largest holding at 33% it is at my upper limit for an actively managed fund, another 5% in Wellington, 10 % in Vanguard Retirement income, 10% in Vanguard value index for large cap and small cap about 25 % outside of Vanguard (Just my paranoid not all eggs in the same mutual fund company basket) and the balance mostly in vanguard intermediate bond fund index. Overall 50/50 with a wide 10% rebalance band which very rarely gets exercised.
Three different balanced funds totaling almost half of your portfolio? That seems to be a bit unorthodox, especially when 25% small cap are added in. But what do I know? We're sitting on 0/80/20 (stocks/bonds/TIPs) in our tax deferred, and we are getting slammed today and pretty much the whole week. All of the books written up to recently about the safety and smoothness of bond funds should be tossed into a large pile and set ablaze.

I would like to believe I would be better off if I could deal with our portfolio in terms of meeting expenses (yes, income) rather than total return. By doing that I very likely could move the necessary allocation into stocks and just not look at the "net worth" based on fund prices. I realize this is not optimal, but what we're doing now is death by thousands of small cuts.

My apologies. This has not been a good week for me.
__________________
statsman is offline   Reply With Quote
Old 11-06-2015, 02:57 PM   #93
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Quote:
Originally Posted by statsman View Post
Three different balanced funds totaling almost half of your portfolio? That seems to be a bit unorthodox, especially when 25% small cap are added in. But what do I know? We're sitting on 0/80/20 (stocks/bonds/TIPs) in our tax deferred, and we are getting slammed today and pretty much the whole week. All of the books written up to recently about the safety and smoothness of bond funds should be tossed into a large pile and set ablaze.
You might enjoy reading the latest version of The Bond Book by Annette Thau. She is a former municipal bond analyst and her book has pros and cons of different kinds of bonds and bond funds, and she doesn't seem to have a personal bias in any direction.

Anette Thau article from the AAII Journal -
Bond Market Strategies for a Rising Interest Rate Environment
AAII: The American Association of Individual Investors
__________________

__________________
Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
daylatedollarshort is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Kitces: / Managing Sequence Of Return Risk With Bucket Strategies Vs A Total Return macav933 FIRE and Money 21 12-06-2014 10:38 AM
Total Return - Capital Appreciation & Dividend/Income Midpack FIRE and Money 32 08-28-2013 10:19 PM
Poll:Income/dividend vs total return portfolio bigla FIRE and Money 16 05-20-2012 10:04 AM
Income investing and total return investing. clifp FIRE and Money 18 09-03-2011 10:17 AM
Total Bond Mkt Index vs PIMCO Total Return Inst/Stable Value Dude FIRE and Money 7 04-03-2008 01:11 AM

 

 
All times are GMT -6. The time now is 08:55 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.