Out Of Wellesley?

[yakers]

DW retired 2 years ago and I did on March of this year, so far have not touched our, now declining, deferred comp funds, this year was covered by a buy out when I retired and we have cash in our credit union that plus our pensions covers our 2009 expenses. But starting in 2010 we will need to draw down on our IRAs or have a major contraction in lifestyle or. gulp, w@rk.

I like to keep things simple particularly for DW who is not interested in matters financial. So her IRA is in VG Wellesley and mine is primarily in a target retirement type account.

Over the last few years we have been satisfied with these choices and they have done OK through the recent market declines. But, should we be doing something different? Is there ever a time to get out of Wellesley?

 

[cute fuzzy bunny]

I'm guessing that most Wellesley holders are a bit happier than most investors these days. Except for target retirement income and lifestrategy income, its lost the least of all vanguard balanced funds YTD.

You'll get a largely inflation protected ~4% out of the fund like clockwork. You wont have a bunch of losing years or any huge drop years.

You also wont make as much as if you had much higher stock holdings, and the associated volatility.

So I guess the short answer is a couple of questions...what dont you like about it and what would you like to have in the way of parameters that would be better? More return and more volatility? Less return and less volatility?

 

[W2R]

DW retired 2 years ago and I did on March of this year, so far have not touched our, now declining, deferred comp funds, this year was covered by a buy out when I retired and we have cash in our credit union that plus our pensions covers our 2009 expenses. But starting in 2010 we will need to draw down on our IRAs or have a major contraction in lifestyle or. gulp, w@rk.

I like to keep things simple particularly for DW who is not interested in matters financial. So her IRA is in VG Wellesley and mine is primarily in a target retirement type account.

Over the last few years we have been satisfied with these choices and they have done OK through the recent market declines. But, should we be doing something different? Is there ever a time to get out of Wellesley?

You didn't like last week's dividends?

Wellesley has dropped, but so has everything else. Over the long term, it has kept pace with inflation while providing good dividends. I have not even thought of selling my Wellesley, personally. It is doing what it is supposed to do.

 

[mb]

Is there ever a time to get out of Wellesley?

I haven't looked at it for many years but IRRC the bond portion of Wellesley had a fairly long duration so it would not do very well if interest rates increased.

 

[cute fuzzy bunny]

Sort of on the short end of intermediate term.

When rates have shot up or down, it hasnt seemed to have much of a material effect. Pretty smooth chart.

 

[mb]

Sort of on the short end of intermediate term.

When rates have shot up or down, it hasnt seemed to have much of a material effect. Pretty smooth chart.

Should be fine then.

My comments were based on their bond portfolio of about 15 years ago.

MB

 

[REWahoo]

Roughly 40% of my nest egg is in Wellesley and I have no plans for any decrease. On the contrary, after all the debris is cleaned up following yesterday's little dust up I'm considering adding another dollop.

 

[yakers]

I actually like Wellesley but I just wanted to be sure that I was not *blind* to something. I held an S&P500 fund for many years and it did well enough, especially in up markets but I learned as I got older to add some Intl stocks and bonds. I just wanted to make sure there wasn't something about Wellesley that I was missing.

And I thought it might get a reply out of Uncle Mick

 

[brewer12345]

Wellesley isn't nearly as good as a SPIA.

 

[Olav23]

Do you have Admiral Shares of Wellesley? If not, if you don't have a capital gain built up in Welly, I think it is a no-brainer to move to the Vanguard Target Retirement Income fund.

Here is why I would make the decision:

Expense ratio (assuming non-admiral shares): TR: .19% Well: .25%
Current Yield: TR: 4.03% Well: 4.79% (so, both get close to the magic 4%)

Asset mix:
TR: 70% bonds/30% stock
Bonds diversified into 20% tips, 45% total bond, 5% prime money market
Bond average credit quality: AAA (95% rated A or above)
Stock: 24% Total US, 6% international and emerging mkts
Average market cap: $27b (smaller market cap, so less stock allocation needed for equity returns)

Well: 63% bonds/37% stock
Bonds un-diversified: 294 bonds
Bond average credit quality: AA (85% rated A or above)
Stock: only 52 stocks! (non-diversified)
Average market cap: $46.5b

Returns: (to aug-31)
TR: 3-year pre-tax: 4.4%
Well: 3-year pre-tax: 4.23%

TR: 3-year post-tax: 3.05%
Well: 3-year post-tax: 2.62%

So, even in tax-efficiency, TR Income beats out Wellesley.

Trailing Returns, 1-yr to today:
TR: -4.23%
Well: -6.72%

Personally I know what choice I would make, mainly due to the lower credit quality of Wellesley, the smaller market cap of TR Income and the more diversification TR Income offers. But it is your judgement call!

If you want to compare all the stats:
Vanguard Target Retirement Income Report (VTINX) | Snapshot
Vanguard Wellesley Income Report (VWINX) | Snapshot

 

[W2R]

Roughly 40% of my nest egg is in Wellesley and I have no plans for any decrease. On the contrary, after all the debris is cleaned up following yesterday's little dust up I'm considering adding another dollop.

I have about 30% in VWIAX Wellesley, as my plan dictates, though I would really like to buy more! When the market eventually turns around and becomes more of a bull market, I can buy more during rebalancing and that will be great.

Wellesley has a long history, during which its performance has been consistently quite good. I was VERY pleased with last week's dividends, which to me seemed surprisingly hefty, especially considering recent market volatility, bank failures, and so on.

 

[Dawg52]

Wellesley isn't nearly as good as a SPIA.

No luck Brewer. Not even a nibble.

 

[cute fuzzy bunny]

It was a pretty lame attempt.

 

[ziggy29]

Wellesley isn't nearly as good as a SPIA.

Doesn't look like you reeled anything in...

 

[REWahoo]

No problem. He's got one on the hook here.

 

[ziggy29]

No problem. He's got one on the hook here.

Fish on!

 

[yakers]

Wellesley isn't nearly as good as a SPIA.

Its funny to write about nasal coffee, sounds cute but not if its actually happening. I wanted to post a clever response but I was actually mopping up the keyboard.

 

[cute fuzzy bunny]

Its much worse than spontaneously generated nasal milk.

 

[brewer12345]

Its much worse than spontaneously generated nasal milk.

Soda is a lot nastier than either. And don't ask about the time I got seasick after having a breakfast of oatmeal...

 

[bbbamI]

Oh dudes...it's lunchtime!

 

[yakers]

Yes, the shares are Admiral class. I like the analysis compared to the VG TR fund, this is the kind of insight I was looking for, but as my main fund is in a TR type account I don't see a reason to change out DW's Wellsley for a TR fund. But that is some good thinking. It is easy to be happy with Wellesley when it is going down less than other funds and less than the market and when the dividends come in. But investing is a bit bigger than that and I need to keep an open mind when I am feeling most complacent.

Do you have Admiral Shares of Wellesley? If not, if you don't have a capital gain built up in Welly, I think it is a no-brainer to move to the Vanguard Target Retirement Income fund.

Here is why I would make the decision:

Expense ratio (assuming non-admiral shares): TR: .19% Well: .25%
Current Yield: TR: 4.03% Well: 4.79% (so, both get close to the magic 4%)

Asset mix:
TR: 70% bonds/30% stock
Bonds diversified into 20% tips, 45% total bond, 5% prime money market
Bond average credit quality: AAA (95% rated A or above)
Stock: 24% Total US, 6% international and emerging mkts
Average market cap: $27b (smaller market cap, so less stock allocation needed for equity returns)

Well: 63% bonds/37% stock
Bonds un-diversified: 294 bonds
Bond average credit quality: AA (85% rated A or above)
Stock: only 52 stocks! (non-diversified)
Average market cap: $46.5b

Returns: (to aug-31)
TR: 3-year pre-tax: 4.4%
Well: 3-year pre-tax: 4.23%

TR: 3-year post-tax: 3.05%
Well: 3-year post-tax: 2.62%

So, even in tax-efficiency, TR Income beats out Wellesley.

Trailing Returns, 1-yr to today:
TR: -4.23%
Well: -6.72%

Personally I know what choice I would make, mainly due to the lower credit quality of Wellesley, the smaller market cap of TR Income and the more diversification TR Income offers. But it is your judgement call!

If you want to compare all the stats:
Vanguard Target Retirement Income Report (VTINX) | Snapshot
Vanguard Wellesley Income Report (VWINX) | Snapshot

 

[cute fuzzy bunny]

I think you can tell the outcome of an analysis of two funds, one with a higher stock component than the other, over the past 3 years without reading any statistics.

Looking at the ten year returns on wellesley vs lifestrategy income (since TR income doesnt have a ten year track record), wellesley picks up almost a full percentage point per year in returns. Thats a lot.

That having been said, I've often recommended that people interested in "this kind of fund" buy equal amounts of LS income, TR income and Wellesley. They really do invest rather differently and in rather different approaches. Two of them have fairly decent long term results and theres no reason to expect TR income to do badly.