Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: Portfolio questions
Old 05-09-2005, 09:17 AM   #21
Recycles dryer sheets
 
Join Date: Oct 2004
Posts: 408
Re: Portfolio questions

Kate,

Thanks for your reply. I have also read Larry's book and pulled out a lot of good information. My most immediate concern right now is trying to get a handle on the amount of income this port will generate given the size of the portfolio. I've PM alec on some of the details to try and better understand all of this. I, too, was thinking of taking the income produced off of Wellington and using it for my living expenses. I just don't know how much it is all going to produce and what tax bracket it would put me in. Here is a true confession: I am a spread-sheet dummy. When the next class that opens up in the local college I am there.

After 2 years of actively reading and thinking I had a handle on this I am starting to doubt myself. Less meddling sounds good at this point.

LovesLife
__________________

__________________
LovesLife 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!

Re: Portfolio questions
Old 05-09-2005, 10:08 AM   #22
Full time employment: Posting here.
 
Join Date: Apr 2005
Posts: 577
Re: Portfolio questions


LovesLife,

I just use paper and pen and a calculator, no spreadsheet. I've been tracking my expenses for a long time so that part is easy. And I'm trying to set it up so distributions from Wellesley cover my living expenses, and leave my other funds to (hopefully) grow.

I did a lot of jumping around before I settled (for now) on my plan. I have a hunch that's pretty normal. Don't worry about it. You'll settle on something that suits your own needs and goals.

All the best to you!
kate
__________________

__________________
kat is offline   Reply With Quote
Re: Portfolio questions
Old 05-09-2005, 10:53 AM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,409
Re: Portfolio questions

One thing that took about thirty years (roughly 1966-1996) to figure out - per Bogle when presented with a variety of solutions - ala Occam's razor - the simplest is often the best - aka 60/40 balanced index in my particular case.

Still gotta putz with my side money though - it's a male hormonal thing.

At todays valuations - I suspect 40/60 is closest to the 4% take out handgrenade.

BUT - if you just gotta 'do MPT' - then you just gotta.

Coffeehouse, Bernstein examples, four corners, or perhaps even an old 1980's Harry Browne??
__________________
unclemick is offline   Reply With Quote
Re: Portfolio questions
Old 05-09-2005, 12:10 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Portfolio questions

Alec - See the go-round Wab and I had around wellesley/wellington vs the standard balanced index fund and even the s&p500. Both outperformed the balanced index for all periods while producing a higher dividend payout, with less volatility. Both also came close to the s&p500 with far, far less volatility and far, far greater dividend payout.

The value tilt and stock picking is apparently working. That the expenses of both funds is in the vicinity of the indexes certainly helps and wipes out the big downside of most managed funds...the high cost.

Loveslife...the dividend yield quoted by vanguard is for the stock and bond dividends...they'll break out the components for tax purposes for you at year end. They do not include capital gains. If you want to see what your investment would have earned last year, do this: take the amount you plan to invest and divide it by the current share price for wellington. Thats your # of shares. Go to vanguards web site, pick the list of funds, pick wellington, and click on distributions. That will tell you by quarter and year end for the last six quarters what the dividend and capital gains payouts were per share. Multiply those #'s by your number of shares, and you'll see what income you would have seen by quarter and at year end.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Portfolio questions
Old 05-09-2005, 02:47 PM   #25
Full time employment: Posting here.
 
Join Date: Oct 2003
Posts: 961
Re: Portfolio questions

Hey th,

I wasn't trying to suggest that Wellington, Wellesley, Balanced Index, S&P 500, TSM etc., is better than the other. I was merely trying to point out that the main reason that Wellington and Wellesley have seemed so steady eddie, and performed so well over the past 1, 5, 10 years is because of their value tilt and their inclusion of bonds.

I think the value tilt, low turnover, and low costs explains almost all of the great performance of Wellington and Wellesley. I don't think it has much to do with stock picking. Obviously Wellington and Wellesley are going to have higher dividend payouts, but this is just because they focus specifically on value stocks and high dividend paying stocks respectively. There is certainly nothing wrong with that if you want value or high dividend paying stock.

However, you don't need wellington or wellesley to have a value tilt. You can do the same with a value fund and a bond fund. I looked at 60/40 and 40/60 mixes of large value indexes and the lehman bros aggregate bond index from 1984 to present [minus 0.22% expenses of course], and the infamous stock picking didn't really add much value at all. Also, Wellington and Wellesley had higher standard deviations than the 60/40 and 40/60 index mixes. If I compared the returns with a deep value index balanced fund, like the CRSP 1-5 value [e.g. DFA LV] and 40% LBA, there is no outperformance of Wellington and Wellesley.

Unfortunately, I have the spreadsheet at home.* So, I'll try and post later tonight.

- Alec
__________________
ats5g is offline   Reply With Quote
Re: Portfolio questions
Old 05-09-2005, 03:07 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Portfolio questions

Sorry, I was reacting to a lately oft repeated "no difference between wellesley/wellington and a plain old balanced index fund". You're right, a hunk of value stocks and a hunk of bonds of your choice in the right balance can produce similar results. I've been pondering crafting a muni bond/value stock hybrid myself. Just havent figured out which ones and in what proportion yet. Objective is to reduce the tax implications, increase long term portfolio growth and reduce withdrawals as the wife is due back at work in a couple of weeks.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Portfolio questions
Old 05-09-2005, 03:18 PM   #27
Full time employment: Posting here.
 
Join Date: Oct 2003
Posts: 961
Re: Portfolio questions

hey, no harm, no foul. I know how jumpy little boys can make dads [no sleep and loads of caffine].

- Alec
__________________
ats5g is offline   Reply With Quote
Re: Portfolio questions
Old 05-09-2005, 03:32 PM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Portfolio questions

Jumpy? Moi? He's been wailing the last 2 hours (yes, one of his nicknames is "the prince of wails"). Just finally got him to take a nap. God bless the inventor of high tech swaddling blankets, cribs that vibrate, and white noise generators.

Its true that the conditions that have led to wellesley/wellington outperformance the last few decades might not repeat. Sliding interest rates, soft inflation, value stock dominance except for 95-99. At ordinary or low valuations I wouldnt hesitate to jump into index based setups. At the current valuations, I like the idea of someone with a great track record making a few decisions to keep my head above water. Especially when they arent charging very much for the pleasure.

Brewer said he's met the wellington guys and would give them his money. I think his standards are pretty high.

I would like to see your analysis on home rolled wellesley/wellington 'clones'. I've got some re-porting to do fairly soon.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Portfolio questions
Old 05-09-2005, 06:12 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,409
Re: Portfolio questions

Th

You lucky dog - being a CA cat and all that - benchmark Vg Tax Managed Balanced and bounce your ideas against the bogey.

Three Vg CA tax exempt funds and Vg Tax Managed offerings to mix and match.

And, and now from left field - pick the top ten holdings from the funds you like and hold them 'forever in a cheap brokage account' and play the interest cycle with CA tax exempt mixes.

We haven't beat the number of stocks for diversification/volitility curve dog for a while.

Hey - this could be fun! - the best tax exempt current income WITH inflation fighting growth.

Let the games begin.
__________________
unclemick is offline   Reply With Quote
Re: Portfolio questions
Old 05-09-2005, 08:34 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Portfolio questions

Tax managed balanced doesnt shake me of all california state taxes.

I really, really, really dont wanna have to make quarterly estimated tax payments.

I also really, really, really dont wanna get whacked for underwithholding at the end of the year.

But yeah, nice to have all those CA money market and muni funds, along with the tax managed stock funds. Although I still have to snoop out the actual levels of payout among the various 'tax managed' funds vs their non tax managed buddies. I'd love a value tilt. What still puts me off about some of the tax managed funds is the 2% back end penalty for sales within a year and 1% for 5 years. I know why they're there, but I hate having any fees hanging over my head if I need/want to do something different.

Heck, I'm already chafing at the 3% 11 month cd's I bought just 5 months ago...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Portfolio questions
Old 05-09-2005, 08:36 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Portfolio questions

...and worse, long term cd rates just wont budge. Heck the tax free CA money markets are barking up the 2-3 year cd rates tree right now and the emigrant/ing accounts arent that far behind 4-5 year cd's.

Weirder and weirder this becomes...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Portfolio questions
Old 05-09-2005, 10:11 PM   #32
Thinks s/he gets paid by the post
 
Join Date: Mar 2004
Posts: 1,318
Re: Portfolio questions

Loveslive,
You could probably set up a simple spreadsheet to calculate the expected yield on this portfolio -- just multiply the dollar amount you expect to hold by the current yield or the 2004 dividend or yield of the fund, and sum them all up.

I think you will find the yield overall is around 2.5%, though.

One reason to be heavier in foreign bonds (for the gotta-have-MPT less-correlation folks like me out there) is that you are holding these assets in foreign currencies. Same with foreign stocks -- asset values may be converted back into dollars for you every night to read on your NAV screens, but the assets themselves are not dollar assets.

That gives you one more dimension of diversification.

And in response to your concern that you might go on twitching and tweaking forever... my experience is that by the time you are done with this all, you will be so sick of it you will not want to look at another trade for months. Do your annual rebalancing and spend your time thinking about something much more fun and rewarding. Discipline yourself not to second guess -- it'll make you go nuts, and probably lead you to overtrade and change course.

You won't get it all right, all the time. That's ok. Forever is a long time, perfection is the enemy of good, and all that. Just find a system you understand and that hits your personal priorities, iimplement it at whatever speed you are comfortable with, and then close the door and let it work. Markets will go up and they will go down. But right now, your money market assets are guaranteed to be losing money in real/after-tax terms.

The next step is the biggy -- don't get looped up in analysis paralysis. Start making some decisions, then implement them, and move forward. rebalance annually, maybe tweak a little around the edges here and there (I have a Penfed CD instead of some of the medium term bonds, for instance), then look at the whole thing again in 5 years and see if you want to make any more fundamental changes (add or drop an asset class, for instance, or change percentages by more than a few digits). You're almost there! Time for action!

__________________
ER for 10 years; living off 4.3% of savings (and a few book royalties ;-)
ESRBob is offline   Reply With Quote
Re: Portfolio questions
Old 05-10-2005, 07:32 PM   #33
Recycles dryer sheets
 
Join Date: Oct 2004
Posts: 408
Re: Portfolio questions

Hi Everyone.

I would like to thank all of you for sharing your thoughts on my proposed portfolio. It has certainly given me a lot to think about. It also addressed some areas I am weak in such as income tax potentials. I think it would be alot easier on my head if I just went with a single fund like the VG Retirement series.

Bob,

I am printing out your last response and taping it to the wall. Your words have a way of giving me courage. Thank you.

Thank you all.

LovesLife

__________________

__________________
LovesLife 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
SWR - Amortize your portfolio RgrGd FIRE and Money 5 03-28-2007 11:29 AM
Minimum starting portfolio to achieve success Dorus FIRECalc support 1 08-10-2006 05:03 AM
Questions on ESRBob's Book bongo2 FIRE and Money 2 02-19-2006 07:11 PM
Conservative distribution phase portfolio peteyperson FIRE and Money 13 03-22-2005 07:48 AM
Volatility in your Portfolio ESRBob FIRE and Money 5 03-03-2005 10:09 AM

 

 
All times are GMT -6. The time now is 12:46 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.