"Pssst!! Wellesley"

[unclemick]

You are not missing anything. My nephew fresh out of Annapolis headed for flight school( thus starting TSP) in contrast to my Sis actually listened to my advice(BS depending on who you ask) - gave him Bogle's first Book circa 1994 - 'don't read books' but read this book and max TSP in 500 Index equivalent. Check back in twenty years. And no I didn't see the coming irrational exuberance. He did crack after about 10 yrs listening to fellow officers he slipped and read Four Pillars. He promised to only screw up going forward ( actually I like a lot of Bernstein).

Today I would say pick the lifecycle fund for your age (aka Target) and do your day job - they put in enough bells and whisles to make you think it's complicated. It is not.

heh heh heh - 1966 - 1982 flat I look back as my 'true grit' period - actually I made every stupid move in the investment book except perhaps commodities. Hence I work on grumpy and opinionated - WITH a Curmudgeon Certificate..

[FIREdreamer]

Originally Posted by Midpack

I don't have any room whatsoever in my tax deferred accounts for Wellesley so my only option is in my taxable account. I am in a higher tax bracket, so I don't want income from my taxable holdings now. So PSSST Wellesley doesn't apply to me.

Yes, in your case Wellesley would be a bad choice. Lots of dividends (most taxed as ordinary income) plus sizable capital gains each year.

[cute fuzzy bunny]

Originally Posted by unclemick

I believe CFB is the evil perpetrator

I'm pretty sure we collaborated.

Before ever coming along to the ER forum, I looked pretty long and hard at how to invest as a 39 year old early retiree. Thats before all y'all changed my mind 5 times.

What seemed to be the best mix was half Wellesley and half Wellington. That put you at about a 50/50 mix of stocks and bonds. The bonds are mostly short-intermediate term corporates of very good credit quality. The stocks are mostly good dividend paying blue chip large cap value bend.

In looking at Wellesley alone, the small slice of equities is somewhat overcome by the value premium. You get a heck of a nice dividend that you can just take and spend. Historically the products principal value more than kept up with inflation.

So you get your check and you spend it.

What could be more difficult for the fund going forward is recent and current low bond rates, that the last 30-something years that wellesley has been in place have been very good for bonds, and that the large cap/value tilt might produce less of a premium than it has historically.

But for a good place to start with your investments, its pretty low volatility and should be a good performer.

I'd say about all the same things apply to Target Retirement Income or the Lifestrategy income funds, although those depend more on TSM and less on a large cap value equity base, but their bonds are far more diverse. Which may or may not be a good thing.

The managed payout 5% fund is a far racier version, but might prove to be a better option over the next 20 years due to the extreme diversification. Of course, if all the equity markets worldwide tank and commodities eat it, that wont be a happy place.

So maybe a nice low risk high yield port today could be a mix of wellesley, TR income, LS income, and MP 5%...?

Last little tidbit is that allegedly the "old money" folks often invested in Wellington and then started shifting the holdings towards Wellesley as they approached retirement...

[ats5g]

Originally Posted by Midpack

There's why my POV is different. I don't have any room whatsoever in my tax deferred accounts for Wellesley so my only option is in my taxable account. I am in a higher tax bracket, so I don't want income from my taxable holdings now. So PSSST Wellesley doesn't apply to me. But after I retire, Wellesley might make good sense for me one day. Thanks...

You can create a more tax efficient pseudo Wellesley fund out of 40% Vanguard's LV index fund/etf or Vanguard's High Dividend fund/etf and 60% Vanguard's intermediate muni fund. Same value tilt, and similar duration/credit quality of bonds.

There is nothing all that special about Wellesley, except that you get it all in one fund.

You can also do about the same with Wellington, just use 60% for the stocks and 40% for the bonds.

- Alec

[wildcat]

Originally Posted by unclemick

Actual portfolio at age 65 providing 60% of income:

Target Retirement 2015 - SEC yield 3.2% or so

Norwegian widow stocks - 33 a few examples:

electic ute - Con Ed, Excelon, Empire District

Water - Aqua America

Gas - National Fuel Gas

Telephone - Verizon and AT&T

Food - Flowers, J M smucker

Mfg - VFC(wrangler jeans etc) and Borg Warner

Drugs - Eli Lilly and Glaxo

Financial - BAC, JP Morgan

REIT - Washington REIT, United Dominion

The usual suspects for widows and orphans. also STON and EGLE as flyers from this forum for the hormones.

Target(yield) plus early SS plus a fixed(non cola) pension has my basic retirement covered.

I used to make it more complicated.

heh heh heh - OR pssst Wellesley and go fishing! It's the thought that counts.

ooops! Big oil is usually third or sometimes second - add Exxon and Chevron. 85% Target and 15% Norwegian overall.

Hey UM, what about the financial preferreds?

InvescoPowerShares.com - Financial Preferred Portfolio - PGF

Qualified divis and higher up on the scale than the equity holders - ? Just throwing some gas on the male hormone fire

[Nords]

Originally Posted by cute fuzzy bunny

I'm pretty sure we collaborated.

Wasn't the "Psssst" part of the joke based on a quote that William Shatner/Denny Crane used to say to Candice Bergen's character in "Boston Legal" or whatever the show is called?

I've never seen the show, let alone heard the dialogue, but that's the vague memory I have from a couple years/50,000 posts ago...

[thaidyed]

Until finding this board I always figured that bonds were something to put money into 'later' when I was 'old'. Now I'm thinking perhaps that reasoning is unwise...
I have no bonds in my portfolio at all and the ways to buy direct (I-bonds, TIPS, etc.) and are not very appealing right now so I am intrigued by the idea of using Wellesley as a bond fund (ala FIREDreamer) sounds like a good one...(of course have to finish doing my research first, thnx WantTo).

But assuming I do decide to get into bonds through a dividend generating fund like this, I have a choice to make of what type of account to do it with and the tax implications of dividends are more than I can quite figure out. My tax bracket is all over the place and highly variable (living abroad now, if I move home it will totally change) so I can't really do the numbers and will just have to go by a rule of thumb.

I could use some of my Roth account to hold Wellseley but as I've got a good number of years to go yet and investing aggressively for that reason, seems in the long term, the savings of tax from long-term aggressive stock investing will be more than what I'd save avoiding paying tax on dividends.

Is my logic sound on this?

[Rambler]

Thanks to all, I'll check out the links provided by W2R and others. I'm still accumulating, and in a high tax bracket...but when the j*b goes, I want the high tax bracket to go as well. Also, I am at this point not selling anything to re-allocate, just buying into different products to get to my FIRE AA. I do believe in dividends, as you have probably seen from my previous posts, but I also believe in growth. Most of what I have is in growth stocks, and my additions over the past 8-10 months have been in divvie payers and bonds. But after reading this post, I think it would be a lot easier to manage pssst Wellesley than trying to do all of the management myself. So, I'll be watching a few other funds I have along with dividends produced, and see if I can harvest enough tax losses to get into Wellesley with 100k later in the year. Problem with that though, is that I wouldn't want to sell something that is 20% down yoy when I sold it, to buy something that is only 6% down yoy. So I'll have to do quite a bit of analysis as well as save my pennies so I can get in with over 100k.

Again, thanks to all who have responded.

R

[Ronnieboy]

I think this might be a good fund for my mom. She is 66, has been approached by the financial adviser, buy you dinner, sales pitches for some insurance products where it doesn't cost her a dime to purchase (I wonder how the insurance company and FA get paid?!?), never loses money, and she can take out at least 10% year, oh, and it will never deplete!

Anyhow she is asking advise and I am thinking throwing what she has ~$100k into Wellesley and taking the quarterly payouts along with her SS and alimony (she gets till the old man croaks) she should do o.k.

[ChrisC]

Can someone explain the origin of this and what it means? I think I understand it from the context of its use, but can someone shed some additional light?

[CitricAcid]

Originally Posted by thaidyed

Until finding this board I always figured that bonds were something to put money into 'later' when I was 'old'. Now I'm thinking perhaps that reasoning is unwise...
I have no bonds in my portfolio at all and the ways to buy direct (I-bonds, TIPS, etc.) and are not very appealing right now so I am intrigued by the idea of using Wellesley as a bond fund (ala FIREDreamer) sounds like a good one...(of course have to finish doing my research first, thnx WantTo).

But assuming I do decide to get into bonds through a dividend generating fund like this, I have a choice to make of what type of account to do it with and the tax implications of dividends are more than I can quite figure out. My tax bracket is all over the place and highly variable (living abroad now, if I move home it will totally change) so I can't really do the numbers and will just have to go by a rule of thumb.

I could use some of my Roth account to hold Wellseley but as I've got a good number of years to go yet and investing aggressively for that reason, seems in the long term, the savings of tax from long-term aggressive stock investing will be more than what I'd save avoiding paying tax on dividends.

Is my logic sound on this?

If you have other tax-deferred accounts that is NOT a Roth, I would highly suggest you put Wellesley in the other tax-deferred, instead of the Roth. The big advantages of the Roth is that ALL the CG and capital growth is tax-free, where in regular IRAs and 401ks, the CGs eventually get taxed as regular income. So, you want the best performing growth to occur in your Roth. Obviously, with all the dividends spitting out, you want to DRIP without tax implications so another tax-deferred account would be preferable to a Roth for Wellesley.

[REWahoo]

Originally Posted by ChrisC

Can someone explain the origin of this and what it means? I think I understand it from the context of its use, but can someone shed some additional light?

You can thank Unclemick for this one. It is a reference to investing in dividend paying stocks - picture a Norwegian widow waiting by the mailbox for her quarterly check...

[NW-Bound]

I do not have this fund, but will study.

It is quite more conservative than my Dodge & Cox Balanced, which did very well until recently. A couple other value funds I have also recently stumbled. Turned out the one thing they have in common is too much financials in their holdings. Were the managers lured in by the high dividends of financials?

There was a value-oriented mutual fund manager who appeared on TV all the time in the 2002-2005 time frame touting WaMu. He was right, until he became wrong. I just look at WaMu chart. Shocking!

By the way, many people are mislead when they look at price charts of stocks on the Web. A stock or mutual fund throwing off lots of dividends does not look good next to a growth stock, due to low price appreciation. For a fair comparison, one must include the total growth as if the dividends were reinvested. The pictures often look entirely different. I have shown some charts to my friends that really open their eyes.

I like this thread. The pros & cons are explained well. When people disagree, it is with mutual respect.

[2B]

Originally Posted by NW-Bound

I like this thread. The pros & cons are explained well. When people disagree, it is with mutual respect.

I'm sure some would disagree.

[2B]

Originally Posted by unclemick

heh heh heh - 1966 - 1982 flat I look back as my 'true grit' period - actually I made every stupid move in the investment book except perhaps commodities. Hence I work on grumpy and opinionated - WITH a Curmudgeon Certificate..

I started about the same time but went into the late 90's before discovering index investing. I also did commodities with the predictable, usual result.

[Marquette]

Originally Posted by 2B

I also did commodities with the predictable, usual result.

Your wealth was commoditized?

[cute fuzzy bunny]

He'll be drinking frozen orange juice for a very long time.

[NW-Bound]

Originally Posted by 2B

I'm sure some would disagree.

Oh boy! Even when I am nice, people can still pick on me