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Re: Recommend Wellesley to parents: good advice?
Old 07-16-2006, 12:53 PM   #41
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Re: Recommend Wellesley to parents: good advice?

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he's got aging conservative parents
watch it! they are obviously younger than i, and i'm not over the hill!! *bet you're aging too (even Gabe is aging).
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Re: Recommend Wellesley to parents: good advice?
Old 07-16-2006, 12:55 PM   #42
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Re: Recommend Wellesley to parents: good advice?

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Originally Posted by Cute Fuzzy Bunny
Got some data showing that LCV doesnt behave much different from LC over the long haul?
Are we talking about long-term or over the next 10 years? * In the long-term, historically you would have gotten some small value premium. * Will that premium persist going forward now that the value premium cat is out of the bag? * Got me.

In the short-term, value is more sensitive to the economy. * *The theory is that a stock becomes a "value" when it is having a hard time and is burdened with debt. * If the economy tanks, the stocks that were hurting get hurt even more and some of them die. * *If the economy does well, they can be "rescued" and that's when you get paid your value premium.

As I said before, the 2015 fund is just as likely to lose value in the short-term, but it seems to have more diverse holdings and it is designed to reduce risk as you age, which seems like a better fit for the OP's criteria.
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Re: Recommend Wellesley to parents: good advice?
Old 07-16-2006, 02:22 PM   #43
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Re: Recommend Wellesley to parents: good advice?

Still would like to see the data you're looking at. The stuff I'm looking at shows more than a 'small' premium. Term doesnt seem relevant given a probably 30-40 year investment period and we dont know what the next 30-40 years will bring. I dont see any lessening of the 'value premium' given that the LCG indexes at vanguard are whomping the LCB and LCG indexes in YTD, one year and five year returns.

The 2015 fund starts off with substantially higher equity exposure than wellesley and doesnt get down to the same exposure level for 15+ years. So i'm not seeing the fit with the OP's concern about volatility and risk of loss. Maybe I'm just reading things differently from you.

Given the set of criteria as I read them, a choice between wellesley and 2015 is hands down wellesley. Wellesley or target retirement income or 2005, maybe my answer is to buy both or all three in even amounts and see what happens.

Different question, perhaps a different answer.
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Re: Recommend Wellesley to parents: good advice?
Old 07-16-2006, 02:40 PM   #44
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Re: Recommend Wellesley to parents: good advice?

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Originally Posted by Cute Fuzzy Bunny
I dont see any lessening of the 'value premium'* given that the LCV indexes at vanguard are whomping the LCB and LCG indexes in YTD, one year and five year returns.
(I took the liberty to correct your first LCG to LCV.)

That's exactly why I think the value premium may not persist.* * The recent outperformance of value relative to non-value is historically unprecedented.* *And it corresponds with the popularization of the value premium.* *Basically, I think it'll revert to the mean, which should make it go away (or worse) in the coming decade.* *But I could be wrong.

I personally own a chunk of LCV.* *I also own a large chunk of bonds (a mix of short-term nominal and longer-term TIPS).* *I don't think it's a bad long-term mix, but I think we're trying to answer several different questions here:

1) What's the best way to preserve principal for somebody who plans to retire in the next 10 years, without knowing anything else about their expenses, etc?* * I'd say TIPS.

2) What's a good simple low-cost fund for a conservative investor over the long-term?* *I'd say Wellesley's not a bad pick.

3) What's a good simple low-cost fund for somebody planning to retire in the next 10 years at the traditional retirement age?* *Target 2015 looks like a reasonable pick.

4) What's not quite as simple, but might better preserve spending power over the next 20-30 years?* *I'd say TIPS and a smaller initial allocation of stocks than either of the above funds, with prudent market timing rebalancing.
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Re: Recommend Wellesley to parents: good advice?
Old 07-16-2006, 02:57 PM   #45
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Re: Recommend Wellesley to parents: good advice?

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Originally Posted by DOG51
What fund do you recommend for your conservative equity income allocation?
DOG51,

Fidelity or Vanguard Equity Income Fund -- They are both Large/Value stock funds about the same holdings as either Wellington or Wellesley. I'm just trying to avoid exposing the fixed income portion to interesest rate changes. If they buy a $10,000 CD that matures in 5 years they will get their $10,000 back in 5 years. They'll get their interest too. A bond fund could be worth more or less. They'd be happy it were more but getting less wouldn't be very good for preservation of capital.
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Re: Recommend Wellesley to parents: good advice?
Old 07-16-2006, 06:39 PM   #46
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Re: Recommend Wellesley to parents: good advice?

Yeah, i'm not a huge bond fan right now either with cd's paying as well as they are and MM's right behind them.

Wab, I'd agree with everything you said if it werent for the 'assets not so large' piece of the original puzzle. When you're sitting on $3-5M+ tips @2.5% sound great. When you're sitting on less than that, committing a big piece to a low/zero equity, low rate+low cpi bond holding just sounds like playing to not lose too badly too quickly, but to lose nonetheless.

Not to mention they'd have to deal with the tax implications of holding TIPS and paying taxes on the inflation adjustment every year on top of still being employed, without seeing any of that inflation adjustment income until they sell the bonds. Thats swell for a rich ER...maybe not so good for someone trying to 'keep it simple' and wind up their career.

I also just cant square 2015's holdings of 61% in equities when the OP was concerned that a sub 40% equity holding was too aggressive for a couple who are risk averse and trying to avoid losses.

But we're now recycling the same discussion without any probability of meeting minds. Without further input from soup we're just guessing. I'm guessing that the other three threads I referenced can answer any and all questions about the fund choices, if this dialog didnt already.
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Re: Recommend Wellesley to parents: good advice?
Old 07-16-2006, 07:47 PM   #47
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Re: Recommend Wellesley to parents: good advice?

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Originally Posted by 2B
DOG51,

Fidelity or Vanguard Equity Income Fund -- They are both Large/Value stock funds about the same holdings as either Wellington or Wellesley. I'm just trying to avoid exposing the fixed income portion to interesest rate changes. If they buy a $10,000 CD that matures in 5 years they will get their $10,000 back in 5 years. They'll get their interest too. A bond fund could be worth more or less. They'd be happy it were more but getting less wouldn't be very good for preservation of capital.
I like your thinking on laddering cd's. I plan to do that. On the equity side, how about DVY? I believe it is yielding arounding 3.7%.
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Re: Recommend Wellesley to parents: good advice?
Old 07-17-2006, 04:45 AM   #48
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Re: Recommend Wellesley to parents: good advice?

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Originally Posted by DOG51
I like your thinking on laddering cd's. I plan to do that. On the equity side, how about DVY? I believe it is yielding arounding 3.7%.*
You're getting the CDs/bonds for income and stability. I didn't look at it's holdings but if it's really the high dividend paying Dow stocks this would be a very narrow selection of stocks. I'd avoid it as being not deversified enough.
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Re: Recommend Wellesley to parents: good advice?
Old 07-17-2006, 08:00 AM   #49
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Re: Recommend Wellesley to parents: good advice?

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Originally Posted by 2B
You're getting the CDs/bonds for income and stability.* I didn't look at it's holdings but if it's really the high dividend paying Dow stocks this would be a very narrow selection of stocks.* I'd avoid it as being not deversified enough.
I didn't mean that would be my only fund for stocks. When I roll my 401k into my IRA later next year, I plan for that to be made up of mostly stocks. I won't touch that until I'm 70(18 years) and plan to put it a target fund that is plenty diversified. I was talking about using my taxable account for the cd's and a fund like DVY for additional income and with growth potential. My overall mix would be about 40/60. Fairly conservative but should do the job.

As Unclemick would say, more than one way to skin a cat.
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Re: Recommend Wellesley to parents: good advice?
Old 07-17-2006, 02:25 PM   #50
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Re: Recommend Wellesley to parents: good advice?

Hmm, so maybe I should mix Wellesley with one of Vanguard's Target Retirement funds (2015 VTXVX?) to get some international exposure + a little bit of TIPS. However, is there too much overlap between VTXVX's holding in the total stk mkt index and the equities that Wellesly holds? Would there be another fund that would make a better partner for Wellesly to help provide a little more growth without too much risk, perhaps Vanguard's STAR fund (VGSTX)? It would be ideal if I can generate a sensible portfolio with only two or three Vanguard funds.

The key things here are:

- simplicity, the fewer funds the better
- the portfolio doesn't blow up

It would be nice to slice and dice with individual mutual funds for each asset class but knowing my parents, if one of them has a bad couple of quarters, they will want to sell it, despite my exhortations about asset allocation plans and long-term performance blah blah blah.

I have been telling them that 4% is what they can expect to annually withdraw from their porfolios, however I have not done a thorough review of their estimated expenses in retirement yet. Neither of them has enough money to retire in the next few years so all I can do is enourage them to save and keep away the vultures (unscrupulous financial advisors and annuity salesmen...they've already been hit by one of each).

A CD ladder is a non-starter for them because they don't have the desire to follow it to make sure the money is reinvested, and I don't have the time to do it on their behalf. They need a hands-off strategy that can be adjusted once a year and otherwise forgotten about.

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Re: Recommend Wellesley to parents: good advice?
Old 07-17-2006, 02:35 PM   #51
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Re: Recommend Wellesley to parents: good advice?

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Originally Posted by soupcxan
It would be nice to slice and dice with individual mutual funds for each asset class but knowing my parents, if one of them has a bad couple of quarters, they will want to sell it, despite my exhortations about asset allocation plans and long-term performance blah blah blah.
Based on these comments, I would say you need to pick one fund and leave it at that. Otherwise they will dump everything that drops and screw things up royally.
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Re: Recommend Wellesley to parents: good advice?
Old 07-17-2006, 02:39 PM   #52
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Re: Recommend Wellesley to parents: good advice?

Well, for simplicity it would be hard to beat a Target Retirement fund. For my wife's IRA, our initial transfers are into Wellesley but after we have finished the transfers we plan to add some funds into the Star Fund to capture some growth and diversity. But if two funds are too many just go with a Target Retirement fund.
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Re: Recommend Wellesley to parents: good advice?
Old 07-17-2006, 02:39 PM   #53
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Re: Recommend Wellesley to parents: good advice?

It looks like Vanguard's Target Retirement Income Fund (VTINX) is one of their most conservative:

46% total bond
24% total stock
22% tips
8% other
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Re: Recommend Wellesley to parents: good advice?
Old 07-17-2006, 03:45 PM   #54
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Re: Recommend Wellesley to parents: good advice?

Hmmm

Had my Mom in the forerunner - Lifestrategy Income for 11 years before she passed last Dec. Had Target Income been availible then - would have been a no brainer.

I INTERCEPTED ALL STATEMENTS FROM VANGUARD - and explained them - so the Depression era mentality wouldn't click in - easy cause she lived with us.

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Re: Recommend Wellesley to parents: good advice?
Old 07-17-2006, 03:50 PM   #55
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Re: Recommend Wellesley to parents: good advice?

Electronic statements sent to your email address are even better...no fishing in the mail.
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