I'm also curious about your asset mix. Why did you choose the bond fund?
There's an extremely important concept when dealing with asset allocation (AA): you need to look at the entirety of your portfolio, not an individual asset class.
To put it nicely, your AA is less than ideal. If your AA are these two funds, then you own way more bonds than equities, so you are doomed to less than ideal returns. Especially in this environment when everybody seems to agree that its not a good time to own bonds (return free risk!).
Bonds can be important in your overall AA, even in this environment, IF you have a properly built AA. Your current stock/bond ratio with 50% bonds and 50% Wellesley is ~ 20% stock/80% bonds.
Now on the other hand, if you bought Wellesley by itself, instead of buying other fixed income producing assets, I can see the benefit. Wellesley will most likely give you better performance than a bond fund, cds, with slightly more volatility. For me, that's a reasonable trade-off.
But I'm still puzzled as to why you own the bond fund. I would argue that you would have been better off buying CDs (isn't that ironic?), especially in the way you've constructed your portfolio.
If you are trying to run an experiment on total return investing, then why not buy a Target Retirement Fund that has about a 60/40 mix and see how it does over the next few years?
But maybe that wasn't your goal. Actually, I'm not quite sure what your goal was, maybe you can repeat it to us or send us a link? This is where an investment personal statement is helpful (IPS in bogleheads world). I've never done one, but it can help to determine what your goals are and then build the appropriate portfolio based on those goals.
And one more note based on a personal experience. I bought a sh*tload of equities at about the worse time possibly: 2008 prior to the crash. The values of those assets three months later were significantly lower. I didn't sell and since then, the assets have recovered their value and then some. My point is that 3 months is a small time frame when dealing with assets with volatility. You need to know what your timeframe is and build your AA accordingly. Then you can look at it yearly and see if it's meeting its objective.
I hope this was helpful information. I think it's interesting and good that your are looking at other asset classes beyond CDs, but you would be well served to understand the theory behind this type of investing so your expectations are properly set. And keep in mind, it's not for everyone. There's a good reason why most people are unable to do this. I know a lot of smart people that can't figure it out. It's not hard, but it does take an understanding of portfolio management.
And for those skeptics out there, this is one reason I love this forum. This method works better than anything else. Need proof? Look at the people posting here. How many people have retired early and are using this method? Actually, beyond having a sh*tload of money, I don't see any other alternatives that work (and yes, I'll include those that actively manage their money in this group - at least the ones here), or at least I haven't found that forum yet.
There's an extremely important concept when dealing with asset allocation (AA): you need to look at the entirety of your portfolio, not an individual asset class.
To put it nicely, your AA is less than ideal. If your AA are these two funds, then you own way more bonds than equities, so you are doomed to less than ideal returns. Especially in this environment when everybody seems to agree that its not a good time to own bonds (return free risk!).
Bonds can be important in your overall AA, even in this environment, IF you have a properly built AA. Your current stock/bond ratio with 50% bonds and 50% Wellesley is ~ 20% stock/80% bonds.
Now on the other hand, if you bought Wellesley by itself, instead of buying other fixed income producing assets, I can see the benefit. Wellesley will most likely give you better performance than a bond fund, cds, with slightly more volatility. For me, that's a reasonable trade-off.
But I'm still puzzled as to why you own the bond fund. I would argue that you would have been better off buying CDs (isn't that ironic?), especially in the way you've constructed your portfolio.
If you are trying to run an experiment on total return investing, then why not buy a Target Retirement Fund that has about a 60/40 mix and see how it does over the next few years?
But maybe that wasn't your goal. Actually, I'm not quite sure what your goal was, maybe you can repeat it to us or send us a link? This is where an investment personal statement is helpful (IPS in bogleheads world). I've never done one, but it can help to determine what your goals are and then build the appropriate portfolio based on those goals.
And one more note based on a personal experience. I bought a sh*tload of equities at about the worse time possibly: 2008 prior to the crash. The values of those assets three months later were significantly lower. I didn't sell and since then, the assets have recovered their value and then some. My point is that 3 months is a small time frame when dealing with assets with volatility. You need to know what your timeframe is and build your AA accordingly. Then you can look at it yearly and see if it's meeting its objective.
I hope this was helpful information. I think it's interesting and good that your are looking at other asset classes beyond CDs, but you would be well served to understand the theory behind this type of investing so your expectations are properly set. And keep in mind, it's not for everyone. There's a good reason why most people are unable to do this. I know a lot of smart people that can't figure it out. It's not hard, but it does take an understanding of portfolio management.
And for those skeptics out there, this is one reason I love this forum. This method works better than anything else. Need proof? Look at the people posting here. How many people have retired early and are using this method? Actually, beyond having a sh*tload of money, I don't see any other alternatives that work (and yes, I'll include those that actively manage their money in this group - at least the ones here), or at least I haven't found that forum yet.
