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Old 08-14-2013, 03:54 AM   #1
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Hello everyone

In a recent thread a couple of days ago, I promised to give an update about the new investments I made back in March. After months of encouragements here from other posters to be much less conservative, it was the first time I bought something other than CDs, municipal bonds, annuities, or equivalent. Here are the results (if I read the graphs correctly):

Vanguard Intermediate-Term Bond Index Fund Institutional Shares (VBIMX) : Value of $10,000 : $10,286 in March / April and $9,793 latest (about 5% loss)

Vanguard Wellesley Income Fund Admiral Shares (VWIAX) : Value of $10,000 : $10,834 in March / April and $10,787 latest (about 1% loss)

So far, it's a net loss. Any advice please from our experts ?
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Old 08-14-2013, 05:23 AM   #2
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Not an expert at all, however if these investments represented a small % of my NW and a short term decline gets my attention, I would just sell both and put the money in a CD. Many would say to ignore short term movements and invest for the long run. This will only work if your willing to accept short term fluctuations or even longer periods of negative returns.
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Old 08-14-2013, 06:09 AM   #3
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Summer trough. Wait until the end of the year and run your analysis again.
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Old 08-14-2013, 06:12 AM   #4
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Originally Posted by obgyn65 View Post

Any advice please from our experts ?
It's summertime. Have a beer.
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Old 08-14-2013, 06:13 AM   #5
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I have written down the names of those who have been critical of my conservative stance and risk assessment in the past :-) I am waiting for their expert input here :-)
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Old 08-14-2013, 06:15 AM   #6
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No time for a beer this week, but I will sure have a few margaritas in Central America when I fly down there late August. :-)

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It's summertime. Have a beer.
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Old 08-14-2013, 06:21 AM   #7
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Since you're new to the exciting world of short term fluctuations, it's easy to understand your consternation. But these are meant to be long term investments, so you should be looking at long term results, not just a few months.

Looking at M* for these:

VBIMX has had it rough the past year, but its 3 year total return of nearly 4% is well above its benchmark, as are its 5 and 10 year results. Above average return, above average risk.

VWIAX has also underperformed its benchmark but its 3 year total return of 10% is nothing to sneeze at, and it has outperformed its benchmark for five years. High return, below average risk.

With the bond market the way it is, even intermediate term may be too long, so I would consider exchanging the VBIMX fund for one of shorter duration, or perhaps even into the Wellesley for now. That would probably let you sleep more easily.
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Old 08-14-2013, 06:28 AM   #8
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"Expert" advice: Please follow the LOL! Market Timing Newlsetter. If you had you would be up 5% to 10% or so.

Most experts would suggest "Buy, Hold, and Rebalance". There were very clear rebalancing signals in May and June. Did you do anything then? If yes, then congratulations. If not, then why not?
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Old 08-14-2013, 06:48 AM   #9
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I still work and I have no time to read newsletters. I don't know what rebalancing signals are. This website, and bogleheads to much lesser extent, is the only place I go to for investment advice and ideas when I have a few minutes. Many posters told me to be less conservative, as I used to be only in CDs, munis and annuities. I was advised to use vanguard bonds, and many here advised Wellesley.

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"Expert" advice: Please follow the LOL! Market Timing Newlsetter. If you had you would be up 5% to 10% or so.

Most experts would suggest "Buy, Hold, and Rebalance". There were very clear rebalancing signals in May and June. Did you do anything then? If yes, then congratulations. If not, then why not?
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Old 08-14-2013, 07:03 AM   #10
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Be patient. I have a fund I bought in '94 and it's just fine.
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Old 08-14-2013, 07:06 AM   #11
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how have your other investments done over the same period?

Perhaps it is time to watch these funds move down until you are ready to invest more $$ at the lower price.
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Old 08-14-2013, 07:07 AM   #12
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obgyn, I assume these results are with dividends reinvested?

There are always two psychological (and mathematically relevant) positives you can factor into the down period results for dividend-paying stocks or MF's.

One is that your total number of shares has increased as dividend reinvestment purchases are made. 840 shares of VBIMX has grown to 870, or thereabouts.

The other that the share purchases at reinvestment time are made when the shares are "on sale". Those 30 extra shares were purchased at a price below that paid in March, lowering your average cost per share by a small amount.

Both of these factors become more and more relevant to total return as holding periods increase.
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Old 08-14-2013, 07:14 AM   #13
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The investor you do not want to be:

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Old 08-14-2013, 07:17 AM   #14
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I am not an expert, but what does your Investment Policy Statement say to do? Investment Policy Statement - Bogleheads

Mine is simple. Maintain about a 50-50 balance of equities and fixed-income investments. If they're out of balance by more than 5%, rebalance. Ignore short term variation, since I don't have the time or knowledge to make sense of it.
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Old 08-14-2013, 07:40 AM   #15
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I don't know why you are trying to read from charts when you should be able to see how much you invested in each and what the balance is now, adding back in any distributions if you did not reinvest them.

If you had a 5 month time frame, you shouldn't have been investing in stocks and intermediate term bonds. Assuming your time frame is longer, don't worry about short term fluctuations.

Most of the problem is that bonds did poorly. Had you invested in Wellington instead of Wellesley (larger % allocation to stocks), you'd have done better. In other words, you were too conservative. But I'm not advising you what to do.
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Old 08-14-2013, 07:58 AM   #16
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OB, I just started investing in 2007. Not a great time to start. I invested a total amount of $1500 in VTI (total stock market) in four small buys between 3/20/07 and 7/01/08. My single largest purchase ($600) was at the highest price - $74.99. After the low of 3/05/09 I sold some losers and invested all of it ($1900) in VTI at $40.99/share. Haven't bought any since. So total invested $3400 and current value is $6586. My cost per share is $51.47.

Time, tracking your cost-per-share, and reinvesting dividends have me on track to double my investment in less than ten years. I try to only buy when it reduces my cost per share. Simple rule.
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Old 08-14-2013, 08:07 AM   #17
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Quote:
Originally Posted by obgyn65 View Post
I still work and I have no time to read newsletters. I don't know what rebalancing signals are. This website, and bogleheads to much lesser extent, is the only place I go to for investment advice and ideas when I have a few minutes. Many posters told me to be less conservative, as I used to be only in CDs, munis and annuities. I was advised to use vanguard bonds, and many here advised Wellesley.
You have mentioned that you use an Edward Jones FA to help you choose CDs. Maybe when you have time you could discuss an asset allocation with her and get her impressions of your choices (did you use EJ for your Wellesley and bond fund purchases?)
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Old 08-14-2013, 09:01 AM   #18
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Originally Posted by obgyn65 View Post
I still work and I have no time to read newsletters. I don't know what rebalancing signals are. This website, and bogleheads to much lesser extent, is the only place I go to for investment advice and ideas when I have a few minutes. Many posters told me to be less conservative, as I used to be only in CDs, munis and annuities. I was advised to use vanguard bonds, and many here advised Wellesley.
I'm laughing because the aforementioned newsletter is [Mod Edit for clarification] a thread originated by forum member LOL! [/mod edit] ON THIS WEBSITE, so since you are posting and reading on this website, it would take only another 10 seconds to read it.
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Old 08-14-2013, 09:05 AM   #19
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Part of learning how to invest in riskier assets is figuring out how to emotionally handle the volatility. You could consider this a gentle introduction.
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Old 08-14-2013, 09:15 AM   #20
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I doubt any of the experts you are referring to suggested the fund goes up in a straight line. If you had looked at the long term chart you would have known this.

Vanguard Wellesley Income Fund Fund Chart - Yahoo! Finance
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