Vanguard Wellington VWELX at this time?

[modhatter]

I am retired and other than social security have no other form of income. My objective is to preserve my income for my son who will need this income when I am no longer here. I placed $500,000 in the hands of a well known bond investor, when I was very ill, and did not think I was going to make it. That resulted in purchasing very risky investments (which I unfortunately left up to him) resulting in a total loss of $250,000, much of which is gone forever in 4 bankruptcies so far. I have another $200,000 I invested myself, in a combination of dividend producing stocks, a lot of utilities, mlps etc. I am almost whole at this point in that portfolio.

I have several CD's coming due, and as you know we are looking at not much more than a 2% return on those. I already have money in the higher paying CD's (Pen Fed etc.) I am in a quantry as to what to do at this juncture.
An annuity in not in my vocabulary.

I do need to produce income, so my choices are:
CD's
bonds
bond market
Wellington
Foreign dividend funds (don't know any in particular)

Though we could all get rich if we could predict the future, I am inclined to feel that we are going to continue in a deflationary environment, and stagflation at best, with inflation down the road when we come out of it, which I think will be years. Yet, playing it so safe as to earn 1 to 2% is difficult to swallow as well.

Wellington, which is a bond/stock fund with greater emphasis on bonds is at $26.68 today with a yield of about 3.75%. What is your feeling about this fund at this juncture? As I am not familiar with funds like this.... Do they make quarterly payments to you on their yield?

Any other ideas? I am not that sophisticated in this areana. I used to be involved in real estate, but those days are gone with no inclination to return due to health.

I am shy of investment advisors. I did better as a total novice then my "expert".

What say you, guys?

 

[REWahoo]

Mod, it's nice to see you back posting again. Sorry for the lousy experience at the hand of your well known "expert".

When you say..

Wellington, which is a bond/stock fund with greater emphasis on bonds...

...do you actually mean Wellesley rather than Wellington?

I own both and the fund allocation of Wellesley is roughly 35/65 stocks/bonds vs. the reverse for Wellington. Regardless, I think in your situation I'd go with Wellesley as it is a better income generator - current yield slightly north of 4.6%.

Edit to add: Yes, both Wellington and Wellesley make quarterly dividend distributions.

 

[teejayevans]

Wellington, which is a bond/stock fund with greater emphasis on bonds

Wellington Fund (VMELX) assets are divided roughly 60% equities and 40% bonds.
Wellesley Fund (VWINX) is roughly divided 60% bonds and 40% equities.

I would use CDs for money that you need in the next ~2 years, so
what if interest rate is low, not going to make that much difference over
2 year period.
Maybe use Short Term Bond index (VBISX) and High Yield Corp (VWEHX)
funds for years 3-6, will give better return, and either of the above for
the rest of the money.

Picking the right advisor is harder than picking a stock, unfortunately
there a so many bad ones they taint the entire profession.
TJ

 

[yakers]

Another vote for Wellesley, DWs IRA is in it. My primary IRA is in a target retirement type fund and they work if you select one with an AA you like.

 

[rsingh6675]

I have been checking out some income producing funds also. One fund which I am thinking of opening account is AGDCX. It pays 8.82% dividend. If anyone has experience with this fund or a better fund,please respond.
Thanks

 

[modhatter]

I am not familiar with that fund, but with that dividend I would have to say there is definitely more risk involved.

I am wondering if I missed the boat on purchasing Wellsley. It is up around $20 last time I looked. Wouldn't that be buying in on the high side?

 

[modhatter]

Looked into AGDCX. It is a primarily foreign bond fund with stellar performance this year and a good ten yr. return. It is a high yield high risk (average BB) rated fund with a 1.75% yr. total expense. (I think I'm answering my own comments here....)

 

[W2R]

I am not familiar with that fund, but with that dividend I would have to say there is definitely more risk involved.

I am wondering if I missed the boat on purchasing Wellsley. It is up around $20 last time I looked. Wouldn't that be buying in on the high side?

Well, you could say that for buying nearly anything as the market has bounced back nicely after the big drops of last October and March. I think that when you are buying something like Wellesley, you are buying for the long term. If you are concerned that this is a temporary spike, you could DCA into it but Wellesley is not as volatile as some other funds due to its bond component. I would just go ahead and buy it.

I have 30% Wellesley, much of which I bought at higher prices than it sells for today, and I am nevertheless very happy with it as I prepare to retire this fall. It is a nice income source.

 

[LOL!]

There is nothing magic about balanced funds like Wellsley or Wellington. You can create your own balanced fund at any time by buying separately a bond fund and a stock fund. You are only fooling yourself when you buy something like Wellsley or Welllington.

So rather than think about which fund to buy, one should think about what percentage of bonds and what percentage of stocks they want in their portfolio. Once you have those percentages figured out, go buy the index funds with the lowest expense ratios that fulfill those percentages that you can find. There is no boat to miss.

 

[Livefree]

Did the dividend/yield stay the same through the down turn?

 

[W2R]

did the dividend/yield stay the same through the down turn?

Here are the Wellesley dividends per share since March 2008:

date|VWIAX dividend
03/25/08| 0.572 06/25/08| 0.624 09/25/08| 0.593 12/17/08| 0.650 03/26/09| 0.576 06/25/09| 0.541

 

[Bikerdude]

Here are the Wellesley dividends per share since March 2008:

date|VWIAX dividend
03/25/08| 0.572 06/25/08| 0.624 09/25/08| 0.593 12/17/08| 0.650 03/26/09| 0.576 06/25/09| 0.541

I was looking at VWINX yesterday on yahoo and they show a 6/25 dividend of 0.219.

VWINX: Historical Prices for VANGUARD WELLESLEY INCOME FUND - Yahoo! Finance

 

[Bikerdude]

I was looking at VWINX yesterday on yahoo and they show a 6/25 dividend of 0.219.

VWINX: Historical Prices for VANGUARD WELLESLEY INCOME FUND - Yahoo! Finance

oops! sorry, I didn't notice you were quoting Admiral shares. Never mind.

 

[audreyh1]

There is nothing magic about balanced funds like Wellsley or Wellington. You can create your own balanced fund at any time by buying separately a bond fund and a stock fund. You are only fooling yourself when you buy something like Wellsley or Welllington.

By "fooling yourself" do you mean that you are paying higher expenses for balancing that you could do yourself with lower fees?

Personally, I love having a balanced fund do the rebalancing for me. Then I can invest and forget about it, just reap the dividends - I don't have think about the investment ever again.

Audrey

 

[W2R]

oops! sorry, I didn't notice you were quoting Admiral shares. Never mind.

No problem! I guess I should have been less lazy and looked up the Investor shares, but I had the info for the Admiral shares in my Excel spreadsheet so I used that.

 

[NW-Bound]

I don't own Wellesley nor Wellington, but I wouldn't knock them. You might do better, but you could also do a lot worse. Heck, when I get tired of slicin' and dicin', I will join unclemick too (which I hope will be delayed as far as possible, as I am still having fun).

About dividend being cut during this downturn, to be fair one has to judge them against their peer. This being the Great Recession, how can anyone stay immune?

 

[REWahoo]

You are only fooling yourself when you buy something like Wellsley or Welllington.

In what way? If you understand the objectives of these funds, understand they are balanced funds (hold both stocks and bonds), understand the expenses of each fund and they meet your objectives as to asset allocation plus provide convenience of a single fund, how is that "fooling yourself"?

 

[LOL!]

The equities in these balanced funds dropped just as much as equities outside of these balanced funds. If you believe these funds protect you better from equity losses than the same amount of equities in another fund, then you are fooling yourself.

Furthermore, these funds are not tax efficient. Instead of a balanced fund, one can own equities in taxable and fixed income in tax-sheltered. If you own a balanced fund in tax-sheltered you don't get to save money by doing the tax-loss harvesting thing. If you own a balanced fund in taxable, you don't get the tax-deferment on the dividends.

If you have no taxable investments, then a balanced fund is fine, just as a target retirement or life strategy fund is fine.

Often folks buy a balanced fund because they cannot stand the volatility of an equity fund nor the low yields and sometimes losses in a bond fund. They hide the volatility of stocks by mixing with bonds in the same fund. The volatility doesn't go away; it is still there.

So REWahoo is right: If you understand these funds, then you are not fooling yourself. I would venture that many people do not understand these funds.

 

[W2R]

So REWahoo is right: If you understand these funds, then you are not fooling yourself. I would venture that many people do not understand these funds.

I would imagine that you may be right, though looking at this thread I don't think that people like Audreyh1, yakers, NW-Bound, REWahoo, I, or others who have been posting in this discussion of Wellesley are having a hard time understanding balanced funds in general and Wellesley in particular. I don't think any of us are "fooling ourselves", at least based on the matters discussed in your post.

 

[LOL!]

.... I don't think any of us are "fooling ourselves", at least based on the matters discussed in your post.

The folks you mentioned did not start this thread with a specific question about Wellington.

 

[modhatter]

LiveFree,

Who were you adressing that question to?


LOL
A question concerning tax harvesting: You say by owning a balanced fund instead of individual equities and bonds you lose the ability to do any tax harvesting. Well if you own a few funds, and you have loses on one fund, and gains on the other fund, can't that be used for tax harvesting? Or does it not apply to funds?

 

[LOL!]

You cannot tax-loss harvest gains in any fund. You can harvest gains, but that is not the same as tax-loss harvesting.

If the bonds in your balanced fund go up by 10% and the equities in your balanced fund drop by the same dollar amount or less, your balanced fund does not show a loss and thus you cannot do any tax-loss harvesting.

But if you had two separate funds, an equity fund and a fixed income fund, then the equity fund (in taxable) would show the loss, so exchange into a "not substantially identical" equity fund of the same asset class. The bond fund (in tax-sheltered) shows the gains, but you don't owe taxes on the gain if you don't withdraw shares.

 

[Livefree]

I was addressing the question to Want2Retire or anyone that could tell me about the dividends during the rough times we've had. This seems like a conservative, steady fund,
and I understand this throws taxable income, which might not be good if your in a high tax bracket, but if your retired or nearing retirement, it looks like a good holding.

 

[Hillbilly]

Personally, I love having a balanced fund do the rebalancing for me. Then I can invest and forget about it, just reap the dividends - I don't have think about the investment ever again.

Audrey

100% agree Audrey. My DW has not a clue for investing. No fuss, too easy, hands off. And yes I pay a little extra for the rebalancing in a balance fund to know when I'm not around she doesn't have some annuity salesperson.......well you know the rest of the story.

 

[modhatter]

LiveFree,

If you click on the link she provided then click on price history, then yield, you look back as far as you want. It stays fairly consistant, but the fund price fluctuates.

LOL,

I understand what you said about not being able to break up the bond funds from the equity funds in a balanced fund, and about trading funds. But what I'm asking is: Supose you have a $3,000 loss with a Dodge Cox International Fund and a $3,000 gain with lets say Wellington. If the gain in the Wellington fund is due to stocks rising, can the stock portion of that fund be offset by the loss from the Dodge Cox Fund when you sell both fund? And likewise, say if you have two income or two dividend equity funds. If they are the same type of funds can you tax harvest between them?