Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
VG Wellesley vs LifeStrategy Conservative Fund
Old 12-13-2013, 08:10 AM   #1
Recycles dryer sheets
In-control's Avatar
 
Join Date: Mar 2007
Posts: 319
VG Wellesley vs LifeStrategy Conservative Fund

Hi All,

Lazy Man(Person) model of active??

I am at a cross roads and need some other opinions. I have been able to FIRE for a while now. Just waiting for the kids to finish school to pull the trigger. I consolidated 50% of my assets in to the Wellesley Adm fund, a conservative, actively managed fund two years ago and have been happy with it.

The other 50% is in VG Health care(7%), International(8%), High Yield Corp. Bonds(8%) and Fidelity Spartan Indexed Tot. Stk(12%) and Bond Funds(15%)

Over all I am @ 40% stk/50% Bnd and 10% cash allocation and pretty satisfied. I know really want to reduce volatility and risk.

The Lazy Mans(Persons) method would be to move the majority of my assets into the VG LifeStyles fund, Conservative. It is all index funds with an allocation of Bnds(48%)/US Stk(28%)/Inter Stk(12%)/Inter Bnd(12%). That will keep me in my allocation range and increase my diversity.

The benefit of doing this is to increase diversity/reduce volatility/costs/maintenance. The disadvantage based on past performance - loss of ~ 1.5%/time period.

What do you think

__________________

__________________
Just Trekking thru!
In-control is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-13-2013, 08:18 AM   #2
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,149
Life Styles Conservative fund? Did you mean VSCGX, the LifeStrategy Conservative Growth fund?
__________________

__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 12-13-2013, 08:18 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,485
Or if you have both taxable and tax advantaged accounts you may want to buy the index funds instead and periodically rebalance in the interest of tax efficiency. That and you could further tilt the bond allocation to shorter duration bonds to reduce interest risk by using the component funds rather then the composite fund and substituting a broad based lower duration fund for Total Bond.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 12-13-2013, 08:25 AM   #4
Recycles dryer sheets
In-control's Avatar
 
Join Date: Mar 2007
Posts: 319
Quote:
Originally Posted by REWahoo View Post
Life Styles Conservative fund? Did you mean VSCGX, the LifeStrategy Conservative Growth fund?
Yes the VSCGX
__________________
Just Trekking thru!
In-control is offline   Reply With Quote
Old 12-13-2013, 08:30 AM   #5
Recycles dryer sheets
In-control's Avatar
 
Join Date: Mar 2007
Posts: 319
Quote:
Originally Posted by pb4uski View Post
Or if you have both taxable and tax advantaged accounts you may want to buy the index funds instead and periodically rebalance in the interest of tax efficiency. That and you could further tilt the bond allocation to shorter duration bonds to reduce interest risk by using the component funds rather then the composite fund and substituting a broad based lower duration fund for Total Bond.
Thanks - I am keeping things balance by primarily adjusting tax free accounts. I do have to adjust the sector accounts annually. I also put 70% of my salary in pretax'ed 403b & Annuity accounts. So much of my income comes from long term cap. gains and dividends.

One of the benefits of the LifeStyles fund is that it stays balanced.
__________________
Just Trekking thru!
In-control is offline   Reply With Quote
Old 12-13-2013, 09:05 AM   #6
Thinks s/he gets paid by the post
DFW_M5's Avatar
 
Join Date: Sep 2003
Posts: 4,982
Perhaps one consideration point for you is that Wellesley has a bond duration of 6.2 yrs. I have been in this fund for some time with a fairly sizeable position and its been a great conservative performer. It does concern me how it might perform in a raising rate environment, which is bound to happen at some point down the road. I think its hard for Wellington Management to shorten that duration given the large size of this fund, and therefore suspect holders of this may be in for some disappointing results.

I don't know how that compares to the bond duration of the life strategy fund.
__________________
Doing things today that others won't, to do things tomorrow that others can't. Of course I'm referring to workouts, not robbing banks.
DFW_M5 is offline   Reply With Quote
Old 12-13-2013, 09:13 AM   #7
Recycles dryer sheets
In-control's Avatar
 
Join Date: Mar 2007
Posts: 319
Quote:
Originally Posted by DFW_M5 View Post
Perhaps one consideration point for you is that Wellesley has a bond duration of 6.2 yrs. I have been in this fund for some time with a fairly sizeable position and its been a great conservative performer. It does concern me how it might perform in a raising rate environment, which is bound to happen at some point down the road. I think its hard for Wellington Management to shorten that duration given the large size of this fund, and therefore suspect holders of this may be in for some disappointing results.

I don't know how that compares to the bond duration of the life strategy fund.
Thanks -

The duration for the funds with in the LifeStyles are,
5.4 yrs for the Total Bnd fund(48%)
8.3 yrs for the Inter. Bnd fund(12%)
__________________
Just Trekking thru!
In-control is offline   Reply With Quote
Old 12-13-2013, 09:21 AM   #8
Full time employment: Posting here.
 
Join Date: Jan 2013
Posts: 660
Quote:
Originally Posted by In-control View Post
The benefit of doing this is to increase diversity/reduce volatility/costs/maintenance.
It's possible that you would be increasing diversity and reducing volatility and maintenance by investing in VSCGX, but it's almost certain that you would be increasing your costs. VSCGX doesn't appear to offer low cost Admiral shares, so you would be stuck buying the investor class shares. I see that the underlying assets of VSCGX are the investor class shares of Vanguard's total bond market, total stock market, total international stock market, and total international bond market funds. Considering what a simple four fund mixture this is, you could easily duplicate it by directly buying the Admiral shares of the four funds, thereby duplicating the holdings of VSCGX at a lower cost to you. That's what I would do, if I decided to go in this direction. You get lower expenses for only the trivial overhead of needing to do your own annual rebalancing.

The real question is should you go in this direction. I find your current portfolio to be a little on the quirky side, but overall to be quite reasonable. You have a conservative asset mix spiced up with significant holdings of health care stocks and high yield bonds. Do you enjoy making this sort of bet on individual sectors in the hopes of outperforming the market? Some people do and derive great pleasure from managing their own portfolio. If you are one of them, I see no harm in what you are currently doing.
__________________
karluk is offline   Reply With Quote
Old 12-13-2013, 09:33 AM   #9
Recycles dryer sheets
In-control's Avatar
 
Join Date: Mar 2007
Posts: 319
Quote:
Originally Posted by karluk View Post
It's possible that you would be increasing diversity and reducing volatility and maintenance by investing in VSCGX, but it's almost certain that you would be increasing your costs. VSCGX doesn't appear to offer low cost Admiral shares, so you would be stuck buying the investor class shares. I see that the underlying assets of VSCGX are the investor class shares of Vanguard's total bond market, total stock market, total international stock market, and total international bond market funds. Considering what a simple four fund mixture this is, you could easily duplicate it by directly buying the Admiral shares of the four funds, thereby duplicating the holdings of VSCGX at a lower cost to you. That's what I would do, if I decided to go in this direction. You get lower expenses for only the trivial overhead of needing to do your own annual rebalancing.

The real question is should you go in this direction. I find your current portfolio to be a little on the quirky side, but overall to be quite reasonable. You have a conservative asset mix spiced up with significant holdings of health care stocks and high yield bonds. Do you enjoy making this sort of bet on individual sectors in the hopes of outperforming the market? Some people do and derive great pleasure from managing their own portfolio. If you are one of them, I see no harm in what you are currently doing.
Thanks -

I asked the same ? of the VG rep as I had the same assumption. I was told that the overall expense ratio is a combined at.15%. Which makes it lower then then Wellesley Adm shares @ .18. It would be slightly less expensive .02% to build the fund with Adm shares and re-balance on my own.

As for the portfolio mix I am trying to consolidate. The Health care and Corp. bond fund. The health care fund has 3x'ed since I have owned it and I try to keep it @ 5% because it's a cash cow! The Corp. bond as well generate a steady flow of income. I will be dropping that one when the share values increases a bit.
__________________
Just Trekking thru!
In-control is offline   Reply With Quote
Old 12-13-2013, 09:54 AM   #10
Full time employment: Posting here.
 
Join Date: Jan 2013
Posts: 660
Quote:
Originally Posted by In-control View Post
I asked the same ? of the VG rep as I had the same assumption. I was told that the overall expense ratio is a combined at.15%. Which makes it lower then then Wellesley Adm shares @ .18. It would be slightly less expensive .02% to build the fund with Adm shares and re-balance on my own.
You are comparing apples and oranges. Wellesley is an actively managed fund, and so can be expected to have somewhat higher expenses than passively managed index funds. The expense ratios of the Admiral shares of the four funds that VSCGX holds are

total bond - 0.10%
total stock - 0.05%
total international stock - 0.16%
total international bond - 0.20%

Taking into consideration VSCGX's current allocation of 47.6%/28.5%/12.0%/11.9% to these funds, I calculate that that you would reduce your expense ratio from 0.15% to 0.105% by buying the Admiral shares of the four component funds, rather than by purchasing the investor shares of VSCGX. That's close to a 33% reduction in your costs.
__________________
karluk is offline   Reply With Quote
Old 12-13-2013, 10:00 AM   #11
Recycles dryer sheets
In-control's Avatar
 
Join Date: Mar 2007
Posts: 319
Quote:
Originally Posted by karluk View Post
You are comparing apples and oranges. Wellesley is an actively managed fund, and so can be expected to have somewhat higher expenses than passively managed index funds. The expense ratios of the Admiral shares of the four funds that VSCGX holds are

total bond - 0.10%
total stock - 0.05%
total international stock - 0.16%
total international bond - 0.20%

Taking into consideration VSCGX's current allocation of 47.6%/28.5%/12.0%/11.9% to these funds, I calculate that that you would reduce your expense ratio from 0.15% to 0.105% by buying the Admiral shares of the four component funds, rather than by purchasing the investor shares of VSCGX. That's close to a 33% reduction in your costs.

Thanks for the clarification and comparison. It is definitely an option.
__________________
Just Trekking thru!
In-control is offline   Reply With Quote
Old 12-13-2013, 01:19 PM   #12
Recycles dryer sheets
madsquopper's Avatar
 
Join Date: May 2006
Location: Vienna
Posts: 93
Slightly off topic, but I've been doing a lot of backtesting to figure out how to do sort of a coffeehouse approach to get to my allocation of 60/40. While looking at this, I also looked at a very simplistic approach using Wellesley since that has been a good performer for me. Based on the Wellesley bond/stock allocation, doing 2/3 Wellesley, 1/6 US Small Cap (like VSS) and 1/6 total international stock (like VXUS) covers most categories and simulates my 60/40 split. This performed almost as well as the more complicated portfolios.

To get closer to your allocation you'd have to do the math; I"m guessing you might edn up with something like 80% Wellesley and 10% of the other two. Whether you want that much in Wellesley is up to you.

Larry
__________________
madsquopper is offline   Reply With Quote
Old 12-13-2013, 01:36 PM   #13
Recycles dryer sheets
In-control's Avatar
 
Join Date: Mar 2007
Posts: 319
Quote:
Originally Posted by madsquopper View Post
Slightly off topic, but I've been doing a lot of backtesting to figure out how to do sort of a coffeehouse approach to get to my allocation of 60/40. While looking at this, I also looked at a very simplistic approach using Wellesley since that has been a good performer for me. Based on the Wellesley bond/stock allocation, doing 2/3 Wellesley, 1/6 US Small Cap (like VSS) and 1/6 total international stock (like VXUS) covers most categories and simulates my 60/40 split. This performed almost as well as the more complicated portfolios.

To get closer to your allocation you'd have to do the math; I"m guessing you might edn up with something like 80% Wellesley and 10% of the other two. Whether you want that much in Wellesley is up to you.

Larry

Ah Ha - your on to me - I read that book last weekend and it triggered, re-kindled, this whole exercise. I came to the same conclusion as you. Add a Mid to Small cap index fund and I will have a better balance. Wellesley has been around awhile and just seems to be a reliable group.

Thanks

Bill
__________________
Just Trekking thru!
In-control is offline   Reply With Quote
Old 12-14-2013, 10:53 AM   #14
Recycles dryer sheets
 
Join Date: Aug 2005
Posts: 480
Since OP wants to reduce risk and volitility:
Consider keeping a similar equity position as what you have now with Wellesley but using other VG funds, and using CD's to replace the bond portion?

That eliminates interest rate risk at least.
__________________
Gearhead Jim is offline   Reply With Quote
Old 12-14-2013, 08:04 PM   #15
gone traveling
 
Join Date: Jun 2012
Location: Austin
Posts: 245
Quote:
Originally Posted by In-control View Post
Thanks -

I asked the same ? of the VG rep as I had the same assumption. I was told that the overall expense ratio is a combined at.15%. Which makes it lower then then Wellesley Adm shares @ .18. It would be slightly less expensive .02% to build the fund with Adm shares and re-balance on my own.

As for the portfolio mix I am trying to consolidate. The Health care and Corp. bond fund. The health care fund has 3x'ed since I have owned it and I try to keep it @ 5% because it's a cash cow! The Corp. bond as well generate a steady flow of income. I will be dropping that one when the share values increases a bit.
Are you referring to VGHAX, the VG health care admiral fund? If so, I'm heavy both Wellington and Wellesley but have 5% of my portfolio in VGHAX and really like how that fund has performed. ER is high at .30% but YTD return has been over 40%
__________________
LakeTravis is offline   Reply With Quote
Old 12-15-2013, 08:17 AM   #16
Recycles dryer sheets
In-control's Avatar
 
Join Date: Mar 2007
Posts: 319
Yes the VGHAX fund. I have been in it for 15 years. The few times it went down I added $ and have been rewarded. I to used be in Wellington but moved those funds to Wellesley as it is more in line with my AO.
__________________

__________________
Just Trekking thru!
In-control is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Which TSP L fund to choose? Or DIY? whipsaw FIRE and Money 9 09-22-2013 06:23 PM
update on Wellesley and Intermediate-Term Bond fund obgyn65 FIRE and Money 179 08-21-2013 05:04 PM
Please Review this Portfolio Proposal bUU FIRE and Money 72 05-30-2013 06:42 AM
Paying for the "payroll tax" cut veremchuka FIRE Related Public Policy 124 03-20-2012 03:33 PM

 

 
All times are GMT -6. The time now is 01:25 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.