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Old 03-17-2010, 12:29 PM   #41
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Seriously, I think most of the VG faithful are not interested in "beating the market.".
Since this thread was about actively managed fund, I assume beating the market is really the goal. Otherwise, would not you just be investing in index ETFs and funds if you are not interested in that?
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Old 03-17-2010, 12:33 PM   #42
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Originally Posted by smjsl View Post
Since this thread was about actively managed fund, I assume beating the market is really the goal.
I'm a Wellesley and Wellington fund investor. I purchased those funds not with the expectation of beating the market, but with the desire to not be beaten by the market.
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Old 03-17-2010, 12:46 PM   #43
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I'm a Wellesley and Wellington fund investor. I purchased those funds not with the expectation of beating the market, but with the desire to not be beaten by the market.
In that case, as I know you know, your desires and goals can be assured by buying index funds instead, and not by buying Wellesley/Wellington...
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Old 03-17-2010, 12:47 PM   #44
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The reason why people around here like Vanguard Wellesley and Wellington is because both funds have a long history of steadily growing investor's money (See what John Bogle had to say about Wellington: http://johncbogle.com/speeches/JCB_WMC1203.pdf). Their low fees make them particularly competitive in the actively managed funds arena.
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Old 03-17-2010, 01:32 PM   #45
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In that case, as I know you know, your desires and goals can be assured by buying index funds instead, and not by buying Wellesley/Wellington...
Thanks, I'll ask my financial adviser about your suggestion.
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Old 03-17-2010, 01:48 PM   #46
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Thanks, I'll ask my financial adviser about your suggestion.
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Old 03-17-2010, 02:45 PM   #47
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I am surprised by the responses on this thread. Some folks here seem to assume that new managers will beat the markets (i.e. the equivalent bond/equity index composition) just because they work for Vanguard... ? Also, how is a decision by committee make it better? Ultimately, some-ONE is responsible for final decision, which is what I would think you'd want. If it's a committee, then noone is really responsible. Plus it makes it even harder to track individual performances.

It's hard enough, and some believe impossible, to find a single person consistently beating markets in time to get in with their fund, and yet many seem to be convinced that just belonging to a club (like vanguard) already ensures ability to beat the markets...?

Is this a new kind of religion and I just missed the orientation?
Actually Vanguard, PenFed, and Costco make up the holy trinity of the Retire Early forum. Bogle along with Buffett is among the pantheon of ER Gods.
Joking aside what the firms share is a "don't be evil" attitude, which translates to "don't rip off your customers"

In the case of Vanguard and Wellesley you are right they won't necessarily beat the market and certainly mere employment by Vanguard doesn't make a manager superior. What you will get is a fund that a has long history of providing good predictable returns, for relatively long risk, and the management/culture seem to work hard and doing stupid things that will lose your money.

The benefit of Wellesley vs index fund of say 60% Total Bond Fund and 40% Total Stock Market, is the Wellesley are constantly tweaking the asset allocation and seemingly doing a better job than most individual doing it at home, and they charge low expenses.
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Old 03-17-2010, 04:41 PM   #48
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Since this thread was about actively managed fund, I assume beating the market is really the goal. Otherwise, would not you just be investing in index ETFs and funds if you are not interested in that?
Brewer is right on. The post was inquiring about the funds performance (solid, predictable, lower market risk and at the same time not under perform its blended index).

Plus risk in terms of management risk. The fund has some new managers. A committee decision process reduces the chances of major blunders, or an individual taking inordinate risks to try to goose the returns or to make up for other bad investment decisions.
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Old 03-19-2010, 09:34 AM   #49
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One "warm fuzzy" that I get from owning Wellesley as my major holding in my taxable account is that the long term experience of Wellington Management might help preserve capital in the event of a "black swan".

Cheers,

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Old 03-19-2010, 09:36 AM   #50
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What Charlie said.

Once again, it isn't "beating the market", it's preventing the market from beating me...
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Old 03-19-2010, 02:01 PM   #51
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Yep. Indexing during accumulation allows you to grow with market which you hope is a good thing. When taking out of portfolio I like having what you feel is good active management process/managers to avoid negative market pitfalls. As well as Wellesley we have bought back into Vanguard GNMA for a small portion of our bonds; an excellent managed fund of US government backed securities.
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Old 03-19-2010, 02:44 PM   #52
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What Charlie said.

Once again, it isn't "beating the market", it's preventing the market from beating me...
My portfolio consists of actively managed and index funds. I own Wellington, Wellesley, and Dodge and Cox (balanced fund). Over the years I have come to favor the actively managed balanced funds for retirement due to the simple fact that not only do they live, eat, and breathe the market (something I don't care to do) - they keep the portfolio in balance between their stated goal of stock and bond percentages. Proper balance is something I've failed to do with my other funds over the years, and I financially can see my shortcomings/mistakes (hindsight is always 20/20). Emotions, fears, and mental paralysis has left me trailing the balanced funds. In my case - I've come to realize that I would've been better off to let the professionals make these decisions/adjustments to my portfolio (I can't seem to handle it successfully now in my late 50's). From what I gather - most people don't do this well either. I believe I would be more successful keeping my eye on the balanced funds' management behavior in my retirement years than constantly struggling to keep tweaking performance and balance myself.
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Old 03-20-2010, 06:36 PM   #53
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More geeky charts and tables, sorry.
I was wondering just how good Wellesley is, so I compared its risk/return to other balanced funds as well as to an "optimum" allocation of all two fund portfolios of Vanguard stock/bond funds. I also included the individual component funds that comprise the portfolios.

Here is what it looks like.
Two fund risk adjusted return.gif
The two-fund portfolios are red, the component funds by themselves are black, and the balanced funds are blue.

You can see that Wellesley does pretty well. The funds marked 2 and 3 (39/61 Health Care/Long Term Invst. Grade Bonds, and 44/56 Health Care/Long Term Treasury) produced better returns at about the same volatility, but I would not want my core holdings dominated by either pair.

The fund marked 1 is 16/84 Health/High Yield Corp. Bond. Surprisingly, this portfolio produced about the same return for less volatility.

I did not include any rebalancing in my hypothetical portfolios, so they suffered from that.

I wanted all the comparisons to be over the same time frame, and I wanted that time to be reasonably long, so I picked 1/1/1992 to the present and included only those funds for which I could get data for the whole time frame. This resulted in each fund having 4712 data points. My poor laptop was cranking.

I could have used a longer time frame, but that would have reduced the number of funds with data over the full time frame. As it is, the popular Total Stock Market fund didn't make the cut (but the 500 Index did).

I defined the optimum allocation as the one that produced the best ratio of equivalent APR to volatility over the time period. I used the standard deviation of the daily percent change in NAV as my measure of volatility.

Here is the same data in tabular form:
Balanced risk adjusted return.pdf
Two fund risk adjusted return.pdf
Component fund adjusted return.pdf

I have an interactive version of the chart that pops up the portfolio or fund information when you hover over a point, but it requires downloading the Mathematica Player, and I doubt that anybody wants to go to that trouble.
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Old 03-21-2010, 04:24 AM   #54
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VG video on Wellesley Management

https://personal.vanguard.com/us/ins...ncome-12152009
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