Wellesley VS. NWBGX

[REWahoo]

Quote:

Originally Posted by Dreamer I have not moved my DH's 401K account since he retired. I have been debating whether to put the majority of it into Wellesley, but worry about the above. I worry that I am too late to the party.

Well, you may have good grounds to be concerned as the party has been going on almost non-stop for 40 years.

Total returns:

2011 9.6
2010 10.6
2009 16.0
2008 -9.8
2007 5.6
2006 11.3
2005 5.0
2004 7.6
2003 9.7
2002 4.6
2001 7.4
2000 16.2
1999 -4.1
1998 11.8
1997 20.2
1996 9.4
1995 28.9
1994 -4.4
1993 14.7
1992 8.7
1991 21.6
1990 3.8
1989 20.9
1988 13.6
1987 -1.9
1986 18.3
1985 27.4
1984 16.6
1983 18.6
1982 23.3
1981 8.7
1980 11.9
1979 6.2
1978 3.6
1977 4.3
1976 23.3
1975 17.5
1974 -6.5
1973 -3.6
1972 9.8
1971 15.1

[Dreamer]

Wow, thanks. I had no idea it had been so good for that long. I guess that I need to get busy. Thanks again.

[NW-Bound]

Before I said anything else, let me say that I think Wellesley is a very fine mutual fund, and at this point I would choose either that or Wellington to be the sole MF for my wife, should I die before her. I have been trying to explain things to her, not so that she would become an active investor like myself, but so that she knows to resist when a friend touts a hot stock, or a salesman tries to sell her something. What I want is "lock box", and the only thing coming out of it is a safe steady dividend stream. The above two funds are better than others I have looked at and owned.

At the moment, that is...

You see, I have been testing the water by putting a bit (1%) into a few conservative funds over the years, Wellesley being the last. I found that if I owned them, then perhaps I would study them a bit more. But what happened was that I spent more time with my own "fund" that I have not done much. I am not ready to give up the helm yet! And then, hey it's all past performance that I can study. I want to study future performance!

Quote:

Originally Posted by Lsbcal When you put it into active management you are to some degree investing in a black box. What do you do if the performance falters? Can you explain the underperformance? And more critically, will the underperformance be recovered now that you are "underwater" so to speak?

Yes, one should not forget that Wellesley is an active fund. Long term performance is one thing, but it is still historical data. They may change management, and a new manager may do something different. And then, there may be some seismic shift that a fund that has to stay true to its bylaws cannot adapt. If I own Wellesley and it falters, I think I can look into it, but my wife would be totally lost.

For example, Dodge&Cox Balanced is one of the funds that I own a little of. It was (and has been?) a very well respected mutual fund, and even Bogle spoke highly of the management. It has been around for decades, same as Wellesley.

It did very well in the period 1996-2006, beating Wellesley significantly, and the management sensibly closed it to new investors, because they would not know how to invest the new influx of cash. So, I said, good, it increased my respect for the fund.

DODBX crashed harder than WVINX in the crisis of 2008-2009. It appears they got too much into financial stocks, perhaps for the dividend. Oops! They have reopened to new investors, but perhaps the reputation might have been damaged. I still own it however, and in during the Great Recession, never sold any of these small positions, because I was too busy thinking about my bigger individual stocks.

They don't say "past performance is no guarantee for the future" for nothing...

[REWahoo]

Quote:

Originally Posted by NW-Bound I am not ready to give up the helm yet!

Testosterone poisoning is tough to recover from...

[NW-Bound]

Quote:

Originally Posted by Dreamer I have not moved my DH's 401K account since he retired. I have been debating whether to put the majority of it into Wellesley, but worry about the above. I worry that I am too late to the party.

When you get into Wellesley, it should be because of its stability, not because of its recent performance. The fund management would be the last to guarantee that recent performance to you.

Some people here also like the simple Vanguard S&P index, so I looked up some historical data to present it below. Wellesley went back a long time, but Vanguard's VFINX, as a surrogate of the S&P index, was created only in 1976, so that is as far back as the Morningstar web site shows. The table shows what you got after putting $10K in the funds, then reinvested all dividends.

Date	VFINX	VWINX
09/30/1976	$10K	$10K
01/01/1992	$72K	$64K
01/01/2000	$301K	$139K
01/01/2012	$318K	$331K

VFINX took a big jump in the 1990-2000 period, but VWINX caught up in the next decade!

Just for grin, I looked up the inflation for the above periods, and adjusted the returns. See below. Indexers lost money in the last decade! They don't say it was a lost decade for stocks for nothing!

Date	VFINX	VWINX
09/30/1976	$10K	$10K
01/01/1992	$30K	$27K
01/01/2000	$103K	$47K
01/01/2012	$81K	$84K

Note: MF performances are from Morningstar. CPI-Us are from US Bureau of Labor Statistics.

[NW-Bound]

Talk about testosterone, I think I am among the mellowest guys. People may find it hard to believe, but I have never watched a sports game in its entirety in my life. No football, soccer, baseball, basketball, hockey, golf, car racing, blah blah blah... Nada... I even stopped watching the Olympics perhaps 10 years ago.

I look at this more as an intellectual exercise, trying to understand how the world works, see how history is unfolding before us. It may be futile, but then some people like to see what sport team would win, what pols will get elected. I find all that boring. Perhaps someday, I will find investing boring too.

[NW-Bound]

I think a lot of active investors, even the slice-dicers who do it with sectored MFs or ETFs think they are great, but one has to be honest with himself. So, some benchmarking should be done.

Quote:

Originally Posted by Lsbcal I think doing benchmarking is a great idea. I'd add another benchmark that is a composite of the type of equity/bond investing you are considering. For instance, if you wanted 50/50 with a value tilt and some international than you would make it up by calculating the proportions going to Vanguard Value Index (large value), Vanguard Total International, and maybe Vanguard Total Bond Mkt. That would be your index fund benchmark.

I do have international exposure through some foreign-stock MFs, or individual companies by ADRs. The latter of course limit me to only the large caps, but it's OK, as I would not know about foreign small-caps. Yes, I also have global bond funds.

It takes a lot of work to construct that synthetic benchmark, and to rebalance and all that. And as I explained earlier, I pick Wellesley because it is a candidate for my wife's sole eventual MF.

[NW-Bound]

Quote:

Originally Posted by donheff Wellesley looks like a no brainer unless you get a lot out of pickin and tradin.

Only pickin', not much tradin'...

To churn the portfolio the way some of these MFs do, my trades would add up to a 7-figure sum a year... No way...

How the hell these guys keep from paying cap gain tax, I wonder?


PS. I guess I would be guilty of excess testosterone if I held something like 10 stocks. As it is, I have something like 100. And the largest position is BRK at only 2% of portfolio, and that is not even a single company in the normal sense.

[clifp]

NW I appreciate your intellectual honesty in this thread.

I have been more careful about keep track of my performance over the last 7 years and have beaten the S&P modestly 2-4% each during this time. Realistically the S&P may not be the right benchmark since I do have a small amount of bonds. Probably 80% VTI, 29% BND is a more accurate measure.

In truth I am a little scared to go back over the last 10-20 year I find out how much better I would have been in Welesley/Wellington.

[Lsbcal]

Quote:

Originally Posted by clifp ... In truth I am a little scared to go back over the last 10-20 year I find out how much better I would have been in Welesley/Wellington.

I haven't analyzed these two that much. On the equity side Wellesley and Wellington are primarily large value and if you believe in the value premium (French-Fama) then this may be a lasting phenomena. It does come and go with possibly some years of "tracking error". Examples are years where small and midcap stocks are the rage or large cap growth (1998 to 2000). Wellington has only 10% foreign so if the dollar takes a hit then international funds will look possibly more appealing at least for awhile. On the bond side, I've not done the analysis. Would expect that both funds take some corporate bond risks. Both funds are active so they can somewhat adjust things and in particular the stock/bond mix. I don't know where to get historic details on Wellington stock percentage changes.

[Major Tom]

Interesting stuff NW-Bound, and as clifp said, you are being as transparent as possible, which is admirable; many people who manage their own investments are not as willing to talk about the weak side of their strategies as they are to tout their successes.

If I could risk an over-simplification; from my side of the tracks (as an indexer who wants to remain as such), it looks to me as if the best reason to actively manage your own investments is not necessarily for greater returns, but because you enjoy doing it.

The performance of VFINX during that "lost decade" as displayed by your table showing returns after adjustment for inflation, does indeed look a bit grim, but when I realized that in a passive portfolio I'd be holding an index fund such as this along with a bond fund, that lost decade would have been easier to stomach.

I've been quite tempted by the allure of Wellesley but being completely honest with myself, if there were a change in management and/or a disastrous few years, I wouldn't take action until after a lot of the damage had been done. I'm just not good at this sort of thing. It's for this reason that I feel a lot happier holding a small number of passively-managed index funds, with both stocks and bonds in the mix.

It's educational reading about the different approaches followed by others here, and I really appreciate the lack of investment dogma in this forum. I don't actively manage my own investments, but I sure do enjoy hearing from those who do.

[audreyh1]

FWIW I use half each OAKBX and DODBX as my balanced fund benchmark against my own AA, and I keep 5% of the total portfolio in each to help me track and compare each year.

[nun]

Quote:

Originally Posted by Lsbcal I haven't analyzed these two that much. On the equity side Wellesley and Wellington are primarily large value and if you believe in the value premium (French-Fama) then this may be a lasting phenomena. It does come and go with possibly some years of "tracking error". Examples are years where small and midcap stocks are the rage or large cap growth (1998 to 2000). Wellington has only 10% foreign so if the dollar takes a hit then international funds will look possibly more appealing at least for awhile. On the bond side, I've not done the analysis. Would expect that both funds take some corporate bond risks. Both funds are active so they can somewhat adjust things and in particular the stock/bond mix. I don't know where to get historic details on Wellington stock percentage changes.

I love Wellesley's performance, but it isn't broad enough for me, so I add Total Stock Market, Total International and Total Bond market to get the AA I want

[justplainbll]

Quote:

Originally Posted by audreyh1 FWIW I use half each OAKBX and DODBX as my balanced fund benchmark against my own AA, and I keep 5% of the total portfolio in each to help me track and compare each year.

For somewhat the same reason I have 20% of my portfolio invested in 42 mutual funds and 11 ETFs.

[NW-Bound]

Quote:

Originally Posted by NW-Bound So, would you trust your money with NWBGX (never open to outside investors), or VWINX? While no MF performance is ever guaranteed, you would be sure that the ride is never boring with NWBGX. You may have sleepless nights, and would be advised to wear your Depend to bed. The manager himself however is used to it and only has bad dreams occasionally.

I am a bit surprised that other than the comments about testosterone, nobody else said "Good grief! Are you a masochist?".

It was not true! Not entirely, at least. I was only losing sleep in early 2000, when I was "making money", lots of it. Let me explain further.

I rolled out my 401k from megacorp to an IRA in 1998, and had the job of reinvesting it. Tech stocks were hot, so I started to buy some tech sector MFs and individual companies. Being an EE, I was enamored with all that wonderful superfast chips, network routers, etc... Still, I was not 100% into these stocks, in fact I was only about 70% in equities total, and perhaps only 30% of portfolio in tech stocks.

Yet, in just about 6 months ending on March 24, 2000, I was gaining maybe 30%.

In early March, some of my stocks were jumping 20% a day! And they kept going day after day! This couldn't be right, so one such crazy day I grabbed 4 of the hottest of the bunch and sold them. My cost basis was about $80K, and I made $40K gain in a matter of a couple of months. But then, you know what happened? A few days later, I checked, and found out I could have had another $40K if I waited a bit.

I didn't know what to do! I lost sleep. Of course, in hindsight, I should just keep on selling until I was out of these stocks! Note that none of these were dot-com stocks. They were all real companies, but their P/E were in the stratosphere. No matter, people said. Their growth justified that! Right! That was the time when Sir Templeton made $80M for himself by shorting some of the dot-coms. In a later interview, he said that he was just "helping people". They clamored to buy, so he sold to them, even if he did not own these stocks.

I eventually sold my tech stocks, when they all started to come down, and I could not stand the pain. But then, when they were down to 1/3, or even 1/5 of their highs, I thought they were cheap now, and bought back. Big mistake! Many of them eventually went under, or got bought out for peanuts.

Many people lost all in that fantastic bubble. So, if you look at my original post, when I said that I only lost 30% from Jan 2000 to Jan 2003, I thought I was saving my ass fairly well. And that tech bust period was when I had no income!

I guess I had to personally experience such a bubble to appreciate what I had read about all previous bubbles in history. Once I understood it (and survived one), I regained my calm and have been OK since. In the Great Recession of 2008-2009, I don't think I was as scared as people who were not immunized with the tech bust. Also, misery loves company. Everybody was hurting. And I was still having the ability to generate income via w*rk.

Here's to jog your memory. In the Great Recession of 2008-2009, the S&P500 dropped 55% from Oct 2007 to March 2009. Balanced funds like Dodge&Cox (DODBX) and Wellesley (VWINX) lost 50% and 22% respectively. Oh, I am sure we all remember that. It was all reflected in the archived threads here. I did not do as well as Wellesley, but much better than S&P and DODBX.

And talk about DODBX, I bought it in 2002, then more in 2004. Never sold it, and at this point, it rebounded and still gives me a combined gain of 45%. Not great, but could have been much worse.

[NW-Bound]

Quote:

Originally Posted by clifp In truth I am a little scared to go back over the last 10-20 year I find out how much better I would have been in Welesley/Wellington.

Might not be, if you were like me.

See, I kept good records from 2000 on, but that was when I started to invest actively. So, I know what my performance has been in the period 2000-2012.

Prior to that, I was only in MFs, and if my memory serves, I was split 50/50 in my 401k contributions between government bonds and some large cap funds. As the S&P did very well between 1980 and 2000 (see the tables of returns I posted earlier), I believe I did fine and might even beat Wellesley since I never rebalanced.

Too ignorant (also too busy) to know I was supposed to rebalance. Worked out well!

[NW-Bound]

Quote:

Originally Posted by Major Tom Interesting stuff NW-Bound, and as clifp said, you are being as transparent as possible, which is admirable; many people who manage their own investments are not as willing to talk about the weak side of their strategies as they are to tout their successes.

As I mentioned, I assumed the net flow to my portfolio was zero, but it might be a bigger number, either in or out, than I remember. You know how unreliably people remember things that they did not write down.

One of these days, I may sit down and reconstruct my cash flow. If I do that, I promise to update this thread.

Quote:

If I could risk an over-simplification; from my side of the tracks (as an indexer who wants to remain as such), it looks to me as if the best reason to actively manage your own investments is not necessarily for greater returns, but because you enjoy doing it.

Yes, I am sure that is the case for many posters here, particularly the "engineer" type. Lsbcal is one, and same with clifp. Engineers like to understand "how things work", and to tinker.

Quote:

The performance of VFINX during that "lost decade" as displayed by your table showing returns after adjustment for inflation, does indeed look a bit grim, but when I realized that in a passive portfolio I'd be holding an index fund such as this along with a bond fund, that lost decade would have been easier to stomach.

True, my comparison of a 100% stock MF to a 60/40 balanced fund was not proper. But I thought it was very interesting to check out the adage that 100% equity would give you higher returns, in exchange for higher risk or fluctuations from year to year. But decade to decade?

That Wellesley catches up to the S&P after 30 years, I found very interesting. Did other balanced MFs do that too, or was it Wellesley manager's skill? If anyone knows, please educate me, as I have not dug that deep to reconstruct and backtest a simple rebalance strategy using passive indices instead of using Wellesley as a surrogate.

PS. It's built in to FIRECalc! But I need to learn how to get that specific info out of it.

Quote:

I've been quite tempted by the allure of Wellesley but being completely honest with myself, if there were a change in management and/or a disastrous few years, I wouldn't take action until after a lot of the damage had been done. I'm just not good at this sort of thing. It's for this reason that I feel a lot happier holding a small number of passively-managed index funds, with both stocks and bonds in the mix.

Yes, I would feel the same. If I am to simplify things, that's the way I may be inclined to do. But how about my future widow? Can't get her to be interested in this stuff.

Here's another thing. I described how Dodge&Cox outperformance led to more influx of money, and caused them to close the fund to new investors. Having too much money can be a curse to MF managers, as they are no longer so nimble, and being able to beat other institutional investors in navigating through treacherous passages. The door is not wide enough! This affliction is called "fund bloat", and also happened with Fidelity Magellan way back when. Too good a success dooms them to a subsequent failure.

I just now search for "DODBX fund bloat", and found some forums where people talked about that potential problem, back in 2006!

[NW-Bound]

Quote:

Originally Posted by audreyh1 FWIW I use half each OAKBX and DODBX as my balanced fund benchmark against my own AA, and I keep 5% of the total portfolio in each to help me track and compare each year.

To set things up for my wife if I croak before her, one thing I might do is to split among several balanced funds, for some protection against individual fund blowing up.

Quote:

Originally Posted by nun I love Wellesley's performance, but it isn't broad enough for me, so I add Total Stock Market, Total International and Total Bond market to get the AA I want

Yes, one thing that worries me about Wellesley as a sole MF is lack of foreign exposure.

Quote:

Originally Posted by justplainbll For somewhat the same reason I have 20% of my portfolio invested in 42 mutual funds and 11 ETFs.

I hope your 42 MFs are low expense ratio. Even so, with so many, I would just go all ETFs, or even individual stocks.

[REWahoo]

Quote:

Originally Posted by NW-Bound I hope your 42 MFs are low expense ratio. Even so, with so many, I would just go all ETFs, or even individual stocks.

Guess maybe you missed this post:

Quote:

Originally Posted by justplainbll For the last 10 or so years, I've been downloading the symbols, closing prices, ttm earnings per share, annualized dividends per share, and ex-div dates for all (some 200+) of my equity and mutual fund holdings on a more or less daily basis from Yahoo-Finance. Because these positions are held in over a half dozen accounts, I find it helpful to generate a consolidated position recap report.

[NW-Bound]

OMG! I missed what he implied he was doing with the other 80% of portfolio.