Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Wellesley VS. NWBGX
Old 01-04-2012, 01:22 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,391
Wellesley VS. NWBGX

I am not an indexer. I have been shifting more and more money from MFs into individual stocks, or sector ETFs.

I believe in market-timing buy-low-sell-high, therefore I never want to hold just one asset. The problem is the act of rebalancing by itself is tricky. It can really affect one's performance.

And more than that, I try to do sector rotations, selling out of hot ones to go into cold ones. Oh yes, one can make a lot of money in theory, but with zillions of people out there doing it, am I smarter than they are?

People who are actively self-managing their portfolio should compare themselves to some benchmarks, or indices, or well-known mutual funds to see if they would be better off handing their money over to a professional money manager, or just to follow some indices.

I am no different. As often posted here, I have been pondering if I should just put all of my money in a good MF such as Wellesley, and just head into the woods in my RV (if my wife would follow me, as I would be lonely otherwise), only emerging every so often to see how much money the MF manager has made for me.

So, what is my performance compared to Wellesley? The following table compares Wellesley (VWINX) against NWBGX (hedge fund managed by NW-Bound). I tried to use VWIAX, which would give a better return due to lower fees, but Morningstar did not show historical data prior to 2002 for the Admiral fund.

Caveat: I kept a diary showing my portfolio total worth to the last dollar. It is recorded daily, unless I was without Internet connection due to traveling or boondocking. However, I do not keep meticulous records of money flowing in/out of that portfolio. My income in the last 10 years has been really sporadic, because I did not have full-time income the last decade.

There were years where my income was so little I had to move money around to fund our IRAs. I know that my wife's income, when she was still working, was not sufficient to support our expenses. Still, I had some good years where we had plenty of money left over. There was even one year where I triggered AMT. But then, we bought a second home, and in recent years had to support two children through college on my part-time income.

In short, for the sake of simplicity, I just assumed that the money flow into my portfolio was neutral overall. That assumption could be all wrong (I suspect there was net flow into the portfolio, not out), but to reconstruct all transactions would take a bit of work.

Ladies and gentlemen, the following table shows what you would have at the beginning of each year since 2000, if you put $10K into VWINX, vs. NWBGX. Again, the manager of NWBGX was "borrowing" from the fund from time to time, and "repaid" as he was able to. His accounting was sloppy, but he was definitely not Madoff, as there are indeed records showing NAV of NWBGX as spread out among two dozen accounts at Schwab, Scottrade, Fidelity, US Treasury, etc... In fact, as stated, the manager of NWBGX might also have been a benevolent one, meaning he migh have deposited more than he withdrew.


Jan 1 VWINX NWBGX

2000 10000 10000
2001 11617 9885
2002 12456 9464
2003 13015 7811
2004 14308 10644
2005 15356 11929
2006 15965 13634
2007 17733 14930
2008 18735 17155
2009 16645 13011
2010 19656 16192
2011 21625 18524
2012 23772 17612


So, what do you think? In a nutshell, NWBGX's manager performance really stank in the 2000-2003 time frame. He was hanging on to his tech stocks way too long after the 2000 bust. He redeemed himself for the period of 2003 till now, gaining 125% vs. 83% for VWINX. But again, it could have been due to his depositing his own money into the fund to make up for his past sin. But he bought his 2nd home in 2005 too!

Due to accounting irregularities, the above performance of NWBGX would not be approved by the SEC, and must be taken with your tongue planted firmly in your cheek. The above table shows that your $10K in Jan 1, 2000 would have shrunk to $7811 on Jan 1, 2003 due to tech stock imploding, plus the manager's borrowing for living expenses. The truth is that it was not even the lowest point, which was reached on March 03, 2003 when the manager borrowed a bit of money to pay off his mortgage on his 1st home. You would have 70 cents on the dollar at that point!

As to investment style, VWINX hold 40% stock, mostly conservative dividend stocks. NWBGX equity ratio is higher and not fixed, but varies from a high of 80% to briefly as low as 40%, and has a large percentage of high-beta stocks. VWINX has an annual portfolio turnover of 48%, while NWBGX's is a lot lower and also very sporadic, meaning it can be as low as 5%, and as high as 60%.

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.
__________________

__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   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 01-04-2012, 01:35 PM   #2
Thinks s/he gets paid by the post
Free To Canoe's Avatar
 
Join Date: May 2008
Location: Cooksburg,PA
Posts: 1,738
Thanks for posting.

Coservative funds have done well in the last decade as your data indicates.

I am currently trying to determine who Wellesley's main competition is.
__________________

__________________
Free to canoe
Free To Canoe is online now   Reply With Quote
Old 01-04-2012, 01:51 PM   #3
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,412
Quote:
Originally Posted by Free To Canoe View Post
Thanks for posting.

Coservative funds have done well in the last decade as your data indicates.

I am currently trying to determine who Wellesley's main competition is.
Morningstar classifies Wellesley as conservative allocation and their "picks" of that category are, in addition to Wellesley,

Manning & Napier Pro-Blend Cnsrv Term S EXDAX

T. Rowe Price Personal Strat Income PRSIX

Vanguard Tax-Managed Balanced Adm VTMFX
__________________
MichaelB is offline   Reply With Quote
Old 01-04-2012, 01:58 PM   #4
Thinks s/he gets paid by the post
Free To Canoe's Avatar
 
Join Date: May 2008
Location: Cooksburg,PA
Posts: 1,738
Quote:
Originally Posted by MichaelB View Post
Morningstar classifies Wellesley as conservative allocation and their "picks" of that category are, in addition to Wellesley,

Manning & Napier Pro-Blend Cnsrv Term S EXDAX

T. Rowe Price Personal Strat Income PRSIX

Vanguard Tax-Managed Balanced Adm VTMFX
Thanks. I tried the dumb approach at M* and got bogged down in too much data even in the conservative allocation area. Lots of insurance companies have their own mutual funds.
__________________
Free to canoe
Free To Canoe is online now   Reply With Quote
Old 01-04-2012, 02:14 PM   #5
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,412
Quote:
Originally Posted by Free To Canoe View Post
Thanks. I tried the dumb approach at M* and got bogged down in too much data even in the conservative allocation area. Lots of insurance companies have their own mutual funds.
My pleasure. I would also look at the Moderate Allocation funds, which also seem pretty conservative to me:

American Funds American Balanced A ABALX

American Funds Inc Fund of Amer A AMECX

Dodge & Cox Balanced DODBX

FPA Crescent FPACX

Manning & Napier Pro-Blend Mod Term S EXBAX

Vanguard Wellington Inv VWELX

Excluding the load funds, the others look pretty good for those interested in low maintenance investments. Note - they all generate taxable income.
__________________
MichaelB is offline   Reply With Quote
Old 01-04-2012, 07:50 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
I've got all my records in Quicken, but like you I've had money movement in both directions. I could track those as well and create a benchmark portfolio, but that seems like too much work. Certainly for quite a few individual investments the timing of the money flow made a big difference.

Given your higher volatility and lower return so far, I'd kind of prefer VWINX. But your future might be brighter when the market finally picks up.
__________________
Animorph is offline   Reply With Quote
Old 01-04-2012, 08:51 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,391
Quote:
Originally Posted by Animorph View Post
Given your higher volatility and lower return so far, I'd kind of prefer VWINX. But your future might be brighter when the market finally picks up.
So, I guess I cannot count on you to become a client of my hedge fund, if I decide to open it to the public.

It's OK, and I appreciate your honest appraisal. Well, as I said, I have been thinking about closing door and sending my money elsewhere as well.

But, in the table above, you can see that my performance since 2003 has not been too shabby. Yes, the in/out flow might have made some differences, but I have such a large margin ahead of Wellesley (125% vs. 83%), and while I do not want to reveal my portfolio size, it is large enough that I don't think the net addition or withdrawal that was unacounted for would make up anymore than 10-15%.

So, the only thing that was really wrong was my performance from 2000-2003. Now, I only started to be my own "hedge fund manager" since 1999 and started to buy individual stocks then. That poor performance was when I first practiced active investing, and I was not cocky nor arrogant then. I was simply inexperienced.

So, have I outgrown my naivete, or have I been simply lucky since 2003?

I have been thinking about splitting my portfolio. Half goes to VWIAX, the other half to NWBGX. I think it would be a good hedge. If I beat Wellesley, I can brag about it. If I fail, well, I still have some money to continue to live my life in humility.

PS. I started to track money flow a bit less casually now, in preparation for full retirement. Prior to that, I had a really cavalier approach to budgeting, because I thought we were so LBYM that it did not matter. Yes, compared to people I know, we are, but not to this ER crowd here.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 01-04-2012, 09:03 PM   #8
Full time employment: Posting here.
 
Join Date: Jul 2011
Posts: 721
Quote:
Originally Posted by MichaelB View Post
My pleasure. I would also look at the Moderate Allocation funds, which also seem pretty conservative to me:

American Funds American Balanced A ABALX

American Funds Inc Fund of Amer A AMECX

Dodge & Cox Balanced DODBX

FPA Crescent FPACX

Manning & Napier Pro-Blend Mod Term S EXBAX

Vanguard Wellington Inv VWELX

Excluding the load funds, the others look pretty good for those interested in low maintenance investments. Note - they all generate taxable income.
Another couple to consider (and I'm sure they've been discussed here somewhere) are:
Permanent Portfolio PRPFX (considered conservative allocation)
Janus Balanced JABAX (in the moderate allocation category)
__________________
panacea is offline   Reply With Quote
Old 01-04-2012, 10:07 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Quote:
Originally Posted by NW-Bound View Post
But, in the table above, you can see that my performance since 2003 has not been too shabby. Yes, the in/out flow might have made some differences, but I have such a large margin ahead of Wellesley (125% vs. 83%), and while I do not want to reveal my portfolio size, it is large enough that I don't think the net addition or withdrawal that was unacounted for would make up anymore than 10-15%.

So, the only thing that was really wrong was my performance from 2000-2003.
Well, your last 5 years have not been that great either. And you're pretty much even from 2004 on. Not that I've done any better. Quicken says I'm +1.56% annualized for the past 5 years. I would suspect much of that is my heavy foreign allocation, along with an all equity portfolio with cash now and then. I would think a larger than 40% equity allocation would explain quite a bit of your differences.
__________________
Animorph is offline   Reply With Quote
Old 01-04-2012, 10:28 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,391
Yes, Wellesley certainly has a more steady climb. My own performance is, ahem, uneven at best.

Wellesley did very well through the Great Recession of 2008-2009, much better than some other balanced funds like Dodge & Cox Balanced (DODBX). The latter is now rated 2-star by Morningstar, but if I remember correctly, it used to be 5-star. The problem is that past performance is never a guarantee of the future, as they say. Hence, I do not know if Morningstar rating is really meaningful.

What bothers me about Wellesley is that bonds and Treasuries have been doing so well, can we expect that performance to continue? Will I curse myself later for "chasing performance" if I get into Wellesley now? That's what I have been pondering.


Quote:
Originally Posted by Animorph View Post
I would think a larger than 40% equity allocation would explain quite a bit of your differences.
I just checked Vanguard S&P Index. For 100% equity, it returns 34.5% for the period Jan2004-Jan2012, while both Wellesley and I have returns of around 65%.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 01-05-2012, 07:41 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,634
Wellesley looks like a no brainer unless you get a lot out of pickin and tradin.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 01-05-2012, 07:58 AM   #12
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: 42,074
Quote:
Originally Posted by donheff View Post
Wellesley looks like a no brainer unless you get a lot out of pickin and tradin.
Unclemick will be along shortly to comment on the relationship between testosterone poisoning and stock pickin...
__________________
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 01-05-2012, 08:08 AM   #13
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,412
Quote:
Originally Posted by donheff View Post
Wellesley looks like a no brainer unless you get a lot out of pickin and tradin.
Or if you have only taxable accounts. This is the time of year, just after distributions and getting ready for taxes, that one looks for options.
__________________
MichaelB is offline   Reply With Quote
Old 01-05-2012, 08:58 AM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,432
Quote:
Originally Posted by NW-Bound View Post
As often posted here, I have been pondering if I should just put all of my money in a good MF such as Wellesley, and just head into the woods in my RV (if my wife would follow me, as I would be lonely otherwise), only emerging every so often to see how much money the MF manager has made for me.
I can see myself simplifying things a bit when I get into in my 60's. Not far off. Maybe buying a target fund like Unclemick and just forget it. Or going 20% cd's and splitting the balance balance with Wellesley and the Permanent Portfolio. Add a small spia to go along with SS and I could put it on auto-pilot. Conservative and simple.
__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Old 01-05-2012, 11:17 AM   #15
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 2,423
Quote:
Originally Posted by MichaelB View Post
Or if you have only taxable accounts. This is the time of year, just after distributions and getting ready for taxes, that one looks for options.
Do you mean that Wellesley should only be for taxable accounts? Can you explain, please? I'm just a beginner with investing (but I learn a lot here) and my ROTH IRA is in Vanguard STAR fund. I've been thinking of changing it to Wellesley.
__________________
Married, both 62. DH retired June, 2010. I have a pleasant little part time job.
Sue J is offline   Reply With Quote
Old 01-05-2012, 11:33 AM   #16
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: 42,074
I think MichaelB means the reverse: since Wellesley is an 'income' fund targeted to pay quarterly dividends, that income will be taxable if not held in an IRA or 401k.
__________________
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 01-05-2012, 11:38 AM   #17
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,412
Quote:
Originally Posted by REWahoo View Post
I think MichaelB means the reverse: since Wellesley is an 'income' fund targeted to pay quarterly dividends, that income will be taxable if not held in an IRA or 401k.
+1
__________________
MichaelB is offline   Reply With Quote
Old 01-05-2012, 11:48 AM   #18
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 2,423
Quote:
Originally Posted by REWahoo View Post
I think MichaelB means the reverse: since Wellesley is an 'income' fund targeted to pay quarterly dividends, that income will be taxable if not held in an IRA or 401k.
Thanks, that was my understanding, too. Just clarifying the comment.
__________________
Married, both 62. DH retired June, 2010. I have a pleasant little part time job.
Sue J is offline   Reply With Quote
Old 01-05-2012, 12:07 PM   #19
Thinks s/he gets paid by the post
 
Join Date: Jan 2005
Posts: 2,554
Quote:
Originally Posted by NW-Bound View Post

What bothers me about Wellesley is that bonds and Treasuries have been doing so well, can we expect that performance to continue? Will I curse myself later for "chasing performance" if I get into Wellesley now? That's what I have been pondering.

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.
__________________
Dreamer is online now   Reply With Quote
Old 01-05-2012, 12:11 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,675
Quote:
Originally Posted by NW-Bound View Post
...(snip)...
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 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.

Regarding NWBGX vs VWINX. I'd personally only consider VWINX. It has had excellent recent relative performance and I'd expect it to return to middle of the pack. When small stocks start making headlines and/or international stocks start to recover that safe stalwart might look a little less tempting. You have to decide if that will be OK with you. I guess VWINX could be characterized as large value equity with an active bond component.

I personally benchmark my performance against (1) Vanguard Wellington VWELX and (2) a simple index portfolio representative of my allocations. I'm also constantly wondering if I should give it to the active managers and Vanguard active managers are some of the few I'd trust (besides maybe Dodge and Cox). I'd only go with lowish ER active management funds -- preferably below 0.6%. My total ER=0.18% because I use mostly index ETF's. 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?

My only active fund is Bill Gross's PTTRX. That's a great example of a fund that didn't do well last year. It's a bit of a black box too. I trade it with cash, Treasuries and PTTRX. That is a system approach I just came up with so have not implemented it yet. I'm sticking with PTTRX and last month it did well but last year's ride was not fun. Just saying that I can make mistakes too.
__________________

__________________
Lsbcal is online now   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


 

 
All times are GMT -6. The time now is 09:06 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.