Wellington versus Wellesley

[David1961]

Am considering moving my IRA funds into either of these Vanguard finds. Have done some preliminary research and both seem to have similar goals. Wellington is more heavily invested in stocks. And I read the other thread that Wellington may be closed to new investors , so that may make my decision easier. Seems like the main difference I can tell is that Wellesley is more focused on preserving your value during a down market. Wellington may be a better long term investment, but may be getting too big to maintain this - probably why it is closed to new investors. Am I correct?

 

[dtbach]

That might be. I just put 80K into Wellington about 3 weeks ago so this would be very recent.

This is from a web search dated 28 Feb this year:

Vanguard Group Inc., the world’s biggest mutual-fund company, said two funds including the $68 billion Vanguard Wellington Fund won’t open new accounts for financial advisers and institutional investors.

So it looks like it is still open to individual investors

 

[bUU]

I think you and I must have tipped the scale. I put 118K into Wellington about 3 weeks ago.

 

[NW-Bound]

Sell, sell, sell!

 

[dtbach]

I think you and I must have tipped the scale. I put 118K into Wellington about 3 weeks ago.

That would be a pretty delicate scale tipping on our .00029% of contributions!

 

[W2R]

I just bought $10K of Wellington in my "play money account". This account is a tiny $10K Roth IRA that I use to act out my hunches in miniature while sticking to my boring old financial plan for the vast majority of my nestegg, thus avoiding catastrophic consequences.

I have never had Wellington before. I had been planning to make this purchase since January and all the news about Wellington this afternoon reminded me of that.

So anyway, dtbach is right - - you can still buy it.

 

[Accidental Retiree]

Like W2R, we just bought some Wellington, new to us, too. We have been moving money to Vanguard as funds become available from maturing CDs, and Wellington was our next stop.

Thanks to this forum, we started with Wellesley earlier this year.

 

[Koolau]

DW has both as a part of her Roth IRA funds. These are the only two managed funds I would probably ever own. Most of our other fund investments are strictly index funds. I credit Uncle Mick (as well as the rest of the forum) for giving me the interest to research Wellesley (and then Wellington). So far, these two have had decent returns for the most part. I view them as "set and forget" - much like index funds. YMMV

Hey! Let's hear it now! Pssst! Wellesley! (Thanks Uncle Mick!)

 

[WilliamG]

Wellington/Wellesley have been a large part of our portfolio. If you have equal amounts of them then you wind up with a 50/50 allocation which just happens to be our overall allocation. Sold quite a lot of Wellesley back in May but have retained all of the Wellington. Will go back into Wellesley some time after interest rates have risen.

 

[LakeTravis]

Wellington/Wellesley have been a large part of our portfolio. If you have equal amounts of them then you wind up with a 50/50 allocation which just happens to be our overall allocation. Sold quite a lot of Wellesley back in May but have retained all of the Wellington. Will go back into Wellesley some time after interest rates have risen.

+1

Exactly my situation (both funds account for 60% of my investments) and strategy - eventually get to where both funds comprise 100% of my investments as a 50/50 split but only after interest rates are climbing).

 

[NW-Bound]

Sold quite a lot of Wellesley back in May but have retained all of the Wellington. Will go back into Wellesley some time after interest rates have risen.

What? Are you keeping the sale proceed in cash? Dirty market timer, you!

 

[NW-Bound]

I bought Wellington and Wellesley only a few years ago, but some people here have had them for longer.

Out of curiosity, I look at their performance vs. Vanguard S&P Index (the flagship fund). For the period of 2000-2013, both lead the S&P by a good margin. For $10K in 1/2000, in 8/2013 you would have $14.6K in VFINX, $20K in Wellesley, and $25.9K in Wellington.

But if you bought in 1/2003 near the bottom of the 2000-2003 crash, then it's $23.6K for VFINX, $21.1K for Wellesley and $24.8 for Wellington at the current time.

What happened was that most of the lead of these funds occurred when they sidestepped the tech stock and dotcom parts of the S&P. After the crash of 2000-2003, then all 3 are roughly the same over the last 10 years. The steadiness of the balanced funds is attractive, of course, for the distribution phase of an ER's life.

Thought that was interesting to note. When you buy makes all the difference.

PS. If we have another crash, I strongly suspect these 2 funds will come down less than the S&P, as they did in the past.

 

[ejman]

I bought Wellington and Wellesley only a few years ago, but some people here have had them for longer.

Out of curiosity, I look at their performance vs. Vanguard S&P Index (the flagship fund). For the period of 2000-2013, both lead the S&P by a good margin. For $10K in 1/2000, in 8/2013 you would have $14.6K in VFINX, $20K in Wellesley, and $25.9K in Wellington.

But if you bought in 1/2003 near the bottom of the 2000-2003 crash, then it's $23.6K for VFINX, $21.1K for Wellesley and $24.8 for Wellington at the current time.

What happened was that most of the lead of these funds occurred when they sidestepped the tech stock and dotcom parts of the S&P. After the crash of 2000-2003, then all 3 are roughly the same over the last 10 years. The steadiness of the balanced funds is attractive, of course, for the distribution phase of an ER's life.

Thought that was interesting to note. When you buy makes all the difference.

PS. If we have another crash, I strongly suspect these 2 funds will come down less than the S&P, as they did in the past.

Yes, the virtue of a well managed balanced fund (ala Wellsi/Welltn) is reducing the volatility when the market goes crazy either overall or in a particular area that then becomes overweight in an index such as SP500.

Of course the reverse is that when the stock market is booming the balanced fund is lagging sometimes by quite a bit. In 1999 Wellesley was down by over 4% while IDX500 was up over 20%. At the time I didn't feel too smart about sticking with Wellesley.

 

[WilliamG]

Meant to link this earler. Steve Vernon article on these two funds for retirement.

Recession-Proof Your Retirement Savings -- Part 2 - CBS News

 

[NW-Bound]

Good article. I only have a comment on this conclusion.

If you had invested in either one of these funds and lived off the income stream, you would have survived one of the worst decades for investing with a relatively steady stream of income and your retirement savings intact. Many retirement investors fared a lot worse.
​

The initial $200K in Jan 2000 would grow into $209K for Wellington and $219K for Wellesley on Jan 2010, if all distributions were consumed. The above amounts were not sufficient to match the inflation during that time frame. One would need to have $257K at the end for the principal to keep up with inflation.

However, the payout often exceeded 3.5%. If an investor exercised restraint and spent less in order to reinvest the excess, perhaps he/she might come closer to retain the principal after inflation.

 

[MooreBonds]

Good article. I only have a comment on this conclusion.

If you had invested in either one of these funds and lived off the income stream, you would have survived one of the worst decades for investing with a relatively steady stream of income and your retirement savings intact. Many retirement investors fared a lot worse.
​

The initial $200K in Jan 2000 would grow into $209K for Wellington and $219K for Wellesley on Jan 2010, if all distributions were consumed. The above amounts were not sufficient to match the inflation during that time frame. One would need to have $257K at the end for the principal to keep up with inflation.

However, the payout often exceeded 3.5%. If an investor exercised restraint and spent less in order to reinvest the excess, perhaps he/she might come closer to retain the principal after inflation.

This was just a quick and dirty analysis on Wellesley, from Jan 1 2000 to Dec 31 2010, with approximate numbers:

Average Price 2000 = $19/share
Average 2010 = $21/share

Average yield from 2000 to 2010 was well over 3.5%. If you took a 3.5% distribution from Wellesley's share price each year and let the rest simply sit in a MM account (not reinvested), you have the following comparisons:

Capital growth from Wellesley 2000-2010 = 11%
Distribution amount above 3.5%/year accumulated in MM account from 2000-2010 = ~$5.14/share = 27%

So if you add your extra cash distributions above 3.5%/year that you didn't spend, your Wellesley portfolio holding would have grown to a total of about $26.14/share, or about 38% from 2000-2010, a bit more than the inflation you cite.

Of course, the biggest factor not taken into account in the above example are the income taxes owed on the distributions you didn't spend. But even if you reduce your 'savings above the 3.5% withdrawal rate' by 25% for taxes, you still achieve total portfolio growth (capital gain plus excess dividend accumulation) of 31% from 2000-2010, roughly in-line with inflation.

However, because Wellesley has a large slug in bonds, it was a somewhat unique 10-year excellent period to own bonds amid the declining interest rates, which certainly helped Wellesley.

 

[NW-Bound]

Thanks for the info. Indeed, Wellesley outperformed Wellington in the recent years. And being able to draw 3.5% and keep your principal the same after inflation is pretty darn good. Tax would be moot in a tax-deferred account anyway.

Anyway, perhaps investors have sensed that the tide has turned, and more flock to Wellington now, causing its manager to close the fund. I wonder if someone has the inflow/outflow to these funds for a comparison. The YTD and last-12-month returns show that Wellington trounces Wellesley, beating the latter by more than 2X.

 

[yakers]

Anyway, perhaps investors have sensed that the tide has turned, and more flock to Wellington now, causing its manager to close the fund. .

Not sure why the fund closed but we (DW) are in those slowly migrating from Wellesley to Wellington. Drawing down Wellesley to live on and occasionally adding to the small Wellingtn holding. Just figure even the Wellesley bond gurus will have trouble with bonds going forward but still want a balanced fund.

 

[redduck]

For sure the W/W funds are still available to buy at Vanguard because I initiated a position in both funds yesterday. I could not buy either of them at another brokerage.

 

[Amethyst]

I just got a semiannual report for Wellington, of which we own a small amount in tax-deferred accounts. It says" "s you may know, we announced in February that the fund would no longer accept new accounts from financial advisor or institutional clients.....individual investors may continue to establish new accounts and make additional purchases."

Amethyst

.

Anyway, perhaps investors have sensed that the tide has turned, and more flock to Wellington now, causing its manager to close the fund. .

 

[NW-Bound]

I have just logged into my Schwab account, and tried to buy Wellington and Wellesley. The software let me, but I did not go through with it in case I could not cancel the orders.

So, I do not know what problem redduck was having.

 

[redduck]

A problem with Scottrade while trying to buy (not really) either VWINX or VWELX: a notice shows up in red for each of these funds saying if I want to buy these funds I need to speak to the branch manager. It also says that these two symbols are incorrect. It also stated I should notify NW-Bound of this situation. (Kind of eerie, no?)

 

[NW-Bound]

I just logged into my Scottrade account, expecting a message "redduck requesting assistance!".

No, I did not see that.

So, I tried to place an order for VWINX. It let me, but of course I did not hit "confirm", in case I could not cancel the order.

Then, I had the idea of trying to enter that symbol as a stock, and not a mutual fund. It stopped me in my track, saying "CR99: trading currently disallowed". Hmm... That's misleading.

PS. But whatever the problem is, it is better to buy direct at Vanguard anyway to save on fees. Schwab charges $76/order. Scottrade may charge a similar amount. As much as I like to help my friends, I am too cheap to spend $76 to find out if the order really goes through. That buys me two wine bottles at my favorite French bistro. And yes, the last time we dined with a close-friend couple, I ordered 2 bottles of wine. The wives did not drink. Me and my friend, we did the 2 bottles between ourselves.

By the way, we spent 3 hours at the table, so we were sober when we stood up.

And no, I did not order 2 simultaneously. One bottle at first, but then half-way through the main course, that bottle ran dry. What's a guy to do? Go thirsty?

 

[redduck]

Ooh, that's embarrassing (for me). I obviously tried to place these orders (not really) as stocks--not as mutual funds.

Anyhow, I just went back to the Scottrade website and it's down for maintenance. (Odds are probably about 50-50 I'm getting this right).


"The bottle ran dry"? That's an interesting way of looking at it.

 

[NW-Bound]

I checked again at Scottrade, and they charge up to $17 for each buy/sell order. That's high compared to stock trade fees of $7, but still a lot less than Schwab at $76. How the heck it costs so much for MF at Schwab?

I made a mistake many years ago of buying a MF through Schwab and got hit unexpectedly with that big fee. No more!

However, Schwab has a lot of no-trading fee MFs and ETFs to select from, so I still have accounts with them. By the way, many of Schwab index funds have lower expense ratios than Vanguards. When I plotted their performance against Vanguard's equivalents, they do not track exactly, but close enough.