Wellesley & Wellington: Set it and forget it?

[HadEnuff]

Within the next month or so I and DW will be getting our rollover IRAs from the corporate pension fund. Small, Professional Corp, terminating due to my retirement. She worked for me in PC..

When we get this chunk, we will be sitting on about 90% of our "nut" in IRAs.

I'm a long time Bernstein AA guy, right now at 60% Stock (well, down to 55% thank you very much), and 40% Bonds (20% short term, 20% intermediate term) all in Vanguard Admiral Shares...

So, I'm thinking just going 50% Wellington, 50% Wellesley in the IRAs, and just "set it and forget it"...

even assuming another 30% drop in equities, there would still be enough in the IRAs to provide us our desired lifestyle with a 3.5% WR.

Thoughts? Suggestions? What I"ve done , managing this money myself in the past is simply every 12 months rebalance. Why not let someone else do that?

 

[MichaelB]

I don't see why not, and you could do a lot worse. I think a few other forum members do that and are happy with the results. It sure beats an advisor.

 

[Aiming_4_55]

My mom has some money just sitting in a Roth IRA that she might never use. She lives off SS and some rental income that I provide. She claims she will leave it to me. I don't factor that in my NW.

I'm thinking of 40% Wellington, 40% Wellesley, and 20% in Vanguard Healthcare Fund VGHCX as a tilt against increasing healthcare rates.

Alot of forum member invest in Wellington & Wellesley, not bad for long term IMHO.

 

[REWahoo]

I've had 2/3 of our portfolio invested in those two funds for more than a decade and have no plans to make any changes. Not sure I would have had the intestinal fortitude to rebalance in 2008-09, but those fund managers apparently have nerves of steel and did it for me.

 

[W2R]

So, I'm thinking just going 50% Wellington, 50% Wellesley in the IRAs, and just "set it and forget it"...
[...]

Thoughts? Suggestions? What I"ve done , managing this money myself in the past is simply every 12 months rebalance. Why not let someone else do that?

I have never done this myself, but wouldn't you have to rebalance between Wellington and Wellesley sometimes? Suppose one's AA was 1/2 Wellington and 1/2 Wellesley. Then if the market crashes, it might become 60% Wellesley and 40% Wellington.

I am thinking you'd have to rebalance like you are doing now. Now, if you had everything in one fund, like in one of the Target Retirement funds, you wouldn't have to rebalance. I think that's what UncleMick does.

I love Wellington and Wellesley more than any other funds, myself, although so far I have limited myself to 30% Wellesley and a negligible amount of Wellington.

 

[HadEnuff]

I have never done this myself, but wouldn't you have to rebalance between Wellington and Wellesley sometimes? Suppose one's AA was 1/2 Wellington and 1/2 Wellesley. Then if the market crashes, it might become 60% Wellesley and 40% Wellington.

I am thinking you'd have to rebalance like you are doing now. Now, if you had everything in one fund, like in one of the Target Retirement funds, you wouldn't have to rebalance. I think that's what UncleMick does.

I love Wellington and Wellesley more than any other funds, myself, although so far I have limited myself to 30% Wellesley and a negligible amount of Wellington.

I was thinking along those lines as well. All of the calculators I've run, it doesn't seem to matter if you are 60-40, or 40-60, but I suppose if things get way out wack, or as I get older, I may want to be more in bonds,
but it would eliminate, I think, the need to rebalance yearly, unless things got crazy.

 

[REWahoo]

I have never done this myself, but wouldn't you have to rebalance between Wellington and Wellesley sometimes? Suppose one's AA was 1/2 Wellington and 1/2 Wellesley. Then if the market crashes, it might become 60% Wellesley and 40% Wellington.

You would think that might be the case, but I don't recall my AA getting out of whack during the 'market unpleasantness' in 08/09. Of course I was watching the bottom line AA, not the dollar value ratio of the two funds to each other.

Out of curiosity I took a look at share prices for the two funds at the pre-crisis high (October 07) and their low at the bottom (March 09). Starting with a 50/50 allocation of the two funds in 07, the dollar allocation of the funds would have changed to 45% Wellington/55% Wellesley at the low in March 09. However, due to the equity/bond investment balance of the two funds, the change in AA would have been only 1.5% - from 50/50 stocks/bonds at the start to a 48.5/51.5 at the bottom.

Due to the nature of these two balanced funds and the fact they maintain a defined ratio of stocks to bonds, I'm not sure how bad the market would have to get before an initial 50/50 allocation would need to be rebalanced. I sincerely hope I never have to find out...

 

[W2R]

Out of curiosity I took a look at share prices for the two funds at the pre-crisis high (October 07) and their low at the bottom (March 09). Starting with a 50/50 allocation of the two funds in 07, the dollar allocation of the funds would have changed to 45% Wellington/55% Wellesley at the low in March 09. However, due to the equity/bond investment balance of the two funds, the change in AA would have been only 1.5% - from 50/50 stocks/bonds at the start to a 48.5/51.5 at the bottom.

Nice!!! Well, that answers that... Thanks.

 

[Lsbcal]

I have 2 benchmark portfolios besides my current one. One is fully indexed and the other is Wellington based. The Wellington based one adds an international small cap fund because Wellington is large cap and only has a small amount of foreign (7% I think). Anyway, checking this back over a decade it did quite well versus my current portfolio.

So in my case I'd probably add some midcap and foreign to the Wellington. Just to round it out and because I'm going to be nashing my teeth should Wellington underperform a bit in a hot midcap or foreign enviornment.

 

[ESRwannabe]

I think set it and forget it is fine for normal retirement money. I have my Roth IRA 100% in vanguard's managed payout fund, and my 401k 100% in vanguard's target retirement income fund.

My taxable brokerage account on the other hand is 100% self-managed. That is where I will "get rich or die trying" a.k.a. make an attempt at early retirement.

 

[nun]

Within the next month or so I and DW will be getting our rollover IRAs from the corporate pension fund. Small, Professional Corp, terminating due to my retirement. She worked for me in PC..

When we get this chunk, we will be sitting on about 90% of our "nut" in IRAs.

I'm a long time Bernstein AA guy, right now at 60% Stock (well, down to 55% thank you very much), and 40% Bonds (20% short term, 20% intermediate term) all in Vanguard Admiral Shares...

So, I'm thinking just going 50% Wellington, 50% Wellesley in the IRAs, and just "set it and forget it"...

even assuming another 30% drop in equities, there would still be enough in the IRAs to provide us our desired lifestyle with a 3.5% WR.

Thoughts? Suggestions? What I"ve done , managing this money myself in the past is simply every 12 months rebalance. Why not let someone else do that?

Would Bernstein be recommending the amount and allocation of bonds you would have. I think to recommend a "Bernstein approach" we'd need to know a bit more about the size of your portfolio and income requirements as he's been pushing liability matching emphasizing TIPS, short bonds and annuities to produce stable income....

That being said a Wellesley/Wellington portfolio is attractive for it's simplicity and past performance.......but the fees are higher than you'd pay with passive funds and you are missing a lot of sectors.

 

[UpAnchor]

Wellesley & Wellington: Set it and forget it?

I'm in a position similar to yours, HadEnuff. A rollover from corporate ESOP within the next few months will represent about half of my retirement portfolio. Already having Wellington/Wellesley in an existing IRA, I'm considering going with Vanguard LifeStrategy Moderate Growth (60/40) for the new rollover and rebalancing the W/W to equal halves, thus ending up with 25% Wellesley, 25% Wellington, and 50% VSMGX with each of those components doing its own rebalancing. This would result in an overall AA of 55/45 with half managed/half indexed. The LifeStrategy bringing broader diversification and some international into the mix.

I have never done this myself, but wouldn't you have to rebalance between Wellington and Wellesley sometimes? Suppose one's AA was 1/2 Wellington and 1/2 Wellesley. Then if the market crashes, it might become 60% Wellesley and 40% Wellington.



I am thinking you'd have to rebalance like you are doing now. Now, if you had everything in one fund, like in one of the Target Retirement funds, you wouldn't have to rebalance. I think that's what UncleMick does.

You would think that might be the case, but I don't recall my AA getting out of whack during the 'market unpleasantness' in 08/09. Of course I was watching the bottom line AA, not the dollar value ratio of the two funds to each other.



Out of curiosity I took a look at share prices for the two funds at the pre-crisis high (October 07) and their low at the bottom (March 09). Starting with a 50/50 allocation of the two funds in 07, the dollar allocation of the funds would have changed to 45% Wellington/55% Wellesley at the low in March 09. However, due to the equity/bond investment balance of the two funds, the change in AA would have been only 1.5% - from 50/50 stocks/bonds at the start to a 48.5/51.5 at the bottom.



Due to the nature of these two balanced funds and the fact they maintain a defined ratio of stocks to bonds, I'm not sure how bad the market would have to get before an initial 50/50 allocation would need to be rebalanced. I sincerely hope I never have to find out...

Agree. I've very occasionally rebalanced between my Wellington/Wellesley but later wondered if it was even worth the small effort. Going forward I anticipate just letting them ride and goin' fishin'.

 

[ejman]

Just for the fun of it, I looked at my return since I started using Quicken in 1992. My portfolio, with a lot of slicing and dicing and a fair amount in Money Market funds returned 7.3% annually from 1992 to 2015. I coincidentally bought equal amounts of Wellesley and Wellington prior to 1992 and kept the investment all these years. When I restrict the Quicken return calculation to just Wellesley and Wellington the return is 8.9%. I sure could have saved a lot of investment hassle and turmoil and twisting and turning during those 23 years and come out ahead!

For comparison purposes the annualized S&P 500 for the same period (dividends reinvested) is 9% S&P 500 Return Calculator - Don't Quit Your Day Job...

Basically the same return for a 50/50 Wellesley/Wellington mix with significantly lower risk - not too shabby!

 

[nun]

Just for the fun of it, I looked at my return since I started using Quicken in 1992. My portfolio, with a lot of slicing and dicing and a fair amount in Money Market funds returned 7.3% annually from 1992 to 2015. I coincidentally bought equal amounts of Wellesley and Wellington prior to 1992 and kept the investment all these years. When I restrict the Quicken return calculation to just Wellesley and Wellington the return is 8.9%. I sure could have saved a lot of investment hassle and turmoil and twisting and turning during those 23 years and come out ahead!

For comparison purposes the annualized S&P 500 for the same period (dividends reinvested) is 9% S&P 500 Return Calculator - Don't Quit Your Day Job...

Basically the same return for a 50/50 Wellesley/Wellington mix with significantly lower risk - not too shabby!

Back in 2007 Bernstein would have have very similar retirement investing advice, but in 2016 I don't think he would recommend such a portfolio for many retirees. A 50/50 Wellesley/Wellington might be a good way to fund retirement, but I'm not sure it could be described as a Bernstein approach in 2016.

http://time.com/money/2861706/to-invest-for-retirement-safely-know-when-to-get-out-of-stocks/

 

[ejman]

Back in 2007 Bernstein would have have very similar retirement investing advice, but in 2016 I don't think he would recommend such a portfolio for many retirees. A 50/50 Wellesley/Wellington might be a good way to fund retirement, but I'm not sure it could be described as a Bernstein approach in 2016.

To Invest for Retirement Safely, Know When to Get Out of Stocks - TIME

I suppose this time it's different...Or maybe not

 

[REWahoo]

To Invest for Retirement Safely, Know When to Get Out of Stocks - TIME

I've seen this article linked several times and always wondered how the author came up with the title since Bernstein never says "get out of stocks". Sounds like a piece about market timing strategy but that's certainly not the case.

I suppose it's just another example of misleading click bait...

 

[Lsbcal]

Back in 2007 Bernstein would have have very similar retirement investing advice, but in 2016 I don't think he would recommend such a portfolio for many retirees. A 50/50 Wellesley/Wellington might be a good way to fund retirement, but I'm not sure it could be described as a Bernstein approach in 2016.

To Invest for Retirement Safely, Know When to Get Out of Stocks - TIME

I read the article. He admitted that in June 2014 (still true today) TIPS and such were not ready for prime time i.e. not enough income to meet most people's needs.

His 2 bucket suggestion I might interpret as a bucket of stocks and a bucket of relatively safe bonds. All in all, I would say the 50/50 Wellesley/Wellington would meet his requirements in that article.

 

[nun]

I read the article. He admitted that in June 2014 (still true today) TIPS and such were not ready for prime time i.e. not enough income to meet most people's needs.

His 2 bucket suggestion I might interpret as a bucket of stocks and a bucket of relatively safe bonds. All in all, I would say the 50/50 Wellesley/Wellington would meet his requirements in that article.

Lack of TIPS an annuities and having a 50% stock allocation do not meet Bernstein's recommendations for retirees who don't have enough in "safe assets"......and they are cash/CDs, TIPs, short bonds and annuities. That's why without the size of the OP's portfolio and income needs it's hard to know if the OP's portfolio would be recommended by Bernstein today. I certainly think the lack of bond diversity, TIPS and annuities would be an issue for him. I'm not taking issue with the 50/50 Wellesley/Wellington portfolio, just in associating it with Bernstein's current thoughts around retirement income portfolios.

But if you’re in or near retirement, it all depends on how close you are to having the right-sized safe portfolio and how much stock you hold. If you don’t have enough in safe assets, then your stock allocation should be well below 50% of your portfolio. If you have more than that in stocks, bad market returns at the start of your retirement, combined with withdrawals, could wipe you out within a decade. If you have enough saved in safe assets, then everything else can be invested in stocks.

 

[Newventurer]

Don't mean to highjack this thread, but for those of us that missed out on Wellington (my understanding is that it is closed to new accounts) research tells me that VGSTX is the next closest, would you agree?

Sorry if I am butting in...

 

[MichaelB]

Don't mean to highjack this thread, but for those of us that missed out on Wellington (my understanding is that it is closed to new accounts) research tells me that VGSTX is the next closest, would you agree?

Sorry if I am butting in...

I believe Vanguard Wellington is still open for retail investors with Vanguard accounts.

 

[HadEnuff]

Lack of TIPS an annuities and having a 50% stock allocation do not meet Bernstein's recommendations for retirees who don't have enough in "safe assets"......and they are cash/CDs, TIPs, short bonds and annuities. That's why without the size of the OP's portfolio and income needs it's hard to know if the OP's portfolio would be recommended by Bernstein today. I certainly think the lack of bond diversity, TIPS and annuities would be an issue for him. I'm not taking issue with the 50/50 Wellesley/Wellington portfolio, just in associating it with Bernstein's current thoughts around retirement income portfolios.

I should qualify my AA as following the advice in 4 Pillars. I know he's changed his tune somewhat since then.

 

[Looking4Ward]

You could probably do a lot worse.

I've got what are essentially three buckets:

Wellesley for the first 3-4 years
Wellington for the next 5-25 years
Vanguard Health for 25+

So far the dividends and capital gains distributions from those have been more then enough to cover my expenses. If things tank and they don't then I plan on drawing from Wellesley first.

 

[MichaelB]

As Yoda would say, "leave the politics out of this, let us".

 

[nun]

I should qualify my AA as following the advice in 4 Pillars. I know he's changed his tune somewhat since then.

Yeah, he's singing a bit of Zvi Bodie's tune; and that's the whole point of my contributions to this thread. Bernstein's current recommendations for retirement income portfolios are very different from his "4 Pillars" thinking. He's become far more risk averse and has recommended a Liability Matching approach in retirement. Have you read "The Ages of the Investor" or the Boglehead threads where Bernstein's move to Liability Matching is discussed?They are interesting.

I have no criticism of your current portfolio, it is very "Bernstein, 4 Pillars" and that was my accumulation approach, just the observation that it's not necessarily something that Bernstein would currently support in retirement, particularly the fixed income part.

 

[Lsbcal]

Yeah, he's singing a bit of Zvi Bodie's tune; and that's the whole point of my contributions to this thread. Bernstein's current recommendations for retirement income portfolios are very different from his "4 Pillars" thinking. He's become far more risk averse and has recommended a Liability Matching approach in retirement. Have you read "The Ages of the Investor" or the Boglehead threads where Bernstein's move to Liability Matching is discussed?They are interesting.

I have no criticism of your current portfolio, it is very "Bernstein, 4 Pillars" and that was my accumulation approach, just the observation that it's not necessarily something that Bernstein would currently support in retirement, particularly the fixed income part.

I've seen a lot of conflict in these advisors recommendations. And then there is advisor ego. Lots of that on display. So which advisor is right for me? Bodie, Bernstein, Swedroe, Ferri, Bogle and etc.

Personally I've taken a bit from most of them but not anywhere near the whole of any of their advise. They would all disapprove of my current path I think. But then like I said, some of them (like Swedroe and Ferri) have a lot of conflicts. The markets are full of conflicting advise and strategies ... and that's what makes a market. Buy or sell? The price is set by these conflicts.