Wellington+total international

[F4mandolin]

Doing the paperwork tomorrow with moving things from EJones to Vanguard. Almost all of it (about $300k) I am likely to put into Wellington. But to get some international exposure I had planned on putting $30-40k or so of that into Total International.....there are other choices, but that fund seems to be one that most people use in their "simple" portfolio's. See anything wrong with this plan....or is there a better choice that I haven't seen?

 

[FIREd]

About 10% of Wellington's assets are international equities. Are you sure you want more?

 

[F4mandolin]

Good point....I thought it was pretty well all domestic. Might change that Total International down to $10-20k or so. Even the 10+% of international in the Wellington might make me happy enough. Thanks for the save....

 

[wanaberetiree]

About 10% of Wellington's assets are international equities. Are you sure you want more?

it's 7.5% according to Vanguard

 

[FIREd]

it's 7.5% according to Vanguard

It varies obviously as this is an actively-managed fund. Morningstar indicates that it was over 9% at the end of 2012, and I have seen it go as high as 13%. So I think that 10% is a good average.

 

[F4mandolin]

I had done a quick Google search after it was brought up.....I think a year or two ago it had 13%....if it is down to 7% at this time....I think I kind of like that little bit of flux. Might not mean anything....but makes me think somebody must be keeping an eye on things. Granted...I'm unfortunately easy to fool at times.....

 

[hlfo718]

Adding the int'l fund will change the overall asset allocation. Are you fine with that risk?

 

[F4mandolin]

Just got off the phone with Vanguard....everything set up for the move. When I told him that I would likely just stick all of the EJones money in the Wellington fund since that had a little bit of International in it.....big pause... then told me it didn't. I mentioned how a couple of people on this site had said it did, and how I had checked/googled and it seemed as if it did. He really tried to talk me out of that thinking....but then looked himself. Hmmmm... yes it does. I mentioned how just googling came up with several different numbers over the last 6 years (7-13%)....he was surprised, but agreed in the end.

 

[wanaberetiree]

Just got off the phone with Vanguard....everything set up for the move. When I told him that I would likely just stick all of the EJones money in the Wellington fund since that had a little bit of International in it.....big pause... then told me it didn't. I mentioned how a couple of people on this site had said it did, and how I had checked/googled and it seemed as if it did. He really tried to talk me out of that thinking....but then looked himself. Hmmmm... yes it does. I mentioned how just googling came up with several different numbers over the last 6 years (7-13%)....he was surprised, but agreed in the end.

Great! Conclusion? => do your homework!

 

[prof12]

Hey F4--

If you don't mind, let me (us) know how easy or difficult the switchover from EJ to Vanguard was. I am ready to make the call after fuming for several months about my FP's recommendations and very high commissions. Thanks. prof12

 

[F4mandolin]

So far ok....bit of a long phone call this morning to put the personal info in....and several calls back and forth yesterday between the EJones person and Vanguard. Yesterday, the Vanguard guy wanted me to have EJ sell my taxable account and have them send it to me....and then forward to Vanguard....but he said to tell EJ to go ahead and sell the ROTH funds and he would get them from EJ.....I didn't get that one, and the EJ person didn't either.....why do it two different ways? I had him do the same with both accounts.

Set up an account for the ROTH and the regular taxable account. There are 3 groups of CD/bonds coming due starting in August and then once a year after that....so they will take care of that at the time and dump it into a money market account they also set up. I cashed in an income account so they are just sending that money to me to do with as I wish. Just need to wait for 7-10 days or so I am told now until things get transferred. He will give me a call at that time to double check to see if the Wellington is where I really want to put it. I will end up with around $25k of gains that I will be hit with at the end of the year....but I am still well under the $72k threshold for moving up to the 25% bracket so I figured I would just take the hit this year and get it over with.

 

[foxfirev5]

Great! Conclusion? => do your homework!

While a huge fan of Vanguard, I always do my own research. I equate their advice to that I would receive at Walmart while shopping.
However I'm a big boy and that suites me just fine.

 

[prof12]

Thanks, F4. I am a little concerned about some of the Vanguard's agent's suggestion on selling and then forwarding. I think if I run into that, I'll ask to speak to a supervisor. I am contemplating moving all accounts from EJ toVanguard in kind and, hopefully, avoid a bunch of left ands not knowing what right hands are doing. I appreciate the heads up. prof12

 

[nun]

10% in non-US investments is a little on the low end IMHO. Nothing wrong with adding to the Wellington international exposure with 10% in a broad ex-US International index.

The bigger problem I have would be putting so much into Wellington as that will bias you towards large value stocks and corporate bonds, also the ER on Wellington is high for a Vanguard fund. You might look at a more passive portfolio including Total Stock Market, Total Bond Market, Total International Stock and Wellington.

 

[F4mandolin]

You might look at a more passive portfolio including Total Stock Market, Total Bond Market, Total International Stock and Wellington.

Yep....that choice right there is giving me conniptions....been yo-yoing back and forth like a kid in a candy store....keep it really simple with the Wellington (and I keep my hands OFF of it) with maybe a little Total Int. thrown in...or do the simple main three funds. Wellington at .17 expense isn't much more than the others. 10 year (Total Int doesn't have one) returns have the Wellington beating the others....although the other version of International comes back at 10+% for the 10 year. As I have been accused of earlier.... analysis paralysis.......twitch......twitch......

 

[travelover]

.......As I have been accused of earlier.... analysis paralysis.......twitch......twitch......

One way to look at it is that you will be saving a lot over EJ, even with a slightly higer ER for Wellington / Wellesley.

 

[MooreBonds]

Just got off the phone with Vanguard....everything set up for the move. When I told him that I would likely just stick all of the EJones money in the Wellington fund since that had a little bit of International in it.....big pause... then told me it didn't.

While I will sing the praises of Vanguard along with all others on this forum for their rock bottom expense ratios of their investments.....my own personal experience with them (closing grandmother's 2 accounts after her death and resulting retitling/transfers) along with others in this forum indicate that - sometimes - you do get what you pay for, and that Vanguard's knowledge of their customer service reps is far from good.

And I'm not talking about calling and getting a random operator - I'm talking about being assigned a specific person (and other people) in their 'estate transfer' division who's supposed specialty is just that: retitling accounts and moving investments once a person passes on!

As with all investments, Don't take their word for it! Double check everything ANYONE tells you (Vanguard, Edward Jones, or otherwise). WRITE DOWN ALL PHONE CONVERSATION NOTES, because odds are, you WILL be told "we'll do X, Y, Z" and odds are, only Y and Z will happen the way they explained, while X was different. And keep every document they send you to verify all monies and funds were transferred correctly.

(note: I would recommend being vigilant with any company, not just Vanguard...but it's easy to think that since Vanguard is a mutual company with great investor-aligned expenses, that their customer service competency would be equally investor-aligned: but that's not always the case, unfortunately).

 

[F4mandolin]

One way to look at it is that you will be saving a lot over EJ, even with a slightly higer ER for Wellington / Wellesley.

That's exactly how I am looking at it. But the paralysis part is going strong with deciding which of the two methods I am going to end up going with. I have a week or so of analysis paralysis to look forward to......hmmm beer and bacon might help.

I have another post on the stock thread for Standard Life.....I think my wife's small pension ££ is going to make EJones rates look like heaven.

 

[nun]

Yep....that choice right there is giving me conniptions....been yo-yoing back and forth like a kid in a candy store....keep it really simple with the Wellington (and I keep my hands OFF of it) with maybe a little Total Int. thrown in...or do the simple main three funds. Wellington at .17 expense isn't much more than the others. 10 year (Total Int doesn't have one) returns have the Wellington beating the others....although the other version of International comes back at 10+% for the 10 year. As I have been accused of earlier.... analysis paralysis.......twitch......twitch......

Wellington plus some International isn't the worst portfolio, but you lack divsersification. By simply adding some Total Stock Market and Total Bond Market you'd solve that problem and end up with a 4 fund portfolio with a low ER, exposure to the whole US stock and bond markets, with value/dividend and corporate bonds from Wellington and foreign stocks from international.

 

[F4mandolin]

Wellington plus some International isn't the worst portfolio, but you lack divsersification. By simply adding some Total Stock Market and Total Bond Market you'd solve that problem and end up with a 4 fund portfolio with a low ER, exposure to the whole US stock and bond markets, with value/dividend and corporate bonds from Wellington and foreign stocks from international.

Now we get into the crux of my paralysis.....The Bogelhead way says don't try to market time.....diversify....keep it cheap etc. Do you buy into the bonds in a serious way right now?... I would normally say that my allocation should be in the 60-40 range, but with the bond market being a little strained at the moment I naturally start leaning away from that 60-40....maybe towards 70-30 or greater.....or I guess you could call it market timing. But I also wouldn't have bought Apple back when it was zooming through the roof, it didn't make sense (to me) to do so at that time. With the analysis paralysis whacking me upside the head...going with the Wellington with another $20-30k or more in the international...or even just sticking with the Wellington might keep me from driving my wife nuts. But I have another week....I need a beer....or six.

 

[braumeister]

....I need a beer....or six.

Pat yourself on the back. You're definitely on the right track now!

 

[samclem]

Now we get into the crux of my paralysis.....The Bogelhead way says don't try to market time.....diversify....keep it cheap etc. Do you buy into the bonds in a serious way right now?

I'm right with you on this. I'm an index investor who believes in "set an AA and rebalance, don't time the market." But the bond prices now seem to offer so little upside and such a large potential downside that I would have a hard time investing in the "normal" %age of bonds for my portfolio. IMO, given the present low bond yields, there's just not much wrong with doing a few things to mitigate the potential problem:
1) Favor bonds with relatively short duration
2) Cut back on bonds and increase the allocation to cash (CDs, etc). Use the cash to dollar-cost average back into bonds as interest rates rise and bond prices get pounded.

That doesn't mean that I'd totally abandon intermediate term bonds, but I wouldn't like to see 50% of my portfolio in them. And, while I'm sure the managers at Wellington are some of the best in the business, I don't think they'll be successful in swimming against the stream of lower bond prices when the time of reckoning comes.

When the Fed gets its thumb off the scale and stops suppressing interest rates, I'd be likely to resume my "efficient market" ways of doing business.

Just my opinion.

 

[nun]

I'm right with you on this. I'm an index investor who believes in "set an AA and rebalance, don't time the market." But the bond prices now seem to offer so little upside and such a large potential downside that I would have a hard time investing in the "normal" %age of bonds for my portfolio. IMO, given the present low bond yields, there's just not much wrong with doing a few things to mitigate the potential problem:
1) Favor bonds with relatively short duration
2) Cut back on bonds and increase the allocation to cash (CDs, etc). Use the cash to dollar-cost average back into bonds as interest rates rise and bond prices get pounded.

That doesn't mean that I'd totally abandon intermediate term bonds, but I wouldn't like to see 50% of my portfolio in them. And, while I'm sure the managers at Wellington are some of the best in the business, I don't think they'll be successful in swimming against the stream of lower bond prices when the time of reckoning comes.

When the Fed gets its thumb off the scale and stops suppressing interest rates, I'd be likely to resume my "efficient market" ways of doing business.

Just my opinion.

So if we are going to market time the bonds why not just do equal amounts of Total Stock Market, Total International Stock, Wellington and put the rest into whatever mix of Short Term Bond Index/ CDs and cash you fancy.

 

[F4mandolin]

So if we are going to market time the bonds why not just do equal amounts of Total Stock Market, Total International Stock, Wellington and put the rest into whatever mix of Short Term Bond Index/ CDs and cash you fancy.

This is how I am absolutely kinda sorta leaning at the moment ....twitch... twitch.... think Sheldon on Big Bang Theory. Very good chance I will flip back and forth a couple more times before it is time to commit. Easier decision getting married.....although I didn't get around to that until I was 49.

But they have been predicting bonds doom for quite a while now.....it is dying about the slowest death of anything I have ever seen.

 

[samclem]

So if we are going to market time the bonds why not just do equal amounts of Total Stock Market, Total International Stock, Wellington and put the rest into whatever mix of Short Term Bond Index/ CDs and cash you fancy.

That would work, but it's a bit more Intl than I'd want to have as an individual who plans to live in the US and needs to keep pace with US inflation). It sounds like F4 wants about 60-70% stocks. An AA that does this might be:
20%: CD ladder or maybe Ally 4 year Raise Your Rate CD
20%: Wellington
40%: VGD Total Stock (US) Market (VTSMX, or Admiral class, or ETF version)
20%: Total Intl Stock market (VGTSX, or Admiral class or ETF version of same.

I'm only throwing in the Wellington because F4 mentioned it, and it does offer some bond diversity. As the bonds tank and the managers rebalance into them from their stocks, maybe there will be some benefits. According to M*, VGTSX and VTSMX have forward looking (!warning!) dividend yields of about 3.1%, which is better than the expected dividend yield from the equities in Wellington. In the case of a major downturn in the market, the 20% in CDs would allow about 5 years of 4%-rate withdrawals before needing to sell any equities, and the dividends from the stocks would extend that by quite a few more years. (Or, just rebalance every year and buy into the cheaper shares with that cash). If the stock market is doing well and the Fed has stopped suppressing interest rates, move some of the cash into bonds over the next few years.

If it were my portfolio I'd want a bigger tilt to small and value, and I'd probably do without the Wellington (though it's a very popular holding). Obviously, there's no "right" way to do this, just a million opinions.