Pssst! What else?

[Charlie_Boy]

Used to be "Pssst! Wellesley!" and then go fishing. What are folks whispering nowadays. I met/read several folks who said just SP500, or others that say they hit the Jackpot, cashed out, why worry? Is there another "Pssst!" What's an old couple (76, 69) to do?

 

[TheWizard]

Depends on what your needs are...

 

[aja8888]

"Psssttt"....... Treasuries, bonds (not bond funds), and CDs.

 

[calmloki]

See you are in Colorado. Treasuries are not taxable by the state so it makes them worth more than CDs earning the same percentage. We're in California and, with high state taxes I figure I need to make about 6+% on a CD vs 5.5% on a Treasury bill. We've stuffed a bunch in 6 month T-bills with a six month ladder. Sold the Psst. Wellesley which we had a small amount in. Haven't re-invested the proceeds yet, but we're making more leaving it in the sweep account than we were with Wellesley.

 

[HI Bill]

Depends on your risk tolerance, nest egg, and income needs. Many here would recommend index investing in something like Boglehead's three-fund portfolio. Bogleheads recommends: Vanguard Total Stock Market Index Fund (VTSAX),
Vanguard Total International Stock Index Fund (VTIAX), and
Vanguard Total Bond Market Fund (VBTLX) in accordance with your preferred asset allocation (60/40?). For my octogenarian-aged father, I've chosen domestic investments of the following ETFs, forgoing the international (a la Buffett): VTI, BND, and VMFXX 59/26/13, which gives him 3 years of RMDs in BND and cash, which should weather any typical equity storms.

 

[COcheesehead]

Golden age of fixed income investing is right now. Ladder individual bonds, go fishing. A 5%- 6%+ yield and the return of your capital is a pretty sweet deal. Stay away from bond funds, they will underperform for awhile.

 

[VanWinkle]

You could do much worse than "Pssst Wellesley" and nothing else will be as simple. Those that hold Wellesley know to hold it through thick and thin. It has paid them well to be patient. The newest fad will fade for many years, but some funds have survived the test of time. Have you heard much about I-bonds lately.......

VW

 

[mrfeh]

Depends on your risk tolerance, nest egg, and income needs. Many here would recommend index investing in something like Boglehead's three-fund portfolio. Bogleheads recommends: Vanguard Total Stock Market Index Fund (VTSAX),
Vanguard Total International Stock Index Fund (VTIAX), and
Vanguard Total Bond Market Fund (VBTLX) in accordance with your preferred asset allocation (60/40?).

+1

And ignore people telling you to time the market.

 

[Mulligan]

You could do much worse than "Pssst Wellesley" and nothing else will be as simple. Those that hold Wellesley know to hold it through thick and thin. It has paid them well to be patient. The newest fad will fade for many years, but some funds have survived the test of time. Have you heard much about I-bonds lately.......



VW

IBonds cannot cause capital losses like bond funds have. And they have never lost capital in high rate environment periods, unlike many other fads. And FWIW, latest early on projections for Nov cycle is 4.64%. Slap this cycles permanent .9% fixed and suddenly you could have a very competitive 5.5% yield. I would suggest for the longer term holders, IBonds are actually becoming more interesting. And next cycle the permanent fixed component could go higher as it has progressed from 0% to .4% to .9% in less than a years time. Then throw in tax deferral, inflation protection, state tax exemption, education tax breaks etc. There are reasons to own these as part of ones portfolio.

 

[COcheesehead]

You could do much worse than "Pssst Wellesley" and nothing else will be as simple. Those that hold Wellesley know to hold it through thick and thin. It has paid them well to be patient. The newest fad will fade for many years, but some funds have survived the test of time. Have you heard much about I-bonds lately.......

VW

It has a 5% 10 year return…
Fidelity’s boring Puritan has an almost 10% return for the same period.

 

[qwerty3656]

I'm not familiar with Wellesley, but googled it and see that it is an income fund. If you're focused on dividend income, everyone seems to be talking about SCHD (but it's all stocks, no bonds).

 

[Chuckanut]

And next cycle the permanent fixed component could go higher as it has progressed from 0% to .4% to .9% in less than a years time. Then throw in tax deferral, inflation protection, state tax exemption, education tax breaks etc. There are reasons to own these as part of ones portfolio.

+1

When the Treasury raised the fixed rate on Ibonds to 0.4% I found it interesting. At 0.9% I find it an incentive to add to my Ibond stash up to the admittedly small limit. If the fixed rate goes up again, I’ll consider backing up my childhood toy dump truck and I’ll load it up.

Some people simply do not like to put their money at risk. An Ibond a year for ten years gives them well over 100,000 dollars that are inflation protected. Sometimes that’s all the water the horse will drink.

 

[enjoyinglife102]

If you prioritize simplicity, I wouldn't bother dealing with I-Bonds with a 10k per person annual purchase limit. I'd also pass on CD and/or Treasury ladders. Sure you get a decent yield right now but you get that with a bond fund as well. When rates go down, you'll be buying replacements on your ladder at a lower rate where the fund will have experienced a nice capital gain. At the end of it all after many years, the overall return is probably about the same.

Wellesley and done will be just fine. Or if you want to hold your bonds and stocks separately and replicate Wellesley, your stock portion in Vanguard High Dividend Yield and your bond portion in Vanguard Intermediate Investment Grade.

 

[COcheesehead]

If you prioritize simplicity, I wouldn't bother dealing with I-Bonds with a 10k per person annual purchase limit. I'd also pass on CD and/or Treasury ladders. Sure you get a decent yield right now but you get that with a bond fund as well. When rates go down, you'll be buying replacements on your ladder at a lower rate where the fund will have experienced a nice capital gain. At the end of it all after many years, the overall return is probably about the same.

Wellesley and done will be just fine. Or if you want to hold your bonds and stocks separately and replicate Wellesley, your stock portion in Vanguard High Dividend Yield and your bond portion in Vanguard Intermediate Investment Grade.

Bond funds have taken a beating and will continue to do so as rates rise which is what the Fed has told us. The average distribution from most general bond funds is below money market yields. Vanguard intermediate is 2.61%. That’s about half what a money market, CDs or treasuries yield.

 

[enjoyinglife102]

Vanguard Intermediate Investment Grade Yields 5.18%. Bond funds have taken a beating, what better time to buy? I don't have the capacity to predict interest rates, and by the way, neither does the Fed. Inflation was "transitory" and no need to raise rates. Oops, sorry we got it wrong and now we'll raise rates by big chunks in a hurry. I see predictions of continued raising of rates and others of cuts by year's end. So it's business as usual, no one knows.

 

[Freedom56]

We are entering a period of "no brainer" investing. MM funds at 5%. Treasury's over 5%. CDs will soon yield 6%. 6%+ yields on agency and high grade corporate bonds are common. Early in 2022 I warned people on this forum about the risks of bond funds. Here is my 2023 warning on bond funds. When long rates move up, prepare yourself for some of the most horrific losses ever seen. Consider what will happen when the 10 year treasury returns to it's historical average of 4.5% or crosses above that to 5%. There is no historical precedent for the national debt creeping up to $51T over the next 10 years. Long rates have nowhere to go but up.

 

[Freedom56]

Vanguard Intermediate Investment Grade Yields 5.18%. Bond funds have taken a beating, what better time to buy? I don't have the capacity to predict interest rates, and by the way, neither does the Fed. Inflation was "transitory" and no need to raise rates. Oops, sorry we got it wrong and now we'll raise rates by big chunks in a hurry. I see predictions of continued raising of rates and others of cuts by year's end. So it's business as usual, no one knows.

Sorry to pop the illusion of a 5.18% yield. The latest distribution yield is 4.01% annualized and the average over the past 6 months is about 3.7%. Look at the distribution table for a reality check.

https://investor.vanguard.com/investment-products/mutual-funds/profile/vficx#portfolio-composition

 

[Phroig]

If you prioritize simplicity ....
Wellesley and done will be just fine. Or if you want to hold your bonds and stocks separately and replicate Wellesley, your stock portion in Vanguard High Dividend Yield and your bond portion in Vanguard Intermediate Investment Grade.

+1
If a 40/60 portfolio works for your risk tolerance, Wellesley is a fine choice. Vanguard Equity Income is perhaps a bit better aligned with the equity portion of Wellesley if you want to slice and dice. For a riskier balanced portfolio, you could try Wellington.

 

[Montecfo]

It is deceptive to criticize the yield of a bond fund at this stage by comparing it to the best short-term yields now available.

Sure, you can "beat" the bond fund with your first purchase. But a bond fund is a portfolio of bonds bought at various times. You know, exactly like what you will have after investing in individual bonds for a few months or years. And bond funds reflect a range of durations, each with their own yields.

No bond ladder earns the highest rates because the issues are bought over time.

Certainly we need to get the yields right and not misstate them. But the comparisons to the holy grail of individual bond purchases can be misleading.

Not a fund bull per se. Just find the near religious fervor for individual issues can leave a lot unexamined.

 

[COcheesehead]

Vanguard Intermediate Investment Grade Yields 5.18%. Bond funds have taken a beating, what better time to buy? I don't have the capacity to predict interest rates, and by the way, neither does the Fed. Inflation was "transitory" and no need to raise rates. Oops, sorry we got it wrong and now we'll raise rates by big chunks in a hurry. I see predictions of continued raising of rates and others of cuts by year's end. So it's business as usual, no one knows.

You are misunderstanding distribution yield. Funds will continue to lose as rates rise as the have been.

 

[Freedom56]

Keep in mind that long duration low coupon treasury's are the "kryptonite" that have sunk some banks this year. Many funds are loaded with far more of that than banks. Many long term low coupon treasury's are trading at 50-60 cents on the dollar. When a fund is in a forced selling mode, due to redemptions, the loss from the sale of that security is realized and there is no recovery of that security back up to par. That capital is gone forever. Before you put new money into a fund, look for the red flags like a low average coupon relative to current yields or high levels of unrealized losses, and a wide disparity between the reported SEC yield and distribution yields. Don't be led off a cliff with all the other lemmings. Fixed income investing is all about math.

 

[W2R]

Used to be "Pssst! Wellesley!" and then go fishing. What are folks whispering nowadays. I met/read several folks who said just SP500, or others that say they hit the Jackpot, cashed out, why worry? Is there another "Pssst!" What's an old couple (76, 69) to do?

I'm perfectly happy with 30% Wellesley, and the rest almost entirely in the Bogleheads 3-fund portfolio described by HI Bill in his post above (5th post of this thread). Also I have some cash and cash equivalents. AA is 47:53.

I'm 75 and have had essentially the same portfolio for a couple of decades, since before I retired. It may or may not be the absolute best portfolio ever, but it DID do very well for me in the 2008-2009 mess. So, I stick with it always.

 

[Dreamer]

Freedom, would you sell Wellsley and buy individual treasuries? I have to admit that I was not even thinking of it as a bond fund.

 

[Freedom56]

Freedom, would you sell Wellsley and buy individual treasuries? I have to admit that I was not even thinking of it as a bond fund.

You are comparing two totally different products. Treasury's are risk free fixed income products. Wellsley is a blended fund (equities and bonds).

 

[Koolau]

Where's unclemick when we need him? I bought Wellesley because of his strong opinion (and subtle pssst!) IIRC he became disillusioned (or something) and bailed. I still hold mine and am happy with it, though full disclosure, I look at it maybe a couple of times/year when statements (paper statements) roll in from Vanguard.