50% Wellesley/50 % Wellington - So Simple Why didn't I do it?

[ejman]

I started investing in mutual funds in 1987 and quickly acquired a large stable of pick of the month mutual funds that eventually worked its way up to about 35 funds which periodically rotated with more pick of the month choices ( from the various monthly financial publications), . Even with this large number (I guess actually a closet index fund with God knows what bias but certainly much higher costs than index funds) I actually managed to ER on my investments only in January of 2003 which I tought at the time was really not bad after 16 years of investing and directing about 15 % of my income to the mutual funds.

Imagine my surprise when I actually ran what if numbers on what it would have been if I'd only bought 50% Welleslley/50 Wellington and nothing else:

1/1/03 to today (per quicken) my basket 9.4% Wellsi/Welltn 8.1%

1/1/00 to today - my basket 2.3 % Wellsi/Welltn 7.2%

1/1/88 to today my basket 8.2 % Wellsi/Welltn 10%

Jeez! I could have gone fishin instead of putting all that time into reading all those books and financial publications and slicing and dicing!

[ESRBob]

Yep.
You've had your first enlightenment moment on the path to being a craven asset allocatin' slicer dicer.

I spent a whole lot of years losing a lot of sleep, brokerage commissions, self-esteem (the 50% or so of the time I got it wrong) as well as money before I reached investing Nirvanah...

In fairness I'm not a Wellesley-Wellington-only person, but I own both funds and put together something that acts about the same only is more complicated. Just goes to show, getting yourself to investing simplicity is really hard!

[Marquette]

Quote:

Originally Posted by ESRBob In fairness I'm not a Wellesley-Wellington-only person, but I own both funds and put together something that acts about the same only is more complicated. Just goes to show, getting yourself to investing simplicity is really hard!

Boy, that chapter would have been short!

[audreyh1]

Getting yourself to invest simply is really hard! - LOL! That's a GREAT line!

A couple of years ago I wished I had just thrown all my money into DODBX in the first place because I hadn't been able to beat it as a benchmark for many, many years.

And though I seriously considered switching to all DODBX two years ago, the tax hit was too great to overcome. So I stayed put.

Now I'm glad I didn't - because I would have been switched right at the inflection point! For the last two years my more diversified asset allocation portfolio has soundly beaten DODBX - especially this year!

So, simpler is better, but maybe sticking to your plan once you have it in place is good too.

Audrey

[REWahoo]

Quote:

Originally Posted by audreyh1 So, simpler is better, but maybe sticking to your plan once you have it in place is good too.

Best of all is being lucky.

I've been in DODBX for 15 years, gradually ramping up my allocation until it reached 50% when I retired 3 years ago. It was a solid, consistent performer for me but I cut back to 20% when I rolled over my 401k, seeking a little more diversification. Sure glad I did.

[CitricAcid]

Quote:

Originally Posted by REWahoo Best of all is being lucky. I've been in DODBX for 15 years, gradually ramping up my allocation until it reached 50% when I retired 3 years ago. It was a solid, consistent performer for me but I cut back to 20% when I rolled over my 401k, seeking a little more diversification. Sure glad I did.

Market timing sucks when it hurts you.

But it is absolutely awesome when it helps you.

[FANOFJESUS]

Quote:

Originally Posted by ejman I started investing in mutual funds in 1987 and quickly acquired a large stable of pick of the month mutual funds that eventually worked its way up to about 35 funds which periodically rotated with more pick of the month choices ( from the various monthly financial publications), . Even with this large number (I guess actually a closet index fund with God knows what bias but certainly much higher costs than index funds) I actually managed to ER on my investments only in January of 2003 which I tought at the time was really not bad after 16 years of investing and directing about 15 % of my income to the mutual funds. Imagine my surprise when I actually ran what if numbers on what it would have been if I'd only bought 50% Welleslley/50 Wellington and nothing else: 1/1/03 to today (per quicken) my basket 9.4% Wellsi/Welltn 8.1% 1/1/00 to today - my basket 2.3 % Wellsi/Welltn 7.2% 1/1/88 to today my basket 8.2 % Wellsi/Welltn 10% Jeez! I could have gone fishin instead of putting all that time into reading all those books and financial publications and slicing and dicing!

What you say is true but keep in mind that during that time bonds did well. I think we are going into a new time when bonds may not do so well. I would only go into short term bonds at this point.

[NW-Bound]

Quote:

Originally Posted by ejman 1/1/88 to today my basket 8.2%.

It could have been a lot worse. Not all mutual funds do that well. I remember a financial article where its author half-jokingly wrote

"I invest in mutual funds. Lots of them. This is how they work. When the market goes down, they go down a lot. When the market goes up, they go down a little."

[NW-Bound]

Quote:

Originally Posted by REWahoo Best of all is being lucky. I've been in DODBX for 15 years, gradually ramping up my allocation until it reached 50% when I retired 3 years ago. It was a solid, consistent performer for me but I cut back to 20% when I rolled over my 401k, seeking a little more diversification. Sure glad I did.

I got some other old-fashioned value oriented MFs. They went down just like DODBX. Guess what? All these managers got lured in by dividends from financials.

So, what did you diversify to, if you care to share?

[ejman]

Quote:

Originally Posted by rec7 What you say is true but keep in mind that during that time bonds did well. I think we are going into a new time when bonds may not do so well. I would only go into short term bonds at this point.

Well yes, capital appreciation from the bond portion of Wellsi/Welltn would be hit as rates go up. But now that I'm retired, wouldn't the bond portion of Wellsi/Welltn result in greater income to me?

I've read I should be looking at total return but in practice I live off the declared dividends and CG of my funds and do not actually sell any shares. Although there is some year to year fluctuation I find I can live with that - going on 6 years now.

[audreyh1]

Quote:

Originally Posted by REWahoo Best of all is being lucky. I've been in DODBX for 15 years, gradually ramping up my allocation until it reached 50% when I retired 3 years ago. It was a solid, consistent performer for me but I cut back to 20% when I rolled over my 401k, seeking a little more diversification. Sure glad I did.

WOW! Talk about LUCKY!

That's what always struck me about DODBX - it's not that diversified. So it sure bamboozled me that from 2000-2006 it beat my much more diversified asset allocation. Finally, 2007-2008 shows that the broader diversification does indeed pay off over the long run.

Definitely lucky is the best. I wouldn't be RE if it weren't for some really good luck.

Audrey

[NW-Bound]

Quote:

Originally Posted by audreyh1 Definitely lucky is the best. I wouldn't be RE if it weren't for some really good luck. Audrey

Yes. That's why during years when I did well, I tried hard not to gloat. I believe in this principle, which I call the "Conservation of Luck".

[CitricAcid]

Quote:

Originally Posted by NW-Bound Yes. That's why during years when I did well, I tried hard not to gloat. I believe in this principle, which I call the "Conservation of Luck".

I always have believed in this and swore by it, but I usually use it in reference to sports (mostly baseball). Oh, he is tearing the cover off the ball right now, but over the long haul of the season most of the luck balances out.

[FANOFJESUS]

Quote:

Originally Posted by ejman Well yes, capital appreciation from the bond portion of Wellsi/Welltn would be hit as rates go up. But now that I'm retired, wouldn't the bond portion of Wellsi/Welltn result in greater income to me? I've read I should be looking at total return but in practice I live off the declared dividends and CG of my funds and do not actually sell any shares. Although there is some year to year fluctuation I find I can live with that - going on 6 years now.

That's true, sounds like you have a great plan. What percent of the total investment to they kick off each year? I know the yield is around 3.5% but with the capital gains and everything I am guessing at least 6%. If you take all the money they kick off.

[ejman]

Quote:

Originally Posted by rec7 That's true, sounds like you have a great plan. What percent of the total investment to they kick off each year? I know the yield is around 3.5% but with the capital gains and everything I am guessing at least 6%. If you take all the money they kick off.

Last year it was 5.2% - with my particular AE of about 55% stocks 25% bonds 20% short term reserves

[FANOFJESUS]

Quote:

Originally Posted by ejman Last year it was 5.2% - with my particular AE of about 55% stocks 25% bonds 20% short term reserves

I should have made my question more detailed. I was thinking just about the Wellesley-Wellington only. But I guess that too would be 5 to 6% for everything. But other than that 20% short term reserves you have about a Wellesley-Wellington mix with those numbers.

Thanks

[LOL!]

Balanced funds are particularly tax inefficient, so they should not be held in a taxable account. But I don't have to tell folks who own DODBX, Wellesley and Wellington in a taxable account: they should be able see how their returns are diminished significantly by the taxes the pay.

[ejman]

Quote:

Originally Posted by LOL! Balanced funds are particularly tax inefficient, so they should not be held in a taxable account. But I don't have to tell folks who own DODBX, Wellesley and Wellington in a taxable account: they should be able see how their returns are diminished significantly by the taxes the pay.

That's true if you are in the accumulation phase. Since I'm retired, I actually use the dividends and CG's to live on and true am taxed on these but I haven't quite figured out how to totally eliminate taxes other than the ultimate solution and 6 ft under sounds a mite drastic as a tax avoidance option....

[ejman]

Quote:

Originally Posted by rec7 I should have made my question more detailed. I was thinking just about the Wellesley-Wellington only. But I guess that too would be 5 to 6% for everything. But other than that 20% short term reserves you have about a Wellesley-Wellington mix with those numbers. Thanks

Sorry, you are right Wellsi/Welltn only dividends and CG distributions was 6.7% last year for my accounts. My short term reserves drags down the return but I sleep very soundly so good trade off for me

[REWahoo]

Quote:

Originally Posted by NW-Bound So, what did you diversify to, if you care to share?

Nothing exotic - most was moved to Wellesley but I also bought more DODFX to bring international up to 15% of my total.