"Pssst!! Wellesley"

[Midpack]

For those of us who haven't been here long, what is this about? I realize it's a Vanguard Fund, but why the recurring references? If it's a tired subject, I apologize, but if someone would be kind enough to PM and clue me in...dänke.

 

[Rambler]

Ditto...why not just post it here...

R

 

[Moemg]

It's the Vanguard Wellsley fund . A balanced fund which some think is the second messiah but it seems the boglehead's disagree

Bogleheads :: View topic - In Retirement: Reallocating with Wellesley Income as Core

 

[2B]

I don't own any but the fund is approximately 60% bonds and 40% equities. It is a very conservative fund with a very conservative asset allocation. It generates a current 4+% dividend yield (much from the bond portion) and has a good record of growth. It probably makes more sense to buy for an ER'er than a target retirement fund.

 

[W2R]

It's a nice, conservative fund, around 38% equities (the exact percentage changes now and then). Over the years the share prices have kept up with inflation pretty nicely. It sheds some nice dividends, too.

https://personal.vanguard.com/us/funds/snapshot?FundId=0527&FundIntExt=INT if you have over $100K to invest in it, or

https://personal.vanguard.com/us/funds/snapshot?FundId=0027&FundIntExt=INT for those with less than $100K in Wellesley.

So, for some of us it is a nice ER investment core. I have 30% Wellesley, as per my plan, and I am very happy with it. This is not a fund for brave, aggressive, young investors in the accumulation phase. This is a fund for cautious, conservative ERs.

 

[ladelfina]

It's just a favored fund of a few protagonists here.. unclemick seems to be the main source, and continuing supplier, of the "psst.." part but I will leave it to others to identify the absolute originator of the air leak.

 

[Marquette]

It has to do with a Norwegian widow who lived off of dividends from DRIPs. She wouldn't need to rely on DRIPs these days, though, because Wellesley pays a pretty nice and consistent 4% to 4.5% yield while also maintaining it's pricing power.

So, if you've got a bunch of research that says ones portfolio could survive fairly well on a 4% withdrawal (plus or minus a few basis points, depending on valuation and sphincter strength), and you've got a cheap-as-dirt fund from a respected fund company that pays that 4%... then you've got a match made in heaven.

One could do much worse than a portfolio that contained a large chunk of Wellesley.

 

[Dawg52]

It's a fund that Unclemick and others always refer to as a holding one should have to smooth out one's portfolio. The "psst" part has just become a running joke. But if one had everything in it, you would only be down roughly 6% for the year as compared to more traditional 60/40 blends which are down closer to 10%. Wellesley is roughly a 35/65 blend, thus the lower loss at this point.

 

[REWahoo]

...Wellesley pays a pretty nice and consistent 4% to 4.5% yield...

Current yield is running 4.7 -4.8%.

Expense ratio is 0.15 - 0.25%, very low cost for a managed fund.

40% of my nest egg is in the Wellesley basket...

 

[W2R]

It's the Vanguard Wellsley fund . A balanced fund which some think is the second messiah but it seems the boglehead's disagree

Bogleheads :: View topic - In Retirement: Reallocating with Wellesley Income as Core

... or agree...

Bogleheads :: View topic - Wellesly for retiree income?

I would recommend that anybody thinking of buying Wellesley should go to the Bogleheads forum and do a search on Wellesley, and read all of the posts that come up as part of the decision making process. I did, anyway.

I guess maybe UncleMick found out about Wellesley over there too, like I did, though he is in Target Retirement funds right now. As for me, I love those dividends! 4.83% yield on my Admiral shares, 4.73% on Investor shares.

 

[unclemick]

I believe CFB is the evil perpetrator - mentioning it in the early days of the forum - a fund I owned a good slice of back in my 1980's - multi asset days(read slice and dice in mod terms). I picked up on it since it sort of summed up my Norwegian widow story/thoughts. Value premium, dividends/interest as an income stream, the importance of a balance between stocks and bonds and the fact hand grenade wise it's done a good job over it's existance(1970?) of covering 'the SWR number' of recent retirement studies - aka 4%.

Psst - Wellesley! is a lot shorter. Other interesting early pioneer's are Wellington 1929, Dodge and Cox Balanced? 1931? Someone needs to check my memory. These were more 'racy' - in the 70/30 range I think.

Old school - dividend oriented value stocks and some good bonds.

heh heh heh - I won't go near the academic debate between balanced index and old school stuff. I just do both. theoretically impure soul that I am .

 

[FIREd]

I am also a Wellesley Investor. Certainly not a second messiah, but a very nice, stable fund which pays a good dividend and over the past 40 years has more than kept up with inflation which fits with the Norwegian widow strategy. Obviously with the current state of the stock market, it is not a bad fund to own, but in good times it is quite a boring fund. Not everyone agrees that the fund will be able to maintain its past performance going forward, but in that respect it is not that different from any other fund: Past performance is no guarantee of future performance. Overall I like it a lot and use it as a core "bond" fund in my IRA even though I am still in the accumulation phase.

 

[W2R]

I believe CFB is the evil perpetrator - mentioning it in the early days of the forum -

Interesting!! Thanks for the history lesson.

heh heh heh - I won't go near the academic debate between balanced index and old school stuff. I just do both. theoretically impure soul that I am .

Me too. I think that my Wellesley dividends will provide me with plenty of income for ER. I have a little more in indices and they can just sit there and grow for a while (if they just would, grrr)

 

[unclemick]

Actual portfolio at age 65 providing 60% of income:

Target Retirement 2015 - SEC yield 3.2% or so

Norwegian widow stocks - 33 a few examples:

electic ute - Con Ed, Excelon, Empire District

Water - Aqua America

Gas - National Fuel Gas

Telephone - Verizon and AT&T

Food - Flowers, J M smucker

Mfg - VFC(wrangler jeans etc) and Borg Warner

Drugs - Eli Lilly and Glaxo

Financial - BAC, JP Morgan

REIT - Washington REIT, United Dominion

The usual suspects for widows and orphans. also STON and EGLE as flyers from this forum for the hormones.

Target(yield) plus early SS plus a fixed(non cola) pension has my basic retirement covered.

I used to make it more complicated.

heh heh heh - OR pssst Wellesley and go fishing! It's the thought that counts.

ooops! Big oil is usually third or sometimes second - add Exxon and Chevron. 85% Target and 15% Norwegian overall.

 

[Midpack]

I get that the Wellesley AA and dividend stream would be perfect for someone who is retired - makes perfect sense. But some of the apparent (dividend) advocates are still working which I don't understand. I am trying to avoid taxes wherever possible while still accumulating, so I'd rather have appreciation than income until I retire. I am not trying to be dense, what am I missing?

 

[W2R]

I'm still working, but I am as good as ER'd since that will happen next year. I have been moving gradually from my accumulation asset allocation and portfolio towards my ER AA and portfolio for the past couple of years. I want to have everything in place, and to feel comfortable with it before I cut the cord. It will make for a smooth and uneventful transition and that is worth something to me.

But really, if you are interested in Wellesley then why not read the informational webpages on them at Vanguard, that I linked to above, in addition to the discussions here? They will tell you if Wellesley meets your requirements or not.

 

[ladelfina]

Midpack, you can have appreciation via stock price only or appreciation via stock price + dividends. In a retirement account the tax treatment doesn't matter, and so it boils down more to philosophy: better for companies to retain profits for cash cushion and theoretical investment? or throw them off to stockholders? Depends on the type of industry, I'd say, to some extent. I like the idea of dividends because it keeps companies a bit more honest.. they always have to throw off at least the change from the couch cushions. Plus, even if you are not retired and using dividends as income, they still give you more funds for rebalancing (if you are diligent with that) without having to sell.

Also, if you have not been in a high tax bracket, dividends at 15% and CG at 15% have been a wash recently, if I am not mistaken. If, instead, you are in a higher tax bracket, adding to taxable accounts... then you are not "missing" anything, per se.

 

[W2R]

Actual portfolio at age 65 providing 60% of income:

Target Retirement 2015 - SEC yield 3.2% or so

Norwegian widow stocks - 33 a few examples:

electic ute - Con Ed, Excelon, Empire District

Water - Aqua America

Gas - National Fuel Gas

Telephone - Verizon and AT&T

Food - Flowers, J M smucker

Mfg - VFC(wrangler jeans etc) and Borg Warner

Drugs - Eli Lilly and Glaxo

Financial - BAC, JP Morgan

REIT - Washington REIT, United Dominion

The usual suspects for widows and orphans. also STON and EGLE as flyers from this forum for the hormones.

Target(yield) plus early SS plus a fixed(non cola) pension has my basic retirement covered.

I used to make it more complicated.

heh heh heh - OR pssst Wellesley and go fishing! It's the thought that counts.

ooops! Big oil is usually third or sometimes second - add Exxon and Chevron. 85% Target and 15% Norwegian overall.

I don't see any indices there!!!

 

[FIREd]

I get that the Wellesley AA and dividend stream would be perfect for someone who is retired - makes perfect sense. But some of the apparent (dividend) advocates are still working which I don't understand. I am trying to avoid taxes wherever possible while still accumulating, so I'd rather have appreciation than income until I retire. I am not trying to be dense, what am I missing?

Don't you have any bond funds in your portfolio? Don't they pay dividends without providing much growth? You can keep Wellesley in an IRA and pay zero in taxes (for now). I personally consider Wellesley to be a virtual bond fund and use it as one (to balance out Wellington, my other core fund, which I consider to be a virtual stock fund). I see nothing wrong with it. Plus I tend to favor investments that pay dividends in general. I happen to believe that dividends are an important part of total returns.

 

[Midpack]

There's why my POV is different. I don't have any room whatsoever in my tax deferred accounts for Wellesley so my only option is in my taxable account. I am in a higher tax bracket, so I don't want income from my taxable holdings now. So PSSST Wellesley doesn't apply to me. But after I retire, Wellesley might make good sense for me one day. Thanks...

 

[unclemick]

You are not missing anything. My nephew fresh out of Annapolis headed for flight school( thus starting TSP) in contrast to my Sis actually listened to my advice(BS depending on who you ask) - gave him Bogle's first Book circa 1994 - 'don't read books' but read this book and max TSP in 500 Index equivalent. Check back in twenty years. And no I didn't see the coming irrational exuberance. He did crack after about 10 yrs listening to fellow officers he slipped and read Four Pillars. He promised to only screw up going forward ( actually I like a lot of Bernstein).

Today I would say pick the lifecycle fund for your age (aka Target) and do your day job - they put in enough bells and whisles to make you think it's complicated. It is not.

heh heh heh - 1966 - 1982 flat I look back as my 'true grit' period - actually I made every stupid move in the investment book except perhaps commodities. Hence I work on grumpy and opinionated - WITH a Curmudgeon Certificate..

 

[FIREd]

I don't have any room whatsoever in my tax deferred accounts for Wellesley so my only option is in my taxable account. I am in a higher tax bracket, so I don't want income from my taxable holdings now. So PSSST Wellesley doesn't apply to me.

Yes, in your case Wellesley would be a bad choice. Lots of dividends (most taxed as ordinary income) plus sizable capital gains each year.

 

[cute fuzzy bunny]

I believe CFB is the evil perpetrator

I'm pretty sure we collaborated.

Before ever coming along to the ER forum, I looked pretty long and hard at how to invest as a 39 year old early retiree. Thats before all y'all changed my mind 5 times.

What seemed to be the best mix was half Wellesley and half Wellington. That put you at about a 50/50 mix of stocks and bonds. The bonds are mostly short-intermediate term corporates of very good credit quality. The stocks are mostly good dividend paying blue chip large cap value bend.

In looking at Wellesley alone, the small slice of equities is somewhat overcome by the value premium. You get a heck of a nice dividend that you can just take and spend. Historically the products principal value more than kept up with inflation.

So you get your check and you spend it.

What could be more difficult for the fund going forward is recent and current low bond rates, that the last 30-something years that wellesley has been in place have been very good for bonds, and that the large cap/value tilt might produce less of a premium than it has historically.

But for a good place to start with your investments, its pretty low volatility and should be a good performer.

I'd say about all the same things apply to Target Retirement Income or the Lifestrategy income funds, although those depend more on TSM and less on a large cap value equity base, but their bonds are far more diverse. Which may or may not be a good thing.

The managed payout 5% fund is a far racier version, but might prove to be a better option over the next 20 years due to the extreme diversification. Of course, if all the equity markets worldwide tank and commodities eat it, that wont be a happy place.

So maybe a nice low risk high yield port today could be a mix of wellesley, TR income, LS income, and MP 5%...?

Last little tidbit is that allegedly the "old money" folks often invested in Wellington and then started shifting the holdings towards Wellesley as they approached retirement...

 

[ats5g]

There's why my POV is different. I don't have any room whatsoever in my tax deferred accounts for Wellesley so my only option is in my taxable account. I am in a higher tax bracket, so I don't want income from my taxable holdings now. So PSSST Wellesley doesn't apply to me. But after I retire, Wellesley might make good sense for me one day. Thanks...

You can create a more tax efficient pseudo Wellesley fund out of 40% Vanguard's LV index fund/etf or Vanguard's High Dividend fund/etf and 60% Vanguard's intermediate muni fund. Same value tilt, and similar duration/credit quality of bonds.

There is nothing all that special about Wellesley, except that you get it all in one fund.

You can also do about the same with Wellington, just use 60% for the stocks and 40% for the bonds.

- Alec

 

[wildcat]

Actual portfolio at age 65 providing 60% of income:

Target Retirement 2015 - SEC yield 3.2% or so

Norwegian widow stocks - 33 a few examples:

electic ute - Con Ed, Excelon, Empire District

Water - Aqua America

Gas - National Fuel Gas

Telephone - Verizon and AT&T

Food - Flowers, J M smucker

Mfg - VFC(wrangler jeans etc) and Borg Warner

Drugs - Eli Lilly and Glaxo

Financial - BAC, JP Morgan

REIT - Washington REIT, United Dominion

The usual suspects for widows and orphans. also STON and EGLE as flyers from this forum for the hormones.

Target(yield) plus early SS plus a fixed(non cola) pension has my basic retirement covered.

I used to make it more complicated.

heh heh heh - OR pssst Wellesley and go fishing! It's the thought that counts.

ooops! Big oil is usually third or sometimes second - add Exxon and Chevron. 85% Target and 15% Norwegian overall.

Hey UM, what about the financial preferreds?

InvescoPowerShares.com - Financial Preferred Portfolio - PGF

Qualified divis and higher up on the scale than the equity holders - ? Just throwing some gas on the male hormone fire