Vanguard Wellington vs Target Retirement 2030

[JP.mpls]

I do an end of year assessment of my retirement accounts.

My 401K is with Vanguard. I have some of the money in Vanguard Target retirement 2030 fund with about 60/40 allocation. Note: I use the Target retirement funds to get the desired allocation that I'm looking for. My choices are limited in my company's 401K plan.

I also have some money in Vanguard Wellington, which has about a 60/40 allocation.

What I believe I observed looking at my end of year statement:
- Both funds were down for 2018, unless I'm not reading the website correctly.
- The investments in both funds were down about the same amount, which makes sense with their similar allocation.
- The Wellington funds provided dividend income for the year that basically offset their losses for the year, the Target Retirement 2030 fund did not provide any dividend income, so it was down much further for the year.


My comments:
- Am I reading my statement correctly? Did Wellington provide dividend income to offset the investment losses for the year, and did the Target Retirement 2030 fund not do this?
- I'm not a dividend or investment expert, but I like what happened with the Wellington investments in a down year. It makes me want to invest more in Wellington over other similar balanced funds.
- What are the negatives to investing in Wellington if they are heavy in dividend paying stocks?

Thanks in advance for any comments or thoughts you have on this topic.

JP

 

[ERD50]

Mostly 6 of 1 half dozen of the other. If you go here, you'll see total return, set the slider for one year:

https://stockcharts.com/freecharts/perf.php?VTHRX,vwelx

Wellington seems to do a bit better in most periods, but the lead changes from time to time. As close as I can tell, they are both down for 2018, Wellington a little less.

If you go to yahoo finance history on each, it will show any divs and distributions, so you can factor those in. Remember, divs/distributions come out of the fund. It's all money, don't look at the divs/distributions as anything 'extra'.

-ERD50

 

[JP.mpls]

It's all money, don't look at the divs/distributions as anything 'extra'.

-ERD50

ERD50,
Thanks. I was looking at the Wellington dividend distribution as extra income beyond the market gains/losses. I will just go by the total return percentage like you suggested.

I'm still leaping to the conclusion that Wellington is heavy in dividend paying stocks, and that is why it outperformed a Target Retirement fund with similar stock/bond ratio. Is this an incorrect conclusion?


Take care, JP

 

[ERD50]

ERD50,
Thanks. I was looking at the Wellington dividend distribution as extra income beyond the market gains/losses. I will just go by the total return percentage like you suggested.

I'm still leaping to the conclusion that Wellington is heavy in dividend paying stocks, and that is why it outperformed a Target Retirement fund with similar stock/bond ratio. Is this an incorrect conclusion?


Take care, JP

It's hard to say w/o breaking down the component investments. It's possible. But in general, all the studies we've done here don't show any total return advantages to focusing on dividend payers.

Perhaps the Vanguard managers really are better at their stock picks? Perhaps their picks on the bond side is what helped? Perhaps these same advantages will hurt them in other market conditions?

Hard to say, but Wellington and Wellesley do have good and long track records.

-ERD50

 

[Lsbcal]

I would look at Wellington vs VTHRX in a broader way. First go to the Morningstar site portfolio tab: Vanguard Wellingtonâ„¢ Fund Investor Shares Report (VWELX) | Asset Allocation Summary

Note Wellington is heavily weighted to large cap value stocks (in the style box) whereas VTHRX is more evenly weighted to large caps and has 24% in mid/small caps. Next note that Wellingto has a modest weighting to non-US stocks, 12% vs 27% for VTHRX.

So the year's performance can be dependent on which asset classes do best: foreign vs US, large caps vs mid/small, large cap value vs an LC blend.

 

[OldShooter]

I don't know if this will be helpful or not, but IMO this thread illustrates why I don't like blended funds.

First, they are impossible to benchmark. Even knowing the % each in the equity and fixed portions, you don't know what part of total return came from each and even if you know you may not know what is a good benchmark. Using indexed equity funds is really your only defense; at least there you can believe that your equity return is similar to the specified index. On the bond side I don't know if you can even do that. I am just not a bond guy.

Second, unless the equity portion is indexed you are at the mercy of the managers regarding how much risk you are taking on. I won't belabor this, just point to this article: https://www.reuters.com/article/us-...ers-on-risky-path-to-retirement-idUSKBN1GH1SI Re Vanguard I would say that they are pretty trustworthy, but prior to reading the article I would have said the same thing about Fido. I now emphasize to my investment class students: Look in the box. Know what you own.

It's seems easy enough to buy two funds, one equity and one fixed income. Then you have visibility and flexibility.

 

[joylesshusband]

I don't know if this will be helpful or not, but IMO this thread illustrates why I don't like blended funds.

/snip

[/U]It's seems easy enough to buy two funds, one equity and one fixed income. Then you have visibility and flexibility.

Fully agree.
The only reason that I could think of justifying a choice of blended funds is if you or your significant other are not investment-savvy.

An example is my wife - aware of our investment choices and moves, however pretty ignorant about the whys and wherefores.

This is why her tIRA (about 7% of our total portfolio) is kept in the Vanguard Balanced Index fund (VBIAX) in a roughly 60/40 AA, and my written instructions to her are to put everything in VBIAX or Wellington as soon as I kick the bucket.
KISS - fire & forget.

 

[Lsbcal]

I think the intent of the OP was to analyse performance not necessarily to pick the strategy.

 

[OldShooter]

Fully agree.
The only reason that I could think of justifying a choice of blended funds is if you or your significant other are not investment-savvy. ....

Well, we're each other's fan club then. I agree with your point. For someone who is not going to worry about benchmarking and who is willing to trust a manager not to pull some of the shenanigans that the Fido guys did, the blended funds are definitely fire and forget.

And for trust, IMO it is hard to beat a Vanguard fund that indexes the equities to the US market.

I think the intent of the OP was to analyse performance not necessarily to pick the strategy.

Yes. Agreed. That was why I made the tentative comment at the beginning of my post. But the reason that the OP is having trouble doing any kind of benchmarking beyond guesswork is because of the nature of the funds he/she chose. My first point, IOW.

 

[target2019]

My comments:
- Am I reading my statement correctly? Did Wellington provide dividend income to offset the investment losses for the year, and did the Target Retirement 2030 fund not do this?
- I'm not a dividend or investment expert, but I like what happened with the Wellington investments in a down year. It makes me want to invest more in Wellington over other similar balanced funds.
- What are the negatives to investing in Wellington if they are heavy in dividend paying stocks?

1) TR 2030 does pay one dividend, at end of year. The history in Yahoo Finance shows this. Maybe it was reinvested (your choice) so you did not notice?
2) Wellington pays a monthly dividend. It may or may not be in the optimum taxable space for you.
3) The Wellington negative is that there is 35% bonds, so some of the dividends may not be in hte best investing space.

TR 2030 consists of passive index funds. Wellington is actively managed.

 

[pb4uski]

I think the performance difference in 2018 is mostly due to differences international equities exposure.... that and a secondary factor may be because the 2030 fund is a bit more stock heavy.. at 12/31/2018.... 69/31 for VTHRX vs 66/34 for VWELX.

In the long run... and IMO one should compare investments over at least 3 years and preferably longer, they are pretty comparable:

 

[alaska55]

1) TR 2030 does pay one dividend, at end of year. The history in Yahoo Finance shows this. Maybe it was reinvested (your choice) so you did not notice?
2) Wellington pays a monthly dividend. It may or may not be in the optimum taxable space for you.
3) The Wellington negative is that there is 35% bonds, so some of the dividends may not be in hte best investing space.

TR 2030 consists of passive index funds. Wellington is actively managed.

You sure about that, I'm pretty sure it quarterly.

 

[target2019]

You sure about that, I'm pretty sure it quarterly.

Yoa are correct. Quarterly dividend for Wellington, not monthly.