VWINX and Real-Life Retiree Investment Returns

[Ed_The_Gypsy]

Is this fund suited for Retirement account like 401K/IRA or only buy after you've retired to generate income? Will this fund and PRPFX be better option than bond fund for retirement account?

I don't know. Sorry. I only have it in my Roth and that isn't very big. I have forced it on my family members in Roths. I hope they all outlive me by many years. They will see higher interest rates; I may not.

When I am forced to begin minimum withdrawals from my IRA (and everything is in my IRA), I hope that I won't have to spend it all so I can put the unpsent part into a fund outside of a tax-free account. For simplicity, I have VWINX in mind at this time. Our income should be so small as to make tax consequences trivial. There are many others on this board who will have the problem of being in a higher tax bracket who are much more knowledgeable than self about VWINX in a taxable account.

 

[Ed_The_Gypsy]

Love Greaney and love Wellesley, but reading the tables makes a pretty strong argument in favor of Harry Browne's Permanent Portfolio (unless you don't like a smoother ride and an ending balance of 406K vs. 290K).

Are you sure? Greaney warns that the Permanent Portfolio may have run out of gas. Gold was the wind under its wings. Gold doesn't pay dividends, though. It ain't very useful either, so I would not buy gold mining stocks either. I buy oil companies and pipeline companies in my concentrated portfolio. Gold is pure gambling IMHO. (I will be happy to sell my services to companies who mine the stuff, however. People keep waving money in front of my face. )

 

[Ed_The_Gypsy]

It is possible to get the chart that makes one feel worse, or feel better. The main problem I see with performance charts is that they are not synced with your own savings, contributions and allocation.

I pay most attention to total dollars, and asset allocation.

Of course, I do too. This thread has nothing to do with asset allocation. It has to do with a few mutual funds.

Still, I don't see how a rational decision can be made about asset allocation without performance charts that mean something to start with. For a long time, I was simply using the NAV published in the paper. What a numpty. I would have saved decades of wasted time if I had known the difference. There are asset classes that are wonderfully non-correlated, but they are terrible performers over time. All of the chartists I have ever seen pay no attention to dividends.

My personal situation is simple. Savings and contributions, none for 13 years. Allocation has evolved.

One has to make up one's own performance charts according to one's own AA etc, but from personal experience, basing decisions on bad data is not a good idea.

 

[Alan]

Is this fund suited for Retirement account like 401K/IRA or only buy after you've retired to generate income?

I would think it would fit well in an IRA during accumulation, but it can throw off a lot of dividends, and capital gains so you lose tax efficiency if you are living off the proceeds in retirement as all IRA withdrawals are taxed as regular income.

I didn't buy Wellesley until just before retirement when we sold our house and put all the money from the sale into Wellesley in an after-tax account. We withdraw all the income it throws off, and for us this year, of the money it generated (and we withdrew it all to spend), 23.4% was L.T. capital gains, 21.4% was Qualified dividends and 55.2% was Ordinary dividends.

I'm sure it's not the most tax efficient way to live but it is easy, particular for my DW when I'm no longer here.

 

[Ed_The_Gypsy]

Another falsehood that so many people think is correct.... and is sometimes the worst advice ever.... especially if you have individual stocks.....

I disagree. When an asset goes down in price you have lost money. However, you don't lock in the loss until you actually sell it. The same is true for a higher price. You make money, but you still have to sell to lock in the gain. I am ignoring things some people do with options, etc.

You guys caught me. I confess. Everything I said is a lie.

 

[obgyn65]

Posting from the free clinic, sorry short ,message , between 2 patients. You are joking, right ?

You guys caught me. I confess. Everything I said is a lie.

 

[David1961]

[FONT=&quot]
[FONT=&quot]I am comfortable with my instructions to DW to sell everything and buy VWINX after I croak. [/FONT][/FONT]

Hopefully, that is a long ways off.

 

[Alan]

You guys caught me. I confess. Everything I said is a lie.

Posting from the free clinic, sorry short ,message , between 2 patients. You are joking, right ?

Ed has devised this test just for you, now that you are a bonafide equities investor.

Your job is to sift through this thread and report back what is true and what isn't.

Ed will be along later to mark your work

 

[target2019]

Of course, I do too. This thread has nothing to do with asset allocation. It has to do with a few mutual funds.

Still, I don't see how a rational decision can be made about asset allocation without performance charts that mean something to start with. For a long time, I was simply using the NAV published in the paper. What a numpty. I would have saved decades of wasted time if I had known the difference. There are asset classes that are wonderfully non-correlated, but they are terrible performers over time. All of the chartists I have ever seen pay no attention to dividends.

My personal situation is simple. Savings and contributions, none for 13 years. Allocation has evolved.

One has to make up one's own performance charts according to one's own AA etc, but from personal experience, basing decisions on bad data is not a good idea.

Wellesley is a good fund. There is asset allocation within the fund and an investor might dissect it within their broader allocation. Here and elsewhere it has very good reputation and smoother performance.

I believe you took my reply with performance chart in the wrong light. It was half-humorous as I was posting my own performance. I also meant to emphasize that when you enter the market and the timing of your purchases are major factors.

BTW, we have VWINX in our port. It is about 4% overall.

 

[Animorph]

Just for reference, the return with all distributions being reinvested is called "total return". Very different than just a price or NAV chart, as has been pointed out. And also much harder to find, especially as a chart.

 

[LitGal]

To Ed, re. post #6.

Thanks. VWINX and VWELX, together, comprise ~30% of my Vanguard rollover IRA (created last summer from 401K with last employer). Prior to retirement in June, I was in the 401k for about 12 years; and the entire acct. itself was with Vanguard, so I'd been trying to learn how to manage it during those years. I was way too busy to do it much justice, but did make accumulation the top priority.

Vanguard made it easy to just roll over the 401K into this traditional, before-tax IRA. And I simply sent over all the funds as they were at the time I retired. (This IRA represents about 80% of my retirement savings-- the rest are in Roths, including some bank CD's and one at T Rowe Price, in Cap Appreciation fund PRWCX).

A "retirement project" I'm enjoying is learning how to make those years of hard-earned dollars work harder for me. DH and I don't use our savings to live on, at least for now. So our goal is an AA that will help those savings at least stay ahead of inflation, for when we need them in the future.

So, no, I'm not "coasting," though it could look like it. Back in the accumulation phase, my dollar-cost-averaged contributions went through 3 phases: 1) 50/50 to STAR Con. and Mod. Growth; 2) 50/50 to Target Dates 2010 and 2015; 3) 100% to Money Mkt.(Yeah, I know. That last was probably a mistake; but I'd taken on so many responsibilities at work that I couldn't deal with investment ed. at the time.)

Or course the STAR funds dropped in '08; but I "held the course" until I sold them high these past few weeks. Bought the target date funds while the market was coming back........up until about 2010 when there was a brief drop in the market. Didn't pull any $ out of the funds then, just waited for the prices to return. So I sold them in recent weeks as well. (But 2010 is when my contributions went straight to the m. market fund.)

So this IRA is now comprised of the W and W; plus 25% in VFSUX (Short Term Investment Grade); the rest sits in the cash generated by the locked-in gains. I'd like to dollar-cost-average further into W and W if/when prices drop a bit. I know I'm missing out on gains in this surging market, but that's OK. I'm happy with the earnings from the funds I sold; would rather use them if/when I can be a W and W "bargain shopper." While I sit on these sidelines, my current W and W will pay their nice qtrly dividends, building my acct. that way for now.

My approach is probably naive and simplistic, but it's just where I am in the learning curve.

 

[LitGal]

To Retire 2020, re. Post #24

Because of their performance records and composition (Wellesley is 60-65% bonds, Wellington 60-70% stocks), these two balanced funds --held simultaneously, together-- seem like they should stabilize a portfolio through myriad scenarios: interest rates rising, stocks dipping, bonds falling. During those times, one or the other (W or W) will hopefully be "up," IMHO. My only experience with them has been in a before-tax acct., where I'm reinvesting the quarterly dividends to further grow the acct.

I wish I had bought them years ago, instead of the funds I thought were the sensible ones at the time (STAR and target date funds). My current favorite financial "read" is the 2013 Independent Guide to the Vanguard Funds, With All New Funds and Annuities. It's published by The Independent Adviser for Vanguard Investors (1-800-211-7641). In-depth analysis of each Vanguard fund sits side by side with its Vanguard peers. This makes it much easier to "comparison shop."

What the analysis teaches is best learned ASAP, as early as possible in one's financial education, again IMHO.

As I've said elsewhere, I'm pretty new to all of this.

Best of Luck!

 

[Running_Man]

Very interesting article Ed thanks for posting, reinforces my belief in the long term relevance of the simple yet effective permanent portfolio.

 

[Kimo]

To Ed the Gypsy......I would look into the Vanguard Annuities if you at all interested, even with rates this low because there is no surrender charge or fee to get out and do it all over if you like...I don't work for Vanguard, I just have bought their annuities....

 

[Tyro]

I want a simple solution to hand over to my bride when my brain falls out or I fall off the perch (AKA the Norwegian Parrot move).

IIRC, the Norwegian Parrot was nailed to the perch.

 

[Tyro]

I'd like to dollar-cost-average further into W and W if/when prices drop a bit. I know I'm missing out on gains in this surging market, but that's OK. I'm happy with the earnings from the funds I sold; would rather use them if/when I can be a W and W "bargain shopper."

Dollar-cost-averaging ignores valuation; the idea is that the price averages out over time, so you can start it at any time of a cycle -- up or down. If you're going to be a "bargain shopper", that's market timing.

I don't care which anyone does, but most sources differentiate them.

 

[LitGal]

Please Pardon My Naivete, But.....

Dollar-cost-averaging ignores valuation; the idea is that the price averages out over time, so you can start it at any time of a cycle -- up or down. If you're going to be a "bargain shopper", that's market timing.

I don't care which anyone does, but most sources differentiate them.

Tyro, I'm not sure what you mean by differentiation; do you mean between dollar-cost-averaging and valuation?

Also, I know that market-timing is discouraged; but, due to family circumstances, there have been a couple "seasons" of life when DH and I have needed to step out of a surging market. But we've also reaped healthy gains by waiting out the troughs. (I am a bit proud of the fact that I haven't sold during a "down" market.) Have only sold during "higher" markets, a couple times when family concerns precluded leaving $ on a roller-coaster.

True, this probably kept us from meeting historical market gains. (But, when my husband did this in late '99, he locked in 15 yrs. of gains, with no exposure to the drop in '01-02.)

Because of health issues, he and I have had to sometimes re-visit our tolerance for risk.

I'm certainly not encouraging anyone here to do the same. It's just that he and I worked with too many "returning retirees," who had to go back to work to pay their medical premiums after the drop in '08. Because of DH's health, neither one of us wants to find ourselves in that position (by possibly losing savings in the market).

Please forgive me, readers, if I am serving as a bad example!

 

[REWahoo]

Please forgive me, readers, if I am serving as a bad example!

I'll ask the question I can never answer whenever I'm tempted to "sell during a higher market", how do you know it isn't going even higher? And even more troubling (for me), if you do sell how do you know when to buy back in?

 

[LitGal]

Naivete, Part II

I'll ask the question I can never answer whenever I'm tempted to "sell during a higher market", how do you know it isn't going even higher? And even more troubling (for me), if you do sell how do you know when to buy back in?

Re. the first question, "How do you know it isn't going even higher?"

We don't. If it does, DH and I simply know we won't be there to cash in on those gains. (Too bad for us; but why be greedy?)

Re. the second question, "...when to buy back in?"

When the market looks like it's heading for a trough (or in one), we/I check the prices on funds we wished we'd had at the previous peak. How much are they costing now? (Probably a much lower price.) Time to buy.

Kind of like shopping for my favorite sandals. I will not spend $100 for them when everyone's wearing them in July. But, in Jan. (when the world couldn't care less about them-- well, the Ohio world, that is), I check them out on line. Then order them up for $39, plus free shipping because the co. is trying to unload them. Come July, I have my sandals and an extra $60 in my pocket. Everyone else who likes them is back to paying $100 for them, plus whatever the inflation is for that year.

Please don't breathe a word of this "method in my madness" to my brother the successful accountant. It would probably curl his hair, plus he would surely try to talk some business sense into me. But he wouldn't have time, because he works such crazy long hours.

So I just try to keep reading more books, and learning about this investment world. Still, a top priority for me is to NOT return to grading essays and research papers, hundreds of hours a year. DH and I try to keep abreast of our risk tolerance. It has evolved over the past 30 yrs. Right now it is pretty low.

Again, my apologies for any "dumb approaches" described above.

 

[REWahoo]

Kind of like shopping for my favorite sandals.

You need to start an investment newsletter...

 

[LitGal]

Naivete, Part III

LOL!

That's when my dear brother would get involved, to help humanity avoid such risk (bless his heart).

 

[Tyro]

Tyro, I'm not sure what you mean by differentiation; do you mean between dollar-cost-averaging and valuation?

I meant differentiating between market timing and dollar-cost-averaging. The way you phrased it might be confusing to noobs (or not).

Tyro

 

[Tyro]

I'll ask the question I can never answer whenever I'm tempted to "sell during a higher market", how do you know it isn't going even higher? And even more troubling (for me), if you do sell how do you know when to buy back in?

1. You don't, but like horseshoes, hand grenades, and thermonuclear explosions, close is usually good enough. What's important (according to what I've read about it, which was a very long time ago) is to be in during bull markets and out during bear markets.

2. The "whens" in either case depend on the timing model/theory being followed.

I'm not "pro" timing either. I'm on the fence, keeping an open mind, and [-]learning[/-] trying to learn.

Tyro

 

[LitGal]

Thanks, Tyro

I meant differentiating between market timing and dollar-cost-averaging. The way you phrased it might be confusing to noobs (or not).

Tyro

OK-- I see what you mean. So, it seems that DH and I've been using dollar-cost-averaging for much of the past 25 yrs, but then resorting to market timing occasionally when our risk tolerance suggested it.
This is a much clearer way to say it.

Thanks for the help.