Wellesley as part of a lazy portfolio

[nun]

Wellesley is the "dirty secret" of many passive indexers and many of us own it. So going into retirement can it be a useful part of a lazy portfolio......or would you just go with full on indexes for better diversity?

So would

25% Wellesley
25% Total Bond Index
25% International Stock Index
25% TSM

be meaningly different from

40% Total Bond Index
25% International
35% TSM

 

[W2R]

I love Wellesley. I have stayed with the same percentages for years:

30% Wellesley (VWIAX)
20% Total Stock Market (VTSAX)
13% FTSE All World Ex-US (VFWAX)
5.5% cash

The rest is in bond funds (TSP "G Fund" and Total Bond Market VBTLX).

Oh, and I also have 1% Wellington in a tiny Roth IRA.

Somehow all this balances out to 45:55, equities:fixed. Anyway, in answer to your question I think this provides enough diversification for my tastes. I think Wellesley is a better fit for me in retirement than it was in the accumulation phase.

 

[HFWR]

Lots to like about Wellington and Wellesley, but I don't believe they are "passive".

 

[nun]

Lots to like about Wellington and Wellesley, but I don't believe they are "passive".

Exactly...that's why the are the "dirty secret" of many indexers. Well maybe not that much of a secret

 

[redduck]

When indexing and/or lazy portfolios are discussed, I tend to think of the more all-encompassing index funds or etf's such as:

Total Bond Index
International Stock Index
TSM
FTSE All World Ex-US (VFWAX)

But there are etf's that are also index funds, but specific to particular areas such as XLU (Utility index). Can funds like these have a place in a lazy portfolio? In a semi-lazy portfolio?

I am slowly heading for some sort of lazy portfolio, but I do plan on keeping my Wellesley and Wellington.

 

[golfnut]

Doesn't get much lazier then to go with balanced funds like Wellington or Wellesley.

 

[REWahoo]

Doesn't get much lazier then to go with balanced funds like Wellington or Wellesley.

Or a mix of the two...

 

[Koolau]

Doesn't get much lazier then to go with balanced funds like Wellington or Wellesley.

Yeah, I like a little of each even though that probably doesn't make a lot of sense. YMMV

 

[fritz]

Doesn't get much lazier then to go with balanced funds like Wellington or Wellesley.

Or a mix of the two...

Yeah, I like a little of each even though that probably doesn't make a lot of sense. YMMV

+1 on holding both, and it allows us to tweak our stock to bond ratio between them w/o having to do our own rebalancing so far (been holding pretty steady at 52/48 for 8 years now).

 

[MBAustin]

Once nice thing about Wellesley/Wellington is they take care of rebalancing. That makes them "lazy" in my book!

 

[rdy2go]

My personal couch potato portfolio is 50/50 Wellesley and Welington, set and forget. I retired almost a year ago and portfolio is up 10.25% since July 1 of last year. I'm happy and so far have resisted tinkering. Last year, Wellesley outperformed Wellington. This year it is the opposite. Yes, I wish I had more equity and international exposure this year but I don't want to join the market timer group and think I can outsmart the market.

 

[24601NoMore]

We have a mix of Index funds (eg: VG S&P500) and Wellesley.

Wellesley is my 'sleep well at night' fund. Worst year ever was down something like 9.5%. No huge drops..~10% avg annual return since inception. I aim for 6% and am happy if that's what I average..hard to make 6 with that little volatility and reasonable risk nowdays.

 

[nun]

Wellesley and Wellington are very narrow. I'd be nervous only owning such a small fraction of the market.

 

[REWahoo]

Wellesley and Wellington are very narrow. I'd be nervous only owning such a small fraction of the market.

From the Vanguard website:

Wellesley: 61 stocks, 660 bonds
Wellington: 99 stocks, 847 bonds

The track record of these two funds over multiple decades give no indication anyone should be nervous. Even if you assume some significant overlap in the stocks and bonds each fund owns, a 50/50 mix of those two funds would result in a portfolio far more diversified than those on the forum who invest in individual stocks and bonds.

 

[fritz]

Wellesley and Wellington are very narrow. I'd be nervous only owning such a small fraction of the market.

You started this thread on Wellesley, now you're against it?

Well they've both been around a long time - Wels 1970 and Wel 1929 (one of the first mutual funds). Both rated 5-star gold at Morningstar for a long time.

I'm a big believer in the uniqueness of Balanced funds. Use index funds as well (mostly in our accumulation phase), but chose to pull back on index in retirement due to DW having zero interest in investing. I also worry about cognitive ability as I age and not realizing it's no longer in my best interest to manage our funds. Will be relying heavily on Wel/Wels for the bulk of our investments as I age, along with VTMFX (Tax Managed Balanced) and VTSAX (Total Stock Market). My notes to DW are to leave it as it is and follow the plan, but if all else fails - turn it over to Flagship rep to handle when I'm unable or have left the building.

Anyway, have owned Wel/Wels (and index funds) since we started investing and don't worry about either of them. I have been concerned about VFIAX (S&P500), then VTSAX (TSM) and VBTLX (TBM) over the years holding too much weight/concentration in Tech and Govt bonds.

 

[nun]

I said I'd be nervous with a portfolio with only Wellington and Wellesley. I'd want some international and US broad index funds......the question is how much?


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[fritz]

I said I'd be nervous with a portfolio with only Wellington and Wellesley. I'd want some international and US broad index funds......the question is how much?


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You do get International exposure in both Wellington and Wellesley, although it is on the smaller side.

Wels 5.9%
Wel 10.7%

 

[friar1610]

My wife and I don't have a whole lot of room in our modest Rollover IRAs due to a variety of reasons. We had always followed the "bonds in tax-deferred/equities in taxable" while investing so we came to RMD age with 100% bond IRAs. We were a little uncomfortable having no equities in the IRAs but we couldn't convert too much to equities without throwing off our overall AA unacceptably. We looked at the following options:
1. VG Life Cycle Income (20% equities with 40% of that international). Rejected that because 30% of the 80% bond portion was international. We don't see a need for international bonds.
2. A 20% slice of either VG Total Stock Market Index or Total World Stock Index. Either of these would have worked fine but we went with...
3. A 50/50 mix of VG Total Bond Market Index (then the only IRA holding) and Wellesley. That gave us just under 20% equities. It'll also be easy to rebalance for my non-investment inclined wife if she's running things on her own. I'm also considering moving the Total Bond Index to Intermediate Treasury since Wellesley has so many corporates and we probably don't need those that are in Total Bond also. But that's a decision for another day.

Most of our taxable investments are in a VG Index classic 3 fund portfolio. So Wellesley is the only managed fund this died-in-the-wool indexer owns.

 

[madsquopper]

I set up an easy portfolio for my spouse in one of her IRA's. High percentage of Wellesley but it's not a huge amount of money, around 30K. It's 2/3 Wellesley, and 1/6 each of VXF (extended US) and 1/6 VXUS (basically international stocks). So overall it's pretty much a 60/40 blend with most of the typical asset classes represented.

 

[nun]

You do get International exposure in both Wellington and Wellesley, although it is on the smaller side.

Wels 5.9%
Wel 10.7%

That is far too little international exposure for me, hence my original suggestion of a retirement portfolio with:

25% Wellesley
25% Total Bond Index
25% International Stock Index
25% TSM

 

[nun]

......Maybe Vanguard Balanced Index is a better one fund solution than Wellington.


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[fritz]

......Maybe Vanguard Balanced Index is a better one fund solution than Wellington.


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How's your Balanced Index fund experiment coming along?

http://www.early-retirement.org/forums/f28/results-of-my-experiment-after-one-year-80526.html

In the world of balanced funds, Wellington and Balanced Index are a little like comparing apples and oranges. Currently the earnings edge is to Wellington, but Wellington is Large Cap Value oriented equities and heavy in corporate bonds (with +10% foreign). Balanced index is pretty much 60/40 Total Stock Market (weighted Large Cap Blend) and Total Bond Market (heavy Govt. bonds) with no real foreign holdings. You get a better yield with Wellington (I live off taxable accounts dividends currently). As far as Balanced Index being a better all in one fund over Wellington - just compare what others think:

Balanced Index Fund $33 billion total assets
Wellington Fund $99 billion total assets
Wellesley Fund $51 billion total assets (added for thread reference)

 

[nun]

How's your Balanced Index fund experiment coming along?

http://www.early-retirement.org/forums/f28/results-of-my-experiment-after-one-year-80526.html

In the world of balanced funds, Wellington and Balanced Index are a little like comparing apples and oranges. Currently the earnings edge is to Wellington, but Wellington is Large Cap Value oriented equities and heavy in corporate bonds (with +10% foreign). Balanced index is pretty much 60/40 Total Stock Market (weighted Large Cap Blend) and Total Bond Market (heavy Govt. bonds) with no real foreign holdings. You get a better yield with Wellington (I live off taxable accounts dividends currently). As far as Balanced Index being a better all in one fund over Wellington - just compare what others think:

Balanced Index Fund $33 billion total assets
Wellington Fund $99 billion total assets
Wellesley Fund $51 billion total assets (added for thread reference)

Yeah you can make Balanced Index out of TSM and Total Bond, it just saves you having to rebalance. My point is the Wellington is a nice income generator, but it's concentrated in a very narrow segment......diversifying with some broader indexes looks attractive to me.

Thanks for asking about the experiment.

The Balanced Index investment has gone up by an annual 6.5%, it's up from $35.5k to $41.3k....it's slightly a head of what I need to beat the DB plan.....I just have to keep that up for a couple more decades.