Wellesley Fund

[Happyras]

I'm thinking of throwing all my stuff 50/50 into these two funds and quit overthinking stuff!

We basically did this last December and have no regrets.

As far as the bond exposure to rising rates, there as several articles specific to these funds that demonstrate that the short term impact is offset by the long term growth in yield. These are actively managed funds and reading the list of bond investments, they are managing to the yield curve maintaining a 5.6 yr duration, and some interesting moves with notes/securites held with Japan, positioning, I assume, for more US bond capture as rates rise. The short term risk lies mainly with market reaction, wherein a sell off of the fund drives them to sell their best yielding highest rated bonds to liquidate for market demand.

 

[calmloki]

I hope I'm not exposing my ignorance here but aren't the Wellesley and Wellington funds similar in most respects except for their AA approach (40/60 vs 60/40 aprox)? So my question for those of you that have commented about having your monies in both funds, how does that reconcile with your OVERALL AA philosophy? Wouldn't you tend to pick one or the other?

And to join with you in the tall conical hat group - if you are 50% Wellington and 50% Wellesley doesn't that mean you are 50/50 stocks/bonds? If so, what's the point? Is a 50/50 stock/bond split really going to work out much more favorably than 60/40 or 40/60?

I should refresh the screen before commenting the next day.... target 2019 answered well, though I still think it's kind of hair splitting on the differences.

 

[target2019]

The 1st two tables on this page show how much the difference might mean to you.
https://www.bogleheads.org/wiki/Asset_allocation

That is viewed from a high level. For you it may not matter, and that's ok.

After "how much you invest", asset allocation is 2nd most influential decision.

 

[fritz]

I'm thinking of throwing all my stuff 50/50 into these two funds and quit overthinking stuff!

We basically did this last December and have no regrets.

As far as the bond exposure to rising rates, there as several articles specific to these funds that demonstrate that the short term impact is offset by the long term growth in yield. These are actively managed funds and reading the list of bond investments, they are managing to the yield curve maintaining a 5.6 yr duration, and some interesting moves with notes/securites held with Japan, positioning, I assume, for more US bond capture as rates rise. The short term risk lies mainly with market reaction, wherein a sell off of the fund drives them to sell their best yielding highest rated bonds to liquidate for market demand.

Where else can you get professional money management which includes rebalancing for +/- .18% (Admiral level Wellington/Wellesley)?

 

[ExFlyBoy5]

Where else can you get professional money management which includes rebalancing for +/- .18% (Admiral level Wellington/Wellesley)?

Yeah, I don't think it exists. And even if you don't qualify for Admiral level, the cost is around .25%...so even for the small investor, well, you can't go wrong.

I imagine eventually, I will have just about everything in these two funds. They serve my purpose and do it at a rate that can't be beat. And...I don't have to worry about rebalancing or shifting assets around every year.

 

[laurence]

Wellington was my first purchase after finding this board, I had to move an former company 401k into an IRA. Ten years later and no regrets. While it represents less than 5% of my portfolio now, a Wellington/Wellesly mix is a distinct possibility for retirement. What's the dividend on Wellesly?

 

[samclem]

What's the dividend on Wellesly?

30 day SEC Yield: 2.38%
TTM Yield: 2.81%
Dividend Yield: 3.37% (for the stock portfolio)

FWIW: The average weighted maturity of their bonds is about 10 years, the average weighted duration is about 7 years.

Source: Morningstar.

 

[retirementguy1]

I use wellesley for half of my emergency fund. I figure keep one year's expenses in an online high yield checking at 1%. Why not float the other half and get 7-8%. Yes there is more risk than a CD ladder but Wellesley has had one negative year in the last ten years and it only went down 10%. Yes, it is in a taxable acct. I happen to be in the lowest tax bracket so in this instance I'm not all that concerned about tax efficiency. This is not part of my overall AA.

 

[frank]

If you were retired and had 100k in wellington and 100k in wellesley how much would your monthly income from dividends have been last year? can anyone tell me?

 

[pb4uski]

In short, about $477/month on average, but paid quarterly for just income.

-----------------------------------------
Wellesley assuming you bought on 6/19/15 and held for a year and took all distributions in cash:

Initial investment on 6/19/15: $100,000/$61.59; 1,623.640 shares

Income distributions: (0.465+0.401+0.545+0.469)*1,640.640 = $3,084.40
CG distributions: (0.036+1.439)*1,640.640 = $2,419.94

Value on 6/15/16 = 1,640.640*$62.25 = $102,129.84

Dividend and capital gains distributions
Distribution Type	Most Recent
Distribution	Record Date	Reinvest Date	Payable Date	Reinvest Price	Distribution Yield	SEC Yield
Dividend	$0.46500	06/15/2016	06/16/2016	06/17/2016	$62.25	—	2.46% B
Dividend	$0.40100	03/15/2016	03/16/2016	03/17/2016	$60.46	—	—
Dividend	$0.54500	12/15/2015	12/16/2015	12/17/2015	$59.58	—	—
ST Cap Gain	$0.03600	12/15/2015	12/16/2015	12/17/2015	$59.58	—	—
LT Cap Gain	$1.43900	12/15/2015	12/16/2015	12/17/2015	$59.58	—	—
Dividend	$0.46900	09/17/2015	09/18/2015	09/21/2015	$59.84	—	—
Dividend	$0.44500	06/18/2015	06/19/2015	06/22/2015	$61.59	—	—

Wellington assuming you bought on 6/18/15 and held for a year and took all distributions in cash:

Initial investment on 6/18:/15: $100,000/$68.16; 1,467.136 shares

Income distributions: (0.454+0.405+0.509+0.433)*1,467.136 = $2,642.31
CG distributions: (0.111+2.228)*1,467.136 = $3,431.63

Value on 6/15/16 = 1,467.136*$65.09 = $95,495.88

Dividend and capital gains distributions
Distribution Type	Most Recent
Distribution	Record Date	Reinvest Date	Payable Date	Reinvest Price	Distribution Yield	SEC Yield
Dividend	$0.45400	06/15/2016	06/16/2016	06/17/2016	$65.09	—	2.42% B
Dividend	$0.40500	03/15/2016	03/16/2016	03/17/2016	$63.54	—	—
Dividend	$0.50900	12/23/2015	12/24/2015	12/28/2015	$63.98	—	—
ST Cap Gain	$0.11100	12/23/2015	12/24/2015	12/28/2015	$63.98	—	—
LT Cap Gain	$2.28800	12/23/2015	12/24/2015	12/28/2015	$63.98	—	—
Dividend	$0.43300	09/17/2015	09/18/2015	09/21/2015	$64.42	—	—
Dividend	$0.43300	06/18/2015	06/19/2015	06/22/2015	$68.16	—	—

Combined:

Initial investment in 6/2015:..$200,000.00
Income dividends received:.........5,726.71 ($477.25/month on average, but pays quarterly)
CG distributions received:...........5,851.57
Total distributions received:.......11,578.28

Ending value, 6/2016:............$197,625.72
Aggregate return.............................4.6%

 

[pb4uski]

I'm a fan of both Wellesley and Wellington... I have recommended them to others and my plan would be for DW to shift into them when I am gone for simplicity.

They don't currently work well for me due to tax efficiency... I want to hold all my fixed income in tax-deferred and equities in taxable due to 0% tax rate on qualified dividends and LTCG. While the current AA for the domestic equities/bonds portion of my tax-deferred accounts is close to 40/60 so I could use Wellesley that AA within my tax deferred is changing over time as I do Roth conversions. Also, the duration of bonds in Wellesley is more than I would like given the likelihood of increase in interest rates so I use target-maturity bond funds to mitigate that risk.

However, I am hopeful that someday my situation will be such that one of those funds will fit into my portfolio and if I ever get to the point where I want a "set it and forget it" fund, those tow will be at the top of the list for me.

 

[Cobra9777]

I'm a fan of both Wellesley and Wellington... I have recommended them to others and my plan would be for DW to shift into them when I am gone for simplicity.

They don't currently work well for me due to tax efficiency... I want to hold all my fixed income in tax-deferred and equities in taxable due to 0% tax rate on qualified dividends and LTCG. While the current AA for the domestic equities/bonds portion of my tax-deferred accounts is close to 40/60 so I could use Wellesley that AA within my tax deferred is changing over time as I do Roth conversions. Also, the duration of bonds in Wellesley is more than I would like given the likelihood of increase in interest rates so I use target-maturity bond funds to mitigate that risk.

However, I am hopeful that someday my situation will be such that one of those funds will fit into my portfolio and if I ever get to the point where I want a "set it and forget it" fund, those tow will be at the top of the list for me.

+1

Maximizing tax efficiency is difficult with stocks and bonds in the same fund. Our taxable is 100% equities. Tax-deferred is roughly 50/50, but we use the tax-deferred account to rebalance. Like pb4uski, our tax-deferred AA necessarily drifts toward bonds as we convert to Roth, where we hold equities. I also like to slice/dice a bit.

Other reasons: we only own ETFs, primarily to avoid year-end CG distributions. The expense ratio, while low by most standards, is still quite a bit higher than our index ETFs. We prefer highly diversified index funds over actively managed funds, and we house it all at Fidelity, where Vanguard mutual funds would be costly to trade.

 

[RetireAge50]

All of our retirement funds are tax deferred or Roth. We have roughly half in Wellington (IRA and Roth) and the other half (401k) in a combination of S&P 500, T.RowePrice Target 2030, and Stable Value.

My mom and step mom use 100% Wellesley but have lower incomes so taxes are not an issue.

 

[tmm99]

I have 100K sitting on the sideline (as cash) in my rollover IRA. I was waiting for a dip but it is not happening. I wonder if I should just buy now? I cannot DCA into Wellesley at Fidelity (too expensive.)


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[Sunset]

I have 100K sitting on the sideline (as cash) in my rollover IRA. I was waiting for a dip but it is not happening. I wonder if I should just buy now? I cannot DCA into Wellesley at Fidelity (too expensive.)
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You could open an IRA at Vanguard, and then transfer in from the Fidelity IRA whatever you wanted, and then buy Vanguard funds for free.

 

[tmm99]

You could open an IRA at Vanguard, and then transfer in from the Fidelity IRA whatever you wanted, and then buy Vanguard funds for free.

I cannot. I moved my IRA from VG to Fidelity before moving to Canada. VG would have frozen my IRA account (no trade except for selling) while Fidelity was more flexible.

 

[pb4uski]

Just curious... why? Why would where you live prohibit you from trading within your IRA as long as you complied with all their other silly rules?

 

[tmm99]

Just curious... why? Why would where you live prohibit you from trading within your IRA as long as you complied with all their other silly rules?

I don't know why. I've been told VG has been more strict than the rest for at least the last several years. I confirmed this with VG with several reps there before moving funds to Fidelity. I would think being a US citizen is good enough to keep your IRA open and active regardless of where you live, but not with VG. Fidelity lets you trade within your IRA as long as you already had an IRA with them before your move. (You evidently cannot open new ones.) Policies seem much more open for UK and MX residents. Something about Canada that makes it more difficult.

 

[RetireAge50]

I cannot. I moved my IRA from VG to Fidelity before moving to Canada. VG would have frozen my IRA account (no trade except for selling) while Fidelity was more flexible.

If you are retired wouldn't just selling be ok since Wellesley does all the buying and selling for you?

 

[tmm99]

If you are retired wouldn't just selling be ok since Wellesley does all the buying and selling for you?

Yes, it would be OK if I had 100% "set it and forget it" Wellesley already in my rollover IRA, which isn't the case.... (I also have a sizable 401K I still need to move into my rollover IRA but waiting since I can withdraw from my 401K currently...)

Anyway, I want to buy Wellesley, or any funds really, but prices are so high right now. I understand people who are currently wo*rking are putting in money in this market via 401K, etc, but how about the FIRE'd folks? Are you all waiting for the dip? Maybe the market is going to be shaken up in November? Anybody buying more Wellesley now?

 

[Happyras]

30 day SEC Yield: 2.38%
TTM Yield: 2.81%
Dividend Yield: 3.37% (for the stock portfolio)

FWIW: The average weighted maturity of their bonds is about 10 years, the average weighted duration is about 7 years.

Source: Morningstar.

I stand corrected, the average duration was 5.6 yrs last time I checked, but I see both funds are now over 7, which is more rate sensitive than I thought.

 

[UpAnchor]

Anyway, I want to buy Wellesley, or any funds really, but prices are so high right now. I understand people who are currently wo*rking are putting in money in this market via 401K, etc, but how about the FIRE'd folks? Are you all waiting for the dip? Maybe the market is going to be shaken up in November? Anybody buying more Wellesley now?

I'm presently retiring and am struggling with the same decision for how to handle cash distributions from my firm's esop. My Vgd rollover IRA is in Wellesley (VWIAX) and Target Retirement Income (VTINX) and I plan to invest the bulk of the esop distro into additional shares of those same two funds.

But with W-2 income now history, I know my opportunities to DCA or buy the dips are mostly behind me now. And I find it hard to buy at current prices. I don't feel I need to hold out for a substantial correction - I just hate to buy in at the very top.

How much would the market have to retreat before I'd feel better about pulling the trigger? Admittedly, not that much at all. (The sum over which I have cold feet represents a little less than half of my retirement portfolio.)

 

[Backdraft57]

I'm presently retiring and am struggling with the same decision for how to handle cash distributions from my firm's esop. My Vgd rollover IRA is in Wellesley (VWIAX) and Target Retirement Income (VTINX) and I plan to invest the bulk of the esop distro into additional shares of those same two funds.

But with W-2 income now history, I know my opportunities to DCA or buy the dips are mostly behind me now. And I find it hard to buy at current prices. I don't feel I need to hold out for a substantial correction - I just hate to buy in at the very top.

How much would the market have to retreat before I'd feel better about pulling the trigger? Admittedly, not that much at all. (The sum over which I have cold feet represents a little less than half of my retirement portfolio.)

Hey Up, I'm still waiting! A 5% pull back would be good for me. Perhaps after election? I am in the same boat. Retired with 67% of portfolio currently in cash. I just can't buy now

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[Backdraft57]

"As of 2016-10-25 (updates daily):
The Stock Market is Significantly Overvalued. Based on historical ratio of total market cap over GDP (currently at 120.8%), it is likely to return 0.2% a year from this level of valuation, including dividends."

So says a site I watch. Waiting for a sale price isn't market timing in my opinion.


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[UpAnchor]

I believe someone here commented (maybe not on this thread) that - while no one knows what the market will do - the likelihood of it going up by a given amount from this point is probably less than the likelihood of it retreating by the same. Or something like that. And that makes sense to me. Hard for me to believe last spring's correction will be the last one for awhile. I'd happily go all-in at less than that as I already moved half of the subject funds into VWIAX/VTINX since my earlier post. Sitting it out for awhile longer now is easy peasy. If accused of market timing I could just say, "Nah - I'm just a long term indexer adjusting his asset allocation down to fewer equities at the beginning of retirement."