Whats up with Vanguard Wellesley fund?

[SeattleRocks]

I have utilized this fund as pretty conservative fund that it pretty safe. Many investment managers recommend this fund for conservative investors as part of a diversified portfolio. Many people on this board recommend it as their primary fund.

I have been into it for awhile now, but lately, I just cant figure it out. On up days, Wellesley still gets hammered. On really bad days, it gets hammered, but not as much as pure stock plays - but still gets hammered.

I am not a financial market genius, but have a pretty good grasp on things. Is Wellesley getting hit because of the zero interest rates and how expensive bonds are now? Is this the reason because in the past on up market days Wellesley would participate to the upside.

In this market that has fallen so hard, I totally understand Wellesley didn't get hit as hard as the rest of the market. But today in an up market and Wellesley was still down almost 2% is just super frustrating.

Any Wellesley experts out there that give me some advice? Why hold it if you are going to lose on both down or up days? Seems that it is the wrong fund to hold right now with the 70% exposure to bonds in a zero interest rate world or am I looking at this incorrectly? Just feels that low interest rates are going to be around for a long time and Wellesley is just a poor investment choice and wont benefit from any market turn to the positive.

 

[brewer12345]

All bonds are not treasury bonds. Most of the bonds Wellesley owns are not treasuries. Any bond with any credit risk is getting hammered every day in this environment. It will stop at some point, but in the meantime credit risky bonds are getting killed and therefore so is Wellesley.

 

[REWahoo]

On up days, Wellesley still gets hammered.

Today was an up day and it, along with Wellington, got "hammered" because they both paid 1Q dividends, which will show up tomorrow.

 

[USGrant1962]

Well, over the last month Wellesley is -14% while Vanguard Total Stock Market (VTSAX) is -31% and Total Bond Market (VBTLX) is -2.5%.

So one would expect Wellesley to be something like (35% X -31%) + (65% X -2.5%) = -12.5%.

So at -14% they are little worse than indexing, but I wouldn't call it hammered in the context of recent market moves. Since Wellesley is actively managed, they may be exposed to other factors. As Brewer said, perhaps over-weight in corporate bonds, and if they were dividend yield oriented they might have been "hammered" in oil stocks.

You can see top holdings on Vanguards web page, and can download the annual and quarterly reports to see their complete list of holdings.

 

[USGrant1962]

Today was an up day and it, along with Wellington, got "hammered" because they both paid 1Q dividends, which will show up tomorrow.

Posted while I was typing - so that closed most of the gap from indexing.

 

[VanWinkle]

These are unusual times with bonds and stocks both getting sold to raise cash. I would not divorce my fund based on short term losses in unusual circumstances. This fund has a long track record of controlling risk through managed asset allocation. I have this fund, but sold 100k of it to re-balance into VTSAX(Vanguard total US stock market) on Wednesday. I am still a believer in it's value.

 

[JoeWras]

Watching anything day to day will drive you crazy. Look long, and if you must go short, at least give it 30 days.

 

[Spock]

Look up the Wellesley holdings. Last I checked, 19-20% of its bond holdings were BBB which is the bottom of investment grade. Prices of bonds have been dropping as people either raise cash or move higher up the rating ladder. Some bonds are now being downrated and some people never trusted the rating agencies since the 2008 debacle.

 

[Midpack]

Watching anything day to day will drive you crazy. Look long, and if you must go short, at least give it 30 days.

+1. Though I admit I did it when I as young and stupid (late 80’s), I can’t imagine looking at any of my holdings daily, that could drive an investor crazy and lead to crazy decisions. I look quarterly no matter what’s going on. I don’t know exactly where I stand today but I‘ll look first few days of April when my Q1 statement is available. I know ballpark as my equity allocation is off about 30% and other holdings down some too - for now. Probably rebalancing then too. YMMV

 

[SeattleRocks]

+1. Though I admit I did it when I as young and stupid (late 80’s), I can’t imagine looking at any of my holdings daily, that could drive an investor crazy and lead to crazy decisions. I look quarterly no matter what’s going on. I don’t know exactly where I stand today but I‘ll look first few days of April when my Q1 statement is available. I know ballpark as my equity allocation is off about 30% and other holdings down some too - for now. Probably rebalancing then too. YMMV

I totally agree with you, but I think you would also agree that these are completely uncharted times and what we are dealing with right now is unprecedented with no playbook. I have been through all the recent financial catastrophes but to me, this one feels and all evidence points to it to being very different and most likely more damaging then anything we have been through in the past.

I am not going to watch my balances daily, but I am going to try to skate to the puck and just make sure I am invested correctly for this with the focus of keeping my powder dry because I personally believe we are going to see some VERY bad outcomes and a lot more pain from this crisis with it being a U instead of a V recovery.

And since I have a big chunk of my strategy in Wellesley, I think that is now wrong for me right now based on the current crisis and will most likely be exiting that fund and rebalancing. To what I am still trying to figure out.

And a totally horrible time to FIRE lol. I FIRE'd on Jan 27th and then got hit with this. Whatever doesn't kill you...lol

 

[REWahoo]

And since I have a big chunk of my strategy in Wellesley,...

Me too.

... I think that is now wrong for me right now based on the current crisis and will most likely be exiting that fund and rebalancing. To what I am still trying to figure out.

I'm holding firm with Wellesley.

History shows the folks who manage the fund do a better than average job. I'd like to think they will continue to do so because I am not smart enough to know a better place to move those funds right now if I wanted to, which I don't.

I'm a "don't just do something, stand there" investor in times of turmoil. Worked well in 2009, and it might be a good strategy this time, might not.

Good luck whatever you decide to do.

 

[Midpack]

I totally agree with you, but I think you would also agree that these are completely uncharted times and what we are dealing with right now is unprecedented with no playbook. I have been through all the recent financial catastrophes but to me, this one feels and all evidence points to it to being very different and most likely more damaging then anything we have been through in the past.

I am not going to watch my balances daily, but I am going to try to skate to the puck and just make sure I am invested correctly for this with the focus of keeping my powder dry because I personally believe we are going to see some VERY bad outcomes and a lot more pain from this crisis with it being a U instead of a V recovery.

And since I have a big chunk of my strategy in Wellesley, I think that is now wrong for me right now based on the current crisis and will most likely be exiting that fund and rebalancing. To what I am still trying to figure out.

And a totally horrible time to FIRE lol. I FIRE'd on Jan 27th and then got hit with this. Whatever doesn't kill you...lol

No I wouldn't agree, that was my point. Every big correction feels like "completely uncharted times...no playbook...feels very different" because they're all unique. But while some are deeper and/or longer, they've ALL ended the same for 140 years. I went thru 87, '00 and '08-'09 without making any changes thankfully. Many/most people who tried to get clever timing in and out lost (big) - some folks have posted here about huge losses they wouldn't have had if they hadn't sold off. The 2008-09 meltdown was a huge blow and it could have been WAY worse than it was, but we survived and thrived. I'm not convinced this is the worst ever yet. And if this time it really is different, there won't be any good plays...

 

[ERD50]

Originally Posted by JoeWras View Post
Watching anything day to day will drive you crazy. Look long, and if you must go short, at least give it 30 days.

+1. Though I admit I did it when I as young and stupid (late 80’s), I can’t imagine looking at any of my holdings daily, that could drive an investor crazy and lead to crazy decisions. ...

I routinely watch the market through out the day, if I'm at the computer, and I do spend a lot of time there.

It doesn't drive me crazy, you don't need to be young and/or stupid, and it doesn't lead me to crazy decisions. I'm just curious, and if I see a big shift, I figure there may be some news out there, so I check (asteroid strike?). I kind of think of it as a 'barometer'.

In fact, I think that maybe it helps to watch it. Seeing the swings from one day to the next (and in the same day) kind of desensitizes me. Makes me aware that it moves for any/no reason at all. Yawn.

-ERD50

 

[VanWinkle]

I routinely watch the market through out the day, if I'm at the computer, and I do spend a lot of time there.

It doesn't drive me crazy, you don't need to be young and/or stupid, and it doesn't lead me to crazy decisions. I'm just curious, and if I see a big shift, I figure there may be some news out there, so I check (asteroid strike?). I kind of think of it as a 'barometer'.

In fact, I think that maybe it helps to watch it. Seeing the swings from one day to the next (and in the same day) kind of desensitizes me. Makes me aware that it moves for any/no reason at all. Yawn.

-ERD50

You and I may be the exception as most of the academic and industry related articles I read indicate not to watch for short term moves. In fact, one famous person stated to buy two index funds and don't look until retirement. Be ready for a shock when you open that account after 40-50 years.

I think that is good advice for most people. You are in the minority of people who can watch and not do something stupid(at least I would like to think so).

 

[Katsmeow]

In fact, I think that maybe it helps to watch it. Seeing the swings from one day to the next (and in the same day) kind of desensitizes me. Makes me aware that it moves for any/no reason at all. Yawn.

-ERD50

This. This is also the reason why I weigh myself almost every day.

As far as the market, I log into my investment accounts almost every business day since I consider that a safety check (to make sure there is nothing untoward going on with the account). So, by default, I do check it every day. And, honestly, in a situation like this I would want to know and it would drive me nuts not know. So far, I have been able to look at it and not do anything...

 

[ERD50]

This. This is also the reason why I weigh myself almost every day.

As far as the market, I log into my investment accounts almost every business day since I consider that a safety check (to make sure there is nothing untoward going on with the account). So, by default, I do check it every day. And, honestly, in a situation like this I would want to know and it would drive me nuts not know. So far, I have been able to look at it and not do anything...

Funny you mention that, that was going to be in my response to VanWinkle! I also weigh myself almost everyday.

The 'experts' say to not weigh yourself everyday because of the daily variation. But I know that's crazy (my career was mostly measuring things). When there is variation in what you measure, you measure it more often, and average the results. Otherwise, the occasional measurement may have the high error, and it throws off your decision making.

But you get used to the daily variance, and take it in stride, and watch for trends. It's good training.

I don't believe in dumbing things down for the "average investor", better to teach them what is right. It would be like telling someone it's OK to not exercise and watch what you eat, because the average person is not good at that, so don't even try. That's not helpful.

Most people can do better, but they won't if they aren't even shown the way.


-ERD50

 

[Lsbcal]

Recently I have spent a lot of time watching the market news and my portfolio daily. I feel bad when it goes down a lot like now. But somehow it is cathartic to know some of the underlying mechanics and I prefer to know the worst as soon as possible.

Different strokes ...

 

[ls99]

Have a good chunk of $ in it. Have not looked at it, or any of the others in a few months. Might have a look around June or so. Can't rush these things.

 

[Ed B]

While there is no guarantee that Wellesley will do this well in 2020, if you look at how quickly it recovered losses in 2008 & 2009 you may feel better. I have half my Mother's investments in Wellesley and it is doing its job. The dividends are being reinvested at lower prices and the history of this fund shows that the CG+Dividend at the end of the year are often (not always) surprisingly high in a terrible market year.

As someone else said, I trust the Wellington group to manage by bond funds much more than I trust myself or even a bond ETF....but that is just me.

 

[REWahoo]

While there is no guarantee that Wellesley will do this well in 2020, if you look at how quickly it recovered losses in 2008 & 2009 you may feel better. I have half my Mother's investments in Wellesley and it is doing its job. The dividends are being reinvested at lower prices and the history of this fund shows that the CG+Dividend at the end of the year are often (not always) surprisingly high in a terrible market year.

As someone else said, I trust the Wellington group to manage by bond funds much more than I trust myself or even a bond ETF....but that is just me.

If you are addressing this to the OP you are a couple of days too late, based on what he posted on Friday:

I am going to 100% cash (my last trade out of the market is this Monday) to wait this out and am taking the proceeds and spreading it around to several banks to make sure I am FDIC ensured in all directions.

Only time will tell if those of us who are holding on for the wild ride will do better than those who didn't. I hope the OP keeps us posted on how he does as we all slog our way through this.