NW-Bound
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jul 3, 2008
- Messages
- 35,712
I have redone the earlier work of looking up past performance on Morningstar. This time, I believe I got the numbers written down correctly for VFINX (S&P), Wellesley, and Wellington.
I did not use the Admiral shares for the latter 2, because one (or both?) did not exist in 1980. I was able to get the data to line up with Jan 1st of each decade. That will make it easier to compare data with another table that follows.
Looking at the table, we can see that during the boom tech stock decade of 1990-2000, any investor that held any bond would get pummeled by one who was 100% in stock. That's of course not surprising. But what I did not know was that Wellesley trailed behind by a huge amount. Same with Wellington, but to a lesser extent due to Wellesley holding 40% stock, vs. Wellington with 60% stock.
Since 2000, these two MFs made up their losses, due to the performance of fixed income assets.
So, what's new? If you hold bonds to temper volatility, you are going to trail the market when the latter is hot. The converse is going to be true. One cannot have his cake and eat it too.
So far, other than the absolute returns, there has been no surprise. There has been a decade for stocks, followed by a decade for bonds, and depending on your AA, you either beat the S&P or trail it.
But to settle the score of whether you can do the same or better than the MF managers at Wellesley and Wellington, I used *****, a retirement calculator, to test 2 do-it-yourself portfolios: one with 40% stock, and the other with 60%. This should be representative of an investor who would maintain his own AA by balancing between S&P index and a bond index fund.
I set the expense ratio to 0.1% annual fee. The calculator rebalances on Jan 1st each year, I believe. I set the WR to 0, so that the portfolio keeps growing by compounding. And following are the numbers.
Comparing this table to the one above, I would say that the managers of Wellington and Wellesley earned their keep!
PS. Morningstar shows amounts in nominal dollars. *****, same as FIRECalc, shows amounts in 1980 dollars. Hence, I already looked up the cumulative inflation to correct for the dollar amounts in the 2nd table. In other words, all the amounts shown are in nominal dollars, at their respective indicated time.
I did not use the Admiral shares for the latter 2, because one (or both?) did not exist in 1980. I was able to get the data to line up with Jan 1st of each decade. That will make it easier to compare data with another table that follows.
Looking at the table, we can see that during the boom tech stock decade of 1990-2000, any investor that held any bond would get pummeled by one who was 100% in stock. That's of course not surprising. But what I did not know was that Wellesley trailed behind by a huge amount. Same with Wellington, but to a lesser extent due to Wellesley holding 40% stock, vs. Wellington with 60% stock.
Since 2000, these two MFs made up their losses, due to the performance of fixed income assets.
So, what's new? If you hold bonds to temper volatility, you are going to trail the market when the latter is hot. The converse is going to be true. One cannot have his cake and eat it too.
Date | S&P | Wellesley | Wellington | |
1/1980 | $10K | $10K | $10K | |
1/1990 | $48K | $42K | $47K | |
1/2000 | $254K | $115K | $154K | |
1/2010 | $229K | $225K | $280K | |
1/2012 | $269K | $273K | $322K |
So far, other than the absolute returns, there has been no surprise. There has been a decade for stocks, followed by a decade for bonds, and depending on your AA, you either beat the S&P or trail it.
But to settle the score of whether you can do the same or better than the MF managers at Wellesley and Wellington, I used *****, a retirement calculator, to test 2 do-it-yourself portfolios: one with 40% stock, and the other with 60%. This should be representative of an investor who would maintain his own AA by balancing between S&P index and a bond index fund.
I set the expense ratio to 0.1% annual fee. The calculator rebalances on Jan 1st each year, I believe. I set the WR to 0, so that the portfolio keeps growing by compounding. And following are the numbers.
Date | S&P | DIY40/60 | DIY60/40 | |
1/1980 | $10K | $10K | $10K | |
1/1990 | $48K | $32K | $35K | |
1/2000 | $254K | $91K | $129K | |
1/2010 | $229K | $129K | $161K | |
1/2012 | $269K | $146K | $188K |
Comparing this table to the one above, I would say that the managers of Wellington and Wellesley earned their keep!
PS. Morningstar shows amounts in nominal dollars. *****, same as FIRECalc, shows amounts in 1980 dollars. Hence, I already looked up the cumulative inflation to correct for the dollar amounts in the 2nd table. In other words, all the amounts shown are in nominal dollars, at their respective indicated time.
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