Another Wellesley thread

[Ronstar]

When I retired, I rolled about 60% of my 401k into a Vanguard tIRA shown in the attached image. The fund mix is as suggested by a Vanguard rep.

I have another IRA with an FA. My VG IRA's return has beat the FA's return year after year given similar asset ratios at the time.

However, my FA IRA is currently 10.2% ytd at 56/37/7 AA. My VG IRA is 5.3% at 46/54 AA.

The AA hasn't always been this bond heavy in the VG tIRA - I do Roth conversions from VTSAX total stock in the tIRA.

The image highlights how low VG bond fund returns have been in the past year compared to their 3 and 5 year returns.

I'd like to increase the returns from the bond segment yet maintain a similar level of safety that my current mix provides.

I originally wanted to have Wellesley in the mix, but VG's advisor suggested this mix instead - said that this is less maintenance $ IIRC.

Wellesley is a 38/60/2 AA. And is at 14.92% 1 yr return compared to 10.56 and 7.99 for 3 and 5 yrs. My thoughts are to tweak the fund mix, eliminating all current bond funds, bringing in Wellesley, keeping the stock funds, and rework the AA of the IRA to 50/50.

I don't foresee withdrawing from this account for at least 6 years at age 72. Any future Roth conversions can come from the stocks.

Thoughts?

 

[FANOFJESUS]

Wellesley and Wellington are great funds.

 

[tominboise]

Yeah, I have a similar selection of Vanguard bond funds in our aftertax account. I have always had bonds as a counter to stock market variability. I wouldn't do it that way again knowing what I know now, but whatever.

I am trimming the bonds out by using them for our expenses over the next few years. Since they really haven't made much capital gain, I can withdraw without a big tax impact. When those two funds are exhausted, I will regroup. In the meantime, about 25% of that account is in Wellesley.

 

[Koolau]

Wellesley and Wellington are great funds.

I agree. These are the only "managed" funds that I would own. YMMV

 

[target2019]

When I retired, I rolled about 60% of my 401k into a Vanguard tIRA shown in the attached image. The fund mix is as suggested by a Vanguard rep.

I have another IRA with an FA. My VG IRA's return has beat the FA's return year after year given similar asset ratios at the time.

However, my FA IRA is currently 10.2% ytd at 56/37/7 AA. My VG IRA is 5.3% at 46/54 AA.

The AA hasn't always been this bond heavy in the VG tIRA - I do Roth conversions from VTSAX total stock in the tIRA.

The image highlights how low VG bond fund returns have been in the past year compared to their 3 and 5 year returns.

I'd like to increase the returns from the bond segment yet maintain a similar level of safety that my current mix provides.

I originally wanted to have Wellesley in the mix, but VG's advisor suggested this mix instead - said that this is less maintenance $ IIRC.

Wellesley is a 38/60/2 AA. And is at 14.92% 1 yr return compared to 10.56 and 7.99 for 3 and 5 yrs. My thoughts are to tweak the fund mix, eliminating all current bond funds, bringing in Wellesley, keeping the stock funds, and rework the AA of the IRA to 50/50.

I don't foresee withdrawing from this account for at least 6 years at age 72. Any future Roth conversions can come from the stocks.

Thoughts?

What has happened is that Vanguard is only pushing their funds in advice to you. I don't use their advice and went my own way, using VG total bond and Wellesley in my IRA along with VTSAX.

Your FA-managed IRA is the inverse of your VG-advised IRA. So that alone accounts for outperformance.

Wellesley admiral is 7.37% YTD. So you could have done better with everything in VWIAX (at 40/60 AA). I don't know what you should do, but the simplicity of VTSAX and Wellesley and VBTLX is what I have in SEP-IRA. Like you I am converting the VTSAX into Roth/VTSAX. So your plan for just VTSAX and Wellesley makes sense to me, but I am just a stranger on the internet.

I had 5 investments in the SEP-IRA account a while back, but was able to simplify down to just 3. So my insight is that managing 3 balls is much easier than juggling 7 balls.

In my rollover IRA, I am invested in Total International VXUS, Extended Mkt VXF, and VUSB. That's where we're different I suppose.

 

[VanWinkle]

Seems that we are talking about eliminating bond funds and including them in Wellesley instead. You will juice returns since VWIAX is almost 40% stocks. The bonds are more of the corporate type which bears more risk than VBTLX and duration is longer also with the bonds in VWIAX. Nothing wrong with doing it, just realize that you are taking on more risk. If I had a crystal ball 9 years ago, I would have said keep the low/no paying bond funds and exchange the International for US equities. Nobody knows nuthin going forward, including the path of interest rates.

VW

 

[Chuckanut]

I agree. These are the only "managed" funds that I would own. YMMV

Wellesley is the sole source for my bond allocation these days with the exception of the Vanguard short-term bond fund which I consider to be more of a cash equivalent. I sold all my bond index funds a couple of years ago. That former bond money is in CDs. Alas, they are starting to expire.

I use a simple spreadsheet to get the dollar amount of the stock and bond portions of Wellesley when I calculate my AA. EZPZ.

 

[kevink]

The Vanguard FA has you in what seems to me to be an overly-complex iteration of one of their standard LifeStrategy funds - except that the nearly 50:50 domestic:international equity split exceeds Vanguard's standard 60:40. Dollar-hedged international bonds have added nothing but unnecessary complexity to the LifeStrategy funds and I see no advantages to the three-part bond split over 100% VGIT which gives you far higher credit quality than TBM and shorter duration. The big bets on corporate bonds just give you stock market-like risk in what are supposed to be your safe assets - a feature without a benefit.

Wellesley is a different animal altogether since it makes concentrated bets on comparatively long-duration corporate bonds (including ~25% Baa rated) and an equally-concentrated set of dividend paying stocks. Obviously those bets have paid off handsomely for 50 years but when I think about a fund that has benefitted from the bond tailwind W comes to mind first. That said I trust the management and in fact have my 84% MIL almost entirely invested in Wellesley.

If it were me I'd fire the FA and spend his annual fee on fun stuff or invest it and the rest of the portfolio in index funds: 60% VGIT (or a mixture of that with some VTIP and iBonds), 25% VTI and 15% VXUS. Weighted average ER for this is .06% vs. .16% for VWIAX and unlike the latter it is tax-efficient, internationally-diversified on the equity side and offers some downside protection on the bond side. But if I had room for a big chunk of Wellesley in my IRA (which I don't) and had to choose between my current portfolio and a two-funder of Wellesley and Wellington I'd flip a coin. Like others in this thread, I have that much respect for the two W's.

 

[Ronstar]

Thanks everyone - lots of great info here!

If it were me I'd fire the FA....

Well, if it had been up to me, I wouldn't have hired him in the first place. Truth be told - DW made me do it. She trusted the FA from the get go because he has accounts with many of DW's former coworkers. And she talked me into putting part of my IRA with the FA. And I agreed, and have been showing her how mine makes more $ than the FA account.

 

[racy]

...Well, if it had been up to me, I wouldn't have hired him in the first place. Truth be told - DW made me do it. ... and have been showing her how mine makes more $ than the FA account.

What are you? Nuts?!

 

[Ronstar]

What are you? Nuts?!

I figured that keeping the wife happy was more important than making an extra couple of % in my portfolio. But you're right - that's nuts.

 

[yakers]

Now long married but in our earlier life I planned to put DWs tax deferred assets in bonds and mine would hold stocks, she strongly disapproved, why was her account not good enough to hold the assets I was going to hold? Rather than explain portfolio allocation I just put us both into VBIAX (VG 60/40) the whole purpose of my financial management is to have domestic tranquillity. Took 20+ years before she came to trust my financial judgement over 'professional' FAs. And it took mannnny years for her to come to understand that her 403b was a poor option, 'how could all those smart teachers and insurance annuity salesmen be wrong?' Had to introduce her to the teacher in her district who wrote the investment book for teachers and started 403bwise website.
Now when I show her our portfolio totals monthly I get a smile and a 'oh, you manage it so well' and I have left advice that should I pass earlier to at her choice either 1) if she needs to have someone to talk to contact the one FA I actually would trust with my money or better yet 2) Just put everything in Wellsley and spend wwhat she likes. She is quite frugal and we will be leaving significant assets to two sons & grandkids.
But really, Wellesley is designed for her.

 

[racy]

I figured that keeping the wife happy was more important than making an extra couple of % in my portfolio. But you're right - that's nuts.

I meant this part of your comment, "...and have been showing her how mine makes more $ than the FA account."

 

[OldShooter]

... I'd like to increase the returns from the bond segment yet maintain a similar level of safety that my current mix provides. ...

So would everyone else.

 

[FloridaJim57]

I do a mix of 3/4 Wellesley and 1/4 Wellington. Works fine for me

 

[VanWinkle]

4 of my older relatives requested help with their rollovers and investment into a simple fund. I handled the online rollovers and showed them multiple one fund choices for their investments. All 4 chose Wellesley for their one fund investment. No one has changed in 5 years, so I think it was the right choice for them.

 

[Ronstar]

Thanks everyone - I just bought Wellesley. Your posts gave me assurance that it was the right move. Moved most of my tIRA bonds along with some Total Stock and International stock, resulting in a 55/45 AA

 

[yakers]

I do a mix of 3/4 Wellesley and 1/4 Wellington. Works fine for me

I've often thought about just Wellesley in tax deferred and Wellington in taxable which would be about 50/50 for us.
Sort of already have a version of that with Vanguard accounts but have a WF IRA & taxable that I still have individual stocks in and have done well with but that is not sure going forward and DW woulld have no interest in managing those assets.

 

[Fleur58]

In my trad IRA my largest bond positions are in Wellesley and Dodge and Cox Income. Also own bonds in Fidelity Balanced (70/30). I am happy with all of them.