VWEHX or VWEAX

[Katsmeow]

I am considering buying either Vanguard High-Yield Corporate Fund Investor Shares (VWEHX) or Admiral Shares (VWEAX).

I know that these funds were recently closed. However, as a flagship customer I can buy them. We are unlikely to be flagship customers after the end of this quarter so it is either buy the fund now or never buy it (unless it reopens). Ideally, I would buy an amount somewhere between the minimum $3000 VWEHX investment and the $50,000 VWEAX investment. The thing is that the expense ratio is .13 for VWEHX versus .23 for VWEAX. I'm not sure that it is worth buying more than I would prefer to buy just to get the lower expense ratio. But would appreciate any thoughts.

Our portfolio:


Vanguard Short-Term Investment-Grade Fund Admiral - VFSUX - 19%
Vanguard Total Bond Market Index Fund Admiral - VBTLX - 15%
Vanguard Total International Stock Index Fund Admiral - VTIAX - 8%
Vanguard Total Stock Market Index Fund Admiral - VTSAX - 14%
Vanguard Wellesley Income Fund Admiral - VWIAX - 14%
Dreyfus S&P 500 Index Fund - PEOPX - 27%
Cash - 2%

I don't love the Dreyfus S&P 500 fund, but that is my 401(k) with my current employer.

We use the Short-Term Investment Grade Fund for regular withdrawals from DH's IRA and if we bought any of VWEHX or VWEAX it would likely come from VFSUX as I have a bit more in it now than I would prefer. We have generally maintain a 55%/45% allocation.

I am inclined to just go ahead and buy a small amount -- maybe 5% of total portfolio -- of VWEHX which would drop VFSUX to 14%, but am uncertain.

 

[teejayevans]

I have 5-6%, it has been relatively stable, if we slide into another recession, it will drop like stocks, so remember that, its ideal for IRA accounts. I go 5-10% range, if that's 50K, so be it.
Also, do you realize that your Dreyfus, Wellesley, and Total Stock market funds have a lot of overlap? Might want to consider moving some of your TSM to VSMAX & VIMAX.
TJ

 

[Htown Harry]

I'd look at it in this order: asset allocation, then fund selection and allocations within the overall stock/bond allocation, then balancing.

Your bond allocation right now is 19% VFSUX short-term, 15% VBTLX total bond and 7+% in the Wellesley shares. Looks a little light relative to your target 45%.

Kudos on the simplicity and low er's for your fund selections so far, however. Nothing wrong with that.

The difference in an .13 vs. .23 ER on $50,000 is $65 vs. $115, or $50 per year. Not worth chasing for a portfolio in the flagship category, in my opinion.

I'm a holder of about $5000 of VWEHX, with no complaints. But I'm actually looking at going in the opposite direction as you are, as I think I've sliced my bond allocation among too many funds / ETFs. What I'd like to do is split my bond allocation between VBTLX and an international bond index fund, but Vanguard hasn't come through with that option yet:
https://personal.vanguard.com/us/insights/article/international-bonds-01172012

 

[Katsmeow]

Your bond allocation right now is 19% VFSUX short-term, 15% VBTLX total bond and 7+% in the Wellesley shares. Looks a little light relative to your target 45%.

Vanguard Portfolio watch says we are 44.5% bonds (that doesn't include the 2% in cash that we have in a separate IRA elsewhere). I think you have the Wellesley a little low for its bond component. I do think I agree with you that the savings on the ER is not enough to make the tail wag the dog.

Also, do you realize that your Dreyfus, Wellesley, and Total Stock market funds have a lot of overlap? Might want to consider moving some of your TSM to VSMAX & VIMAX.
TJ

Good point. Initially Vanguard did a financial plan for us and recommended for the Vanguard portion only total stock market, total international and total bond. I've drifted a bit from that obviously.

Looking at Portfolio Watch, The analysis says that US stock market is 66% large cap, 27% mid cap and 7% small cap while we are 89.5% large cap, 8.3% mid cap and 2.2% small cap.

So Portfolio Watch gives me a caution on that. They also note that we have a moderate emphasis on value stocks with US stocks at 10.8% value, 89.2% blend and 0% growth.

I am a little uncertain how to solve this. Originally Vanguard has me putting all my 401(k) into Fidelity Advisor Strategic Income T (FSIAX). However, We are unlikely to withdraw from the 401(k) for some years so I felt it was better to keep that in stock funds since we are more likely to withdraw from the IRA that is at Vanguard (at the time we expected to make some large house related withdrawals but those have now been made so from now on we will just be making regular living expenses type withdrawals).

Ideally I would take the money from the S&P500 fund and perhaps move some to mid-cap and small-cap funds. However, those funds in my 401(k) Options (FITIX, HRSVX, RSPFX) have higher expenses and fees than I like.

I guess I could go back to the Strategic Income Fund in my 401(k) and could reduce my total bond fund on Vanguard but then that leaves me with all of our stock funds in the IRA.

The other option as you suggest is move part of Total Stock to VSMAX & VIMAX. If I take about 80% of what is in Total Stock and put 3/4 of that into VIMAX and 1/4 into VSMAX then Portfolio Watch says I would be balanced on market capitalization although that doesn't do anything about the no growth stock although I'm not sure that should bother me.