VWINX - Core IRA Holding ?

[IMATERP]

Over the past 6-9 months I have been reading a lot of positive comments (mostly from folks on this board) about the Vanguard Wellesley Fund. I currently have approximately 25% of my IRA portfolio in the Fidelity 2020 Retirement Fund and I am considering moving this portion of my IRA to Wellesley (as I am conservative and like the minimal perceived downside risk.) I do not believe that I will need to draw on these funds for at least 14 years (until RMD) so I really do not need to be overly concerned with market timing.

1. From a stock market perspective, it appears that now would be a good time to make this shift. Would you agree ?

2. I could see where the potential of the rising of interest rates could minimize the returns for a few years. Do you think that it might be better to sit on the sidelines (for 6 months) in order to see how the market reacts to the Fed straingthening its balance sheet or would you think that this would be a non effect?

Thanks in advance for your feedback.

Michaela

 

[REWahoo]

Your two questions can be summarized as "should I try to time the market?" Many on this forum would say no, but I'd just ask the old Dirty Harry question, "Do you feel lucky?"

 

[Ed B]

If you have 14 years to let your fund grow, then it seems like you could be a little more aggressive. But if you think we are on the brink of another 2000 or 2008 correction then Wellesley should perform very well comparatively speaking against more aggressive funds (market timing again). With 14 years to let it soak how about Wellington? You have to buy it directly from Vanguard but while its volatility is higher than Wellesley, it is better than most in the 60/40 balanced fund niche and will perform better while stocks are doing well.

 

[RonBoyd]

2. I could see where the potential of the rising of interest rates could minimize the returns for a few years. Do you think that it might be better to sit on the sidelines (for 6 months) in order to see how the market reacts to the Fed straingthening its balance sheet or would you think that this would be a non effect?

https://ofdollarsanddata.com/turn-off-tune-out-get-rich-8f0e4bce9e16

... about the amount of noise that exists in the financial media and how you would be far better off as an investor if you ignored it.

 

[MBAustin]

I would do what you think makes sense for the long term and not sweat what might happen in the next 6 months.

 

[jazz4cash]

I don't think you can make a decision based on 1/4 of your portfolio without considering how the other 3/4 is allocated.

Moving from the target date fund to VWINX is more aggressive/less conservative which appears to be opposite of what you are seeking to do.
I generally agree with the previous responses wrt 14 yrs is a good timeframe to ride out any disruptions.
Go Terps

 

[IMATERP]

I don't think you can make a decision based on 1/4 of your portfolio without considering how the other 3/4 is allocated.

Moving from the target date fund to VWINX is more aggressive/less conservative which appears to be opposite of what you are seeking to do.
I generally agree with the previous responses wrt 14 yrs is a good timeframe to ride out any disruptions.
Go Terps

Will definitely take the advice of a fellow "Terp." I'll go ahead and keep my Fido 2020 Fund and put it in my back pocket.

By the way, great suggestions on this board, I actually did glance at the Wellington Fund as an alternative (although it would cost me a $75 transaction fee.) I have two similar balanced funds in my Roth that I have been quite happy with.

Michael

 

[pb4uski]

....Moving from the target date fund to VWINX is more aggressive/less conservative which appears to be opposite of what you are seeking to do.....

I don't think jazz4cash is right on that. The 2020 fund appears to be ~63 stock/28 bond/9 cash whereas VWINX is 39 stock/61 bond/0 cash so VWINX is LESS aggressive/MORE conservative than the 2020 fund.

https://fundresearch.fidelity.com/mutual-funds/composition/31617R605

But I agree with jazz4cash that you need to consider your whole IRA and retirement funds rather than focus on that one holding.

 

[24601NoMore]

Wellesley is my largest holding by far. I bought it as my 'sleep well at night' fund. Only lost < 10% in the 2008 meltdown and has far less volatility than anything else I own - and it's earned something like ~7% since inception.

Plus, it pays high 2's in dividends.

What's not to like? You could do far worse and would be hard pressed to do any better.

 

[jazz4cash]

I don't think jazz4cash is right on that. The 2020 fund appears to be ~63 stock/28 bond/9 cash whereas VWINX is 39 stock/61 bond/0 cash so VWINX is LESS aggressive/MORE conservative than the 2020 fund.



https://fundresearch.fidelity.com/mutual-funds/composition/31617R605



But I agree with jazz4cash that you need to consider your whole IRA and retirement funds rather than focus on that one holding.

I guess I should've actually checked the AA of the fund. That equity allocation is much higher than I would've expected. The 2020 fund we own is closer to 50% equity. That variation is one of the problems with target date funds. I was thinking that the target date fund is getting more conservative as time goes by and likely going to cash/short term debt so that makes it more conservative than a fund with a fixed AA.

 

[jazz4cash]

Just checked our TSP L2020 fund and its only about 38% equity and 55% G fund (cash equivalent). Quite a bit different than Fido's AA.