Wellesley Income Fund

[charlie]

I love the Wellesley Income Fund and have all my
taxable invested there plus about 1/2 of my
Mom's.

Does anybody but me worry that the equity part
(about 38%) is too concentrated in only 55 stocks?

Cheers,

Charlie

 

[unclemick]

Charlie

They(Wellesley) are a managed value balanced fund - good history AND you are paying them a management fee.

Let them do their thing and trust them to stay properly balanced.

Talk's cheap isn't it - heh, heh, heh - I did nothing with my Lifestrategy mod and cons during the last little dip(2000-2003).

Calm with aplom - wellllll sort of.

 

[BUM]

I think you're in pretty good shape Charlie. I went back and forth between Wellesley and Wellington before setteling on the Wellington. If the DOW tanks I dont think it matter if Well is in 38 or 88 stocks. It might actually make a faster comeback with the existing 38.

If you're really nervous about it. Sell some or all off and reinvest...where CDs? Raw materials? Up to you.

BUM

 

[cute fuzzy bunny]

Charlie -

Still my biggest holding. I have no worries about the money there at all. About the only bad thing I can say about Wellesley is the long term return rate may look too good to be true, and given the good performance of the value stock pickings and the excellent environment for bonds during the falling rate situation, the future returns may not be in those heady 10-11% per year rates.

I think the last analysis I bothered to read about reducing volatility by increasing stock holdings said that about 20 varied stocks you probably had enough diversity. 55 is definitely good.

The top 10 equity holdings are also under 15% of the net assets of the fund. Pretty good names in those 10. And the valuations on the stock portfolio are a lot less heady than the S&P500.

My opinion is if you're past your 60's, or earlier in an ER curve + have a low debt position + want a good yield with some inflation offsetting NAV upside...you can do a lot worse than a ballast position of wellesley...especially in the admiral shares @ .19-20% expense charges. I fall solidly into that latter category. I can definitely see Wellesley as remaining 30-40% of my taxable holdings for the term of my retirement.

 

[charlie]

I wasn't thinking about selling Wellesley .... just wanted
some comments about the stock concentration.
Thanks for the warm fuzzy TH & unclemick.

Bum, I have my wife's IRA in Wellington which balances off the Wellesley in our taxable.

Cheers,

Charlie

 

[unclemick]

Now here is the less warm, left handed, INTJ, dare I say Norwegian widow version.

Mr Market has the perfect storm - interest rates rise(rapid rate of change) to overwhelm duration of the bond side while the market P/E collapses for value stocks(happens every great once in a while).

Your current 3.6% yield goes up, BUT the (value) of your Wellesley quoted in market $ goes south.

??Which end of the stick will you take comfort in??

Why you own something is very important. Especially if true grit is called upon - have faith in Mr Market - there will be a test.

 

[charlie]

At age 70 I need the income from Wellesley and the
prospect of reduced NAV does not bother me (much)
provided I don't have to sell any shares.

The thing that would bother me over the long run is
if dividends and interest thrown off do not keep pace
with inflation.

I think the "perfect storm" for Wellesley might be
a repeat of "stagflation" ...... rising rates without
GDP growth. Anybody see that coming?

Cheers,

Charlie

 

[cute fuzzy bunny]

Hey Mick...havent we had a few of those 'perfect storms' since Wellesley first aired? According to moneycentral (for what thats worth), the worst calendar year return for vwinx was -6.43% in 1974, and the worst 3 year return was -.30 from 72-74.

Granted whenever interest rates shot up, the fund takes a beating. In fact, I reduced my holdings a little last year to avoid the drop, but not much downside every materialized.

Oh well, I slid my 'reductions' into wellington, and thats done fairly well since then.

 

[krafty]

Hello,

How would Wellesley fit in a tax-deferred IRA account.I'm at 70/30/10 retired ,and thinking this looks like an excellent fund.Thanks for responses.

Regards,
Bill

 

[Jarhead*]

Charlie: If anybody really knew, they probably wouldn't tell the rest of us.
I carry Wellsley, Wellington also. (In IRA).
I approach all my mutual funds from a "total return" perspective.
Funds like Wellsley, Wellington, etc. have had the winds at their back for last 20 years or so. (Bull mkt. on both bonds and stocks.)
Given where we are in the bond and equity mkts., at this stage, and taking a total return perspective INMHO,
it's going to be a tough job to squeeze out much total return from these funds for the next few years.
Not that anybody gives a darn, what I have decided to do is step aside, with the exception of about 28% alloted to stock mutual funds, with the idea to let them run.

 

[laurence]

I've heard a lot of praise for the Wellington/Wellesley funds on this board. I'm 30, wife is 29, are they good funds for us, or are they too convervative? Hope to ER in mid to late 40's

 

[charlie]

Laurence, I think Wellesley as a long term core
investment would be a good bet.  At your age I
would consider adding Total International, REIT
and Small Cap Value in equal amounts to bring
your total stock allocation to about 70%.  45%
to Wellesley and 18.3% to each of the others would
be about right.  All of these should be in sheltered
accounts.  

Remember, there are a million ways to skin the
cat ... all pretty much valid if diversification and
age appropriate commitment to stocks are followed
and you use your sheltered and taxable accounts
wisely.  

A simpler approach, for example, would be to just
put it all into one of the Vanguard Target Retirement
Funds and let her rip.  

Cheers,

Charlie

 

[Spanky]

A simpler approach, for example, would be to just
put it all into one of the Vanguard Target Retirement
Funds and let her rip.

Cheers,

Charlie

Simplicity is nice - less headache and hassel of rebalancing.

 

[preben]

Good advise Charlie!

 

[brewer12345]

I've heard a lot of praise for the Wellington/Wellesley funds on this board.  I'm 30, wife is 29, are they good funds for us, or are they too convervative?  Hope to ER in mid to late 40's

I would say that Wellesley is too conservative at 40/60 stocks/bonds. Wellington might be OK at 60/40, but it is too slow for my taste. Then again, I have a stomach for more volatility than many.

 

[Jarhead*]

I would say that Wellesley is too conservative at 40/60 stocks/bonds.  Wellington might be OK at 60/40, but it is too slow for my taste.  Then again, I have a stomach for more volatility than many.

As Charley mentioned, think age appropriate. Given your age, and your apparant sophistication of the mkts. in general, you're probably on the right track.
With the changes that I personally have made in the last few months, would probably draw a big "yawn" from you

 

[cute fuzzy bunny]

Thing is...unless you take on a WHOLE lot more volatility, its pretty hard to beat the long term annual returns of Wellesley. Even Wellington doesnt do it, although Wellington is ~80 years old vs Wellesleys ~35.

You can also sort-of buy just the actively managed value stock component, managed by the same company..I think its the "equity income" fund?

 

[fire5soon]

I would love to use one of these as a major holding... too bad over 50% of my retirement stash is in taxable accounts.   :-/

 

[unclemick]

So what do you do in taxible? Muni.'s? What's your opinion on the various 'tax managed' funds from the fund families?

 

[Jarhead*]

Thing is...unless you take on a WHOLE lot more volatility, its pretty hard to beat the long term annual returns of Wellesley.  Even Wellington doesnt do it, although Wellington is ~80 years old vs Wellesleys ~35.

You can also sort-of buy just the actively managed value stock component, managed by the same company..I think its the "equity income" fund?

TH: I've owned Wellsley and Wellington for over 20 years in my IRA. For a guy your age, with the time you have before you have to do any heavy duty sell downs, they are both good solid choices.

For myself, I trimmed my sails a whole bunch, including taking a little over half off the table in both Wellsley and Wellington, and same on the other funds I own.

I personally feel that for the next few years, maybe more, balanced funds are going to be hard put to return anything. I, as I mentioned on another post appreciate dividends, but I am more interested in total return.

Basically, I don't need to go through another gut grinder
at my stage. Hell, you should probably care less, especially if you"re staying liquid enough to belly up to the bar when valuations on bonds, and equities make a little more sense.

 

[laurence]

Thanks for the tailored advice guys, I think I'm going to open a Vanguard account and dip into Wellesly for the coservative side of my portfolio. I really don't have any bond position (~5%) to speak of, so I like this way of entering a position. Plus it will give me an excuse to peruse all the funds there in anticipation of growing non-401k accounts (I don't like having 90% of my assets in company 401k-limited choices but the match makes it worth it). Chalie, I like your take on it, I have my investments in funds close to those you mentioned (can't get Vanguard with 401k) except for REIT and Wellesly. I think once I add those two via Vanguard, I'll feel a lot more comfortable with my plan. Thanks to all! Now to decide if traditional IRA or Roth IRA is the right choice....

 

[charlie]

Laurence, I assume you have picked up on this
already, but REIT and Wellesley in a taxable account
are not good choices unless you need the current
income for living expenses. They would be great
in a ROTH if that's what you had in mind.

BTW, go to the book store and scan a copy of
"The Coming Generational Storm" before you
decide to commit funds to a 401k above the
company match. The author's take is that we
are most surely in for tax hikes in the future
and that at most of us pay a high tax at the
margin due to paying up to 85% tax on SS income.

IMHO, the order should be 401k up to company
match, then ROTH and then taxable accounts.
It is almost a tie between ROTH and taxable due
to the low current rates on dividends and cap
gains and the possibility that the gov will screw
us in the future on ROTH accounts .... but they
could also raise taxes on dividends and cap
gains again.

Cheers,

Charlie

 

[laurence]

So I should put into taxable accounts before maxing the 401(k)? I was getting in mind 401(k) company match, IRA max, 401(K) legal max, taxable accounts. We are only able to afford to put away as much as we are due to the tax sheltered nature of the 401(k). If we switched to taxable, we'd put away less....my hope was to have expenses so low when I retire (no debt payments/mortgage of any kind) that my income would be in a lower tax bracket yet still enough to lead a high lifestyle.....I'm going to have to read this book.

 

[brewer12345]

So I should put into taxable accounts before maxing the 401(k)?  I was getting in mind 401(k) company match, IRA max, 401(K) legal max, taxable accounts.  We are only able to afford to put away as much as we are due to the tax sheltered nature of the 401(k).  If we switched to taxable, we'd put away less....my hope was to have expenses so low when I retire (no debt payments/mortgage of any kind) that my income would be in a lower tax bracket yet still enough to lead a high lifestyle.....I'm going to have to read this book.

Laurence, tax deferred investing includes an implicit bet on future vs. current tax rates. I am wary enough of Congress and our ongoing deficits that I like to have some diversity in my accounts. Right now, over half of our investments are in 401ks or IRAs, and another 10% or so is iin Roths. I am planning on easing up on 401k contributions in part because I want a larger percentage in after-tax accounts. Having said that, it seems likely that in retirement you should be able to withdraw IRA monies in years when you will be in lower tax brackets, given that most FIREees seem to have a lot more control over their taxable income than us working stiffs.

 

[charlie]

I am probably preaching to the choir, but IRA
withdrawals are counted as taxable income at
the ordinary income tax rate. For a couple,
taxable income over $30k per year begins to
expose SS income up to 85% max. If you do
the math you can see that this increases your
marginal tax rate.

A future hidden tax on ROTH income similar to the
stealth tax on SS income or via the back door a la
AMT could happen in a future tax starved admin.

As brewer suggested, growing your taxable account
gives you flexibility. An added benefit is that
qualified dividends and LT capital gains are taxed at
lower rates than the max tax brackets ..... this is
a plus if you are a high tax bracket retiree.

Each person needs to examine his own situation
and make a bet as to whether paying tax now or
later makes the most sense. For some folks, dealing
with the devil we know now as apposed to facing
him in the future seems the best of bad choices.

Cheers,

Charlie