What do you think of these balanced funds?

[cute fuzzy bunny]

A lot of folks liked my original ER idea (circa 2002) of half wellington and half wellesley, which gave you a roughly 50/50 equity/bond portfolio, almost a 4% dividend, and historical capital appreciation (going back to 1929 and 1970 respectively) of another 4-5%.

Well in excess of the recent average for inflation and the fund expenses.

 

[FANOFJESUS]

A lot of folks liked my original ER idea (circa 2002) of half wellington and half wellesley, which gave you a roughly 50/50 equity/bond portfolio, almost a 4% dividend, and historical capital appreciation (going back to 1929 and 1970 respectively) of another 4-5%.

Well in excess of the recent average for inflation and the fund expenses.

That's a good one too. Also a three some of Star/Wellington/Wellesley would be good too.

 

[statsman]

A lot of folks liked my original ER idea (circa 2002) of half wellington and half wellesley, which gave you a roughly 50/50 equity/bond portfolio, almost a 4% dividend, and historical capital appreciation (going back to 1929 and 1970 respectively) of another 4-5%.

Well in excess of the recent average for inflation and the fund expenses.

Interesting. There appears to be a lot of overlap in these two funds, but I guess it would be easier selecting these two (or any two or three) in order to get the portfolio diversification you wanted.

I did something similar in my 401K plan (split between two balanced funds), partly because of the ease of managing the stock/bond ratio I wanted and because these two funds were among the better performers the company offered.

Within the taxable accounts, it is a different story. I'm trying to move a large sum from MM/CD/savings to some combination of bonds and stocks. The above portfolio of Wellington and Wellesley would kill me with the taxable bond interest and stock dividends. Nearly all of the balanced funds are geared this way.

 

[yakers]

Most of our assets are mostly tax deferred. My biggest fund in a target retirement type fund, DWs largest fund is Wellesley, then we have VG Asset Allocation (VAAPX) for our Rotha bit less than 10% of our assets are in individual stocks.
If all I have was taxable funds and wanted to keep it simple then 50/50 Wellesley/Wellington would be a decent choice.

 

[cute fuzzy bunny]

Interesting. There appears to be a lot of overlap in these two funds

That was just a random example, and in this instance there IS some overlap, but the mechanics are different. Star has almost nothing in common with the other two. Lifestrategy moderate is TSM, TBM, and TIM and stays that way. TR2025 is TSM, TBM, europe, pacific and emerging market. So those two share the TSM/TBM component, but the TR2025 loses a lot of its TSM and the three international components over time.

I'd pick something like this if I wanted to be a little bit more equity oriented than the TR series allowed, but still have a conversion (albeit more slowly) from equities to bonds over time...and that 3rd leg gives me a lot more diversity and rebalancing between many other classes that arent heavily weighted in the TR/LS funds.

VG Asset Allocation

Heres a question for ya. I considered VGAA for my roth, but the chief advantage to it vs a straight s&p500 fund was reduced volatility at the cost of a higher ER. Given that you're not withdrawing from the AA fund in the roth, what would be the advantage of the reduced volatility?

 

[lucija]

rec7 - Was your original plan to split all of your taxable funds across one or more of these balanced funds?

If so, I would consider the following:

+ what are you invested in currently? Will you be incurring a (significant) tax hit to re-align the portfolio?

+ in one of your subsequent posts you are suggesting a 50/50 split between domestic and international equities - you should know that none of your suggested funds have that much foreign exposure (although, since they are all managed, their positions vary over time, I would be surprised they come anywhere near 20%)

+ have you considered munis for your bond exposure?

+ your tax considerations may not be as crucial as they are for someone in early accumulation phase, since (I think) you are living of your investments (i.e., you will not have any negative tax compounding)

 

[FANOFJESUS]

rec7 - Was your original plan to split all of your taxable funds across one or more of these balanced funds?

If so, I would consider the following:

+ what are you invested in currently? Will you be incurring a (significant) tax hit to re-align the portfolio?

+ in one of your subsequent posts you are suggesting a 50/50 split between domestic and international equities - you should know that none of your suggested funds have that much foreign exposure (although, since they are all managed, their positions vary over time, I would be surprised they come anywhere near 20%)

+ have you considered munis for your bond exposure?

+ your tax considerations may not be as crucial as they are for someone in early accumulation phase, since (I think) you are living of your investments (i.e., you will not have any negative tax compounding)

+ no tax hit to re-align the portfolio

+ I was suggesting a 50\50 split but in that post I was only 50% in equities so only about 25% of the total portfolio in international. A lot of balanced funds are 10-12% international

+ have you considered munis for your bond exposure? I am luckly I am only in the 15% bracket.

There seem to be two camps when it comes to mutual fund as I can see. One the Adam Bold camp he watchs the preformance but the ER is higher. Or the vanguard camp which is to kept the ER down. I see the advantange to each and I guess I am mixing the two a little bit.

 

[lucija]

...I was suggesting a 50\50 split but in that post I was only 50% in equities so only about 25% of the total portfolio in international. A lot of balanced funds are 10-12% international
..

I was thinking 50/50 within the equity portion of your portfolio. 10-15% in international is fine, if that is what you want. However, it may end up being less than 1/2 of the exposure you mention in a non-balanced proposal. I care a lot about allocation, so that's a big deal for me... For example, PRWCX has less than 5% in international at this point.

...There seem to be two camps when it comes to mutual fund as I can see. One the Adam Bold camp he watchs the preformance but the ER is higher. Or the vanguard camp which is to kept the ER down. I see the advantange to each and I guess I am mixing the two a little bit.

I like balanced funds a lot and you will rarely go very wrong with them... I think you will be OK with any one of your proposed choices if you decide to go that way.

Also, it's good news you do not have to worry about realignment hit today, but I do think it is a consideration in the future. Suppose you dump the whole thing into one actively managed fund and 15 years down the road the fund takes a dive (by consistently under performing its pears) - what then? Will you be locked in owing that fund (due to appreciation)? This is the reason I prefer index funds in taxable - relative tax efficiency, consistent allocation and no management worries.

 

[yakers]

Heres a question for ya. I considered VGAA for my roth, but the chief advantage to it vs a straight s&p500 fund was reduced volatility at the cost of a higher ER. Given that you're not withdrawing from the AA fund in the roth, what would be the advantage of the reduced volatility?

Good question. The fund has done what I wanted, maybe I want the wrong thing? I like the lower volatility even though I am not currently drawing from it. After our credit union account it is the next source of 'cash' if an emergency arises. I do not know if we will ever spend it, it may become all the estate we leave to our two sons. But it sits there mostly growing, available for emergencies and could be used as an alternative to liquidating our IRA, stocks or house if circumstances warrant. Maybe there is a better fund but I just like how this fund is run, whenever I start to think I should adjust my AA a little I find the folks in the VG AA Fund have done so already. In 2010 we could go to Admiral shares if we convert other IRA funds to this one. I am open to suggestions but not inclined to change this fund unless there is a really compelling alternative.

 

[cute fuzzy bunny]

Thanks for the info. Like I said I looked at it for one of our Roth's, but since we wont be touching it for 15-20 years, paying extra for slightly lower long term returns and lower volatility wasnt critical. Since you're leaving it for an emergency cash situation, lower volatility is a more important element.