Anyone else holding Wellington/Wellesley in taxable?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
Topic Author
jjunk
Posts: 951
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Anyone else holding Wellington/Wellesley in taxable?

Post by jjunk »

I currently hold a good bit of Wellington/Wellesley Admiral shares in a 50/50 mix in my taxable account. I'm happy with the overall mix and I wont need the money for 10-15 years. I'm a bit concerned about the tax consequences (in 28% bracket) and wondering how many others hold this as their core holdings in taxable?
DualIncomeNoDebt
Posts: 436
Joined: Wed Jul 18, 2012 3:38 am

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by DualIncomeNoDebt »

I have some, high tax bracket. I know it's not ideal, but I like Wellesly and distributions are reinvested. I also own quite a bit of Vanguard's tax-advantaged funds. The reason I don't put it all in tax-advantaged funds is diversification and uncertainty surrounding taxes.
wesleymouch
Posts: 237
Joined: Wed Dec 05, 2012 1:24 pm

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by wesleymouch »

I believe that they both have a high turnover so that increases your tax bill
tacster
Posts: 269
Joined: Sat Apr 09, 2011 11:08 am
Location: Limbo.

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by tacster »

Yes I have some Wellesley in taxable, distributions reinvested. I'm one year away from retirement at which time I will start collecting the distributions as part of my overall income stream, so I don't feel too bad about the current tax hit. Not sure I'd feel the same if I had 10-15 years left until retirement...
INSERT PITHY QUOTE HERE
pkcrafter
Posts: 15461
Joined: Sun Mar 04, 2007 11:19 am
Location: CA
Contact:

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by pkcrafter »

Better look at this:

http://www.thornburginvestments.com/lit ... alreal.pdf

You can see the big impact of taxes on returns here, but the funny thing is Thornburg is using 0.5 for fees in their study, but their value fund has a load and an ER of 1.32%.

And check the Wiki for tax basics.



Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Levett
Posts: 4177
Joined: Fri Feb 23, 2007 1:10 pm
Location: upper Midwest

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by Levett »

1. The following assertion is mistaken: "I believe that they both have a high turnover so that increases your tax bill." Just check turnover stats for both funds.

2. No, I do not hold either in taxable, but hold both in tax-deferred.

Lev
investor
Posts: 1010
Joined: Mon Feb 19, 2007 9:50 pm

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by investor »

1. turnover is about 35% and 33%

2. also own a lot of both funds in my tax differed account.

investor
Van
Posts: 1006
Joined: Wed Oct 27, 2010 9:24 am

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by Van »

I hold Wellesley in taxable, since I'm out of non-taxable space (in fact this year was my first RMD........ouch!).
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by Default User BR »

jjunk wrote:I currently hold a good bit of Wellington/Wellesley Admiral shares in a 50/50 mix in my taxable account. I'm happy with the overall mix and I wont need the money for 10-15 years. I'm a bit concerned about the tax consequences (in 28% bracket) and wondering how many others hold this as their core holdings in taxable?
I don't hold either in any account.


Brian
User avatar
bengal22
Posts: 2146
Joined: Sat Dec 03, 2011 5:20 pm
Location: Ohio

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by bengal22 »

I have both Wellesley and Wellington in my taxable account. I am retired and I use their distributions to help pay off expenses.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley
Whatyear?
Posts: 202
Joined: Wed Aug 26, 2009 1:05 pm
Location: Massachusetts

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by Whatyear? »

I have both in my taxable account. I was recently (am still am) considering exchanging them for a combination of TSM and MA Tax Exempt with the same overall asset allocation. BUT, in anticipation of that I did a fairly simplistic analysis of how I would have faired had I held TSM/MA Tax Exempt over 1 yr, 3 yrs, 5 yrs, 10 yrs using annualized returns and estimated tax paid on dividends. Over one year I would have been better off with TSM/MA Tax Exempt, over three years it was just about break even, and over both 5 years and 10 years I was better off with Wellington/Wellesley. So far now I am staying with what I have, but I will keep an eye on it. I'm about 10 years from retirement (I hope :)).
johnz1001
Posts: 215
Joined: Tue Jan 01, 2013 6:41 am

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by johnz1001 »

I have them both in taxable, and I am looking for a way out with less of a tax hit.
jb1934
Posts: 131
Joined: Mon Jan 18, 2010 8:39 am

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by jb1934 »

Whatyear? wrote:I have both in my taxable account. I was recently (am still am) considering exchanging them for a combination of TSM and MA Tax Exempt with the same overall asset allocation. BUT, in anticipation of that I did a fairly simplistic analysis of how I would have faired had I held TSM/MA Tax Exempt over 1 yr, 3 yrs, 5 yrs, 10 yrs using annualized returns and estimated tax paid on dividends. Over one year I would have been better off with TSM/MA Tax Exempt, over three years it was just about break even, and over both 5 years and 10 years I was better off with Wellington/Wellesley. So far now I am staying with what I have, but I will keep an eye on it. I'm about 10 years from retirement (I hope :)).
Interesting. What is your federal tax bracket?
jb
ScottW
Posts: 165
Joined: Tue Mar 25, 2008 8:13 am

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by ScottW »

wesleymouch wrote:I believe that they both have a high turnover so that increases your tax bill
Turnover can matter because higher turnover often leads to higher capital gains. Wellington, however, has not distributed any capital gains for the past four years, and shareholders have only been taxed on bond interest and stock dividends.
User avatar
midareff
Posts: 7711
Joined: Mon Nov 29, 2010 9:43 am
Location: Biscayne Bay, South Florida

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by midareff »

I hold Wellesley in taxable. 65/retired and the distributions transfer direct to Ally Bank just like everything else in taxable does.
User avatar
kenyan
Posts: 3015
Joined: Wed Jan 12, 2011 11:16 pm

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by kenyan »

*sigh* my dirty little secret revealed - I do hold Wellesley in taxable; it is part of my house down payment savings (a separate portfolio than my retirement savings). I originally purchased it before I had embraced Boglehead philosophy, and have held on to it despite the tax inefficiency. At this point, it does have significant capital gains and I don't care to sell until the money is needed. If I had to do it over at this point, I would probably replace it with a combination of TSM and munis, but it has treated me well so I can't complain too much.
Retirement investing is a marathon.
Whatyear?
Posts: 202
Joined: Wed Aug 26, 2009 1:05 pm
Location: Massachusetts

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by Whatyear? »

jb1934 wrote:
Whatyear? wrote:I have both in my taxable account. I was recently (am still am) considering exchanging them for a combination of TSM and MA Tax Exempt with the same overall asset allocation. BUT, in anticipation of that I did a fairly simplistic analysis of how I would have faired had I held TSM/MA Tax Exempt over 1 yr, 3 yrs, 5 yrs, 10 yrs using annualized returns and estimated tax paid on dividends. Over one year I would have been better off with TSM/MA Tax Exempt, over three years it was just about break even, and over both 5 years and 10 years I was better off with Wellington/Wellesley. So far now I am staying with what I have, but I will keep an eye on it. I'm about 10 years from retirement (I hope :)).
Interesting. What is your federal tax bracket?
jb
I'll be either 28% or 33% for 2012. For my analysis I actually assumed 35%.
rj49
Posts: 629
Joined: Tue Feb 22, 2011 11:22 pm

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by rj49 »

I had Wellesley in a taxable account, and it's a double-edged sword--on the one hand I wanted the high yield and for the success of the fund's active management reflected in gains. On the other hand, it was shocking at distribution time to see the distributions that would be taxable at the same time and the NAV fall after the distributions, so it felt I was actually losing ground by paying taxes on distributions that decreased the fund NAV. Judging from the frequent 'why did my fund drop 2% today?' posts on here, it's an issue that I don't think everyone realizes when they go after higher yields. But then I remember some really painful capital gains payments from active growth funds in the late 1990s and a really painful one in 2000, when the big capital gains payments were due in the same year as funds had big losses. Until you're hit with a big capital gains tax bill in a managed fund, you don't realize the advantage of index funds in terms of lower turnover and greater tax efficiency, including flexibility in tax-loss harvesting.

I suspect that if bond capital losses start appearing, especially with the longer duration of Wellesley and Wellington, it would hurt even more to pay taxes on higher distributions while at the same time the fund has a possible negative return.
User avatar
Topic Author
jjunk
Posts: 951
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by jjunk »

Thanks everyone for sharing your opinions. I'm looking at paying ~5-7k/yr in additional taxes (based solely on what the fund gave out last year). When I compared it to a similar TSM+Muni portfolio, the returns were similar to what was mentioned here previously (about the same until the 10yr span). I know we're not supposed to look at historical returns but these funds have been pretty consistent so I think its a good data point (though I am not expecting past to equal future).

rj49, your point is a really good one and something I'd need to consider as I continue to hold this mix. Thanks for that.
lazyfabs
Posts: 276
Joined: Mon Sep 19, 2011 9:22 am

Re: Anyone else holding Wellington/Wellesley in taxable?

Post by lazyfabs »

Like others we have Wellesley in taxable just because we have had it for a while. Currently we hold 1/3 in Wellesley, 1/3 Consumer Staples ETF (VDC), and 1/3 in cash. Comes out to roughly a 50/50 split invested in a conservative and defensive manner. Figure people are not going to stop eating, drinking or stop buying diapers and toilet paper anytime soon. Sure there is tax hit on the 1/3 allotted to Wellesley, but minimal in the grand scope of our entire portfolio and other tax issues that loom over us and everyone.

We also hold Wellington, but all in Roth IRA's we can't add money too because of income limits. So it will sit there for many moons until the day comes to hang up the gloves.

We don't 'count' this account for retirement per say, since our goal is to have enough from tax-deferred, ss, pensions, etc. to live on.

If we have to tap into our taxable account $ for some reason, i.e. furnaces die in the middle of winter, then so be it. If not, then many moons from now, sure there will be a decent amount of $ available to splurge above and beyond from what is in our tax-deferred money.

salud
"I think the best way to find happiness is to stop looking so hard." - Kermit the Frog
Post Reply