Another Wellesley vs Target Retirement Income Question

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Splais
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Another Wellesley vs Target Retirement Income Question

Post by Splais »

In the last couple of months I have read several threads that talk about the Vanguard Wellesley fund and Vanguards Target Retirement Income fund. Numerous times I have come across comments where people are putting their money in both funds. I've looked at the performance of both funds in up market periods and down as far back as I can go with TRI. I cannot figure out why people are putting money in both funds. To me, they seem very similar, except that Wellesley is a bit more aggressive and less diversified. Can anyone explain what you gain by putting money in both funds? Why not just decide which level of risk you can live with and pick that one? Thanks for any help. /Steve
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Re: Another Wellesley vs Target Retirement Income Question

Post by beardsworth »

Wellesley is typically about 38% stocks. Target Retirement Income is 30% stocks.

Wellesley is typically composed of about 60 stocks of giant dividend-paying U.S. companies. Target Retirement Income's domestic stock portfolio is Total Stock Market Index, several thousand companies.

Wellesley typically has minimal holdings in foreign stocks, if any. About 30% of Target Retirement Income's stock portfolio is the Total International Stock Index.

Wellesley's bond portfolio is mainly intermediate-term to long-term corporates. Target Retirement Income's bond portfolio is the Total Bond Market Index and (with announced changes in VTINX's composition) Vanguard's new short-term TIPS bond fund and (hedged-to-the-dollar) foreign bond fund.

Wellesley is entirely actively managed. The largest constituents of Target Retirement Income are index funds.

For the Investor share class, the minimum opening investment for Wellesley is $3,000. For Target Retirement Income, it's just $1,000.

In terms of overall portfolio construction, Target Retirement Income is by far the more diversified of the two--which is not the same thing as saying that it always has, or always will, perform better.

I'd imagine that people who choose to hold both funds probably do so because they don't want to "put too many eggs in one basket," and because each of these funds has strengths not offered by the other.
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Re: Another Wellesley vs Target Retirement Income Question

Post by Splais »

each of these funds has strengths not offered by the other

That is what I would like to know. Could you amplify. thanks.
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Re: Another Wellesley vs Target Retirement Income Question

Post by beardsworth »

Splais wrote:each of these funds has strengths not offered by the other

That is what I would like to know. Could you amplify. thanks.
I don't think I can "amplify" more than the line-by-line, item-by-item comparison in my post above.
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Splais
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Re: Another Wellesley vs Target Retirement Income Question

Post by Splais »

I was aware of the points you made. Maybe I am just not understanding. But the things you highlighted, to me, just seem like issues of accepting or not accepting, more risk. What I can't seem to grasp is how these two funds complement each other to the point of being beneficial to hold both.
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Re: Another Wellesley vs Target Retirement Income Question

Post by momar »

People hold Wellesley because of past performance.
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Re: Another Wellesley vs Target Retirement Income Question

Post by Random Musings »

Target Retirement will have further diversification in the near future as int'l bonds will be added to the mix. Since this fund is more bond oriented, it will be another divergence from the Wellesley fund.

RM
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Re: Another Wellesley vs Target Retirement Income Question

Post by steve roy »

Wellesley DOES have a small slug of foreign stocks -- 6.45%. And it's outperformed Target Income, but it's not really a fair comparison, since VTI has more bonds. The Mrs. and I hold both. When we step into retirement, we'll likely have more VTI than Wellesley, but both do their jobs. Wellesley, unlike Target Income, has a large cap value tilt.
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Re: Another Wellesley vs Target Retirement Income Question

Post by Splais »

Steve Roy, what is the "job" Wellesley does for you? And what is it that TRI does for you?
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Re: Another Wellesley vs Target Retirement Income Question

Post by Default User BR »

momar wrote:People hold Wellesley because of past performance.
Which should be ridiculed on this site, but oddly some Vanguard funds get a pass.


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Re: Another Wellesley vs Target Retirement Income Question

Post by Levett »

"People hold Wellesley because of past performance."

The only thing that should be "ridiculed" is a blanket statement without a shred of supporting evidence.

Here's a start: write Vanguard and ask the company to provide information regarding the average holding period of Wellesley investors. That's simple enough, eh?

In the meantime, I believe Morningstar fairly recently produced a study showing that investors in balanced funds tend to capture a higher degree of a fund's reported return (e.g., comparison of investor return v. funds total return). That's not hard to believe because balanced fund investors tend not to chase performance.

Look at the evidence produced by Morningstar re Wellesley:

Trailing Investor Returns VWINX Monthly Quarterly
Trailing Returns (04/30/2013) 1-Year 3-Year 5-Year 10-Year 15-Year
Investor Return % 10.92 10.17 7.80 7.04 6.18
Total Return % 11.54 10.71 8.29 7.63 7.21
% Rank in Category (Inv Rtn) 20 11 18 8 7

Currency is displayed in USD.

(Perhaps someone will align the chart for me).


I could use the example of three generations of my family but that's anecdotal, not evidence. I know the difference.

Lev
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Re: Another Wellesley vs Target Retirement Income Question

Post by Random Musings »

Levett wrote: In the meantime, I believe Morningstar fairly recently produced a study showing that investors in balanced funds tend to capture a higher degree of a fund's reported return (e.g., comparison of investor return v. funds total return). That's not hard to believe because balanced fund investors tend not to chase performance.

Look at the evidence produced by Morningstar re Wellesley:

Trailing Investor Returns VWINX Monthly Quarterly
Trailing Returns (04/30/2013) 1-Year 3-Year 5-Year 10-Year 15-Year
Investor Return % 10.92 10.17 7.80 7.04 6.18
Total Return % 11.54 10.71 8.29 7.63 7.21
% Rank in Category (Inv Rtn) 20 11 18 8 7


Lev
It will be interesting to see what the spread is for TR funds, Vanguard has a one year spread for TR Income, the average between monthly and quarterly looks is about 20 basis points, about a third of Wellesley's spread. This tighter spread seems to permeate with all TR funds for one and three year periods. Although when I look at the five year data, the high outperformance of investor return over total return implies that the flow of assets into these funds distorts their calculations.

RM
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Re: Another Wellesley vs Target Retirement Income Question

Post by livesoft »

I think people buy Wellesley and Wellington because of proven past performance. Or they bought them years ago before the verdict on index investing became so prevalent. They also have a little bit of nagging doubt about using index funds. So they hedge their bets and own both index funds and the actively-managed Wellesley.

It would be interesting to find folks who have abandoned or ditched Wellesley and read their thoughts on why they did so.

Full disclosure: I do not own Wellesley nor Wellington.
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Re: Another Wellesley vs Target Retirement Income Question

Post by bilperk »

Splais wrote:Steve Roy, what is the "job" Wellesley does for you? And what is it that TRI does for you?
Pretty simple, really. Wellesley adds a value tilt, a corporate bond tilt, and holds 27% more equities. All this adds up to more risk and more expected reward. Looked at from the other direction, VTI offers far better market diversification, and "insurance" of a sort against concentrated value, and corporate credit risk.
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Re: Another Wellesley vs Target Retirement Income Question

Post by YDNAL »

Splais wrote:I cannot figure out why people are putting money in both funds. To me, they seem very similar, except that Wellesley is a bit more aggressive and less diversified.
Steve,

They seem "very similar" ONLY IF you ignore the differences, largely as you did. I'm not going to get into these differences because they are posted it seems like weekly (or more).
Splais wrote:Can anyone explain what you gain by putting money in both funds?
Some (many?) investors' investment philosophy adds a domestic Large Cap Value and Corporate Bond tilt, to otherwise "total market" type investing. Rather than expressing my opinion, I prefer to ask you (and others alike) to think hard what these tilts do to both the Equity and Fixed Income profile of their total portfolio.
Splais wrote:Why not just decide which level of risk you can live with and pick that one?
Why should the investors above choose and go against their investment philosophy?

disclosure: I don't own Wellesley (nor Wellington), but did once.
Last edited by YDNAL on Sat May 11, 2013 9:22 am, edited 3 times in total.
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Re: Another Wellesley vs Target Retirement Income Question

Post by dbr »

Splais wrote:In the last couple of months I have read several threads that talk about the Vanguard Wellesley fund and Vanguards Target Retirement Income fund. Numerous times I have come across comments where people are putting their money in both funds. I've looked at the performance of both funds in up market periods and down as far back as I can go with TRI. I cannot figure out why people are putting money in both funds. To me, they seem very similar, except that Wellesley is a bit more aggressive and less diversified. Can anyone explain what you gain by putting money in both funds? Why not just decide which level of risk you can live with and pick that one? Thanks for any help. /Steve
I can't explain it, but probably I am just too simple.
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Re: Another Wellesley vs Target Retirement Income Question

Post by Levett »

Steve,

I don't own both funds, but I am quite familiar with the very human phenomenon of playing some version of both ends against the middle.

If someone is happy owning both funds, what should it matter to me or thee?

Also, I've lived long enough to realize that human beings are not automatons.

Not all our choices are as "rational" as we might think they are. Neither do "rational" choices necessarily lead to expected outcomes. :wink:

Lev
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Re: Another Wellesley vs Target Retirement Income Question

Post by Hexdump »

This was my reasoning when I was deciding on a 1 or 2 fund portfolio, necessitated by my advancing years, and a younger wife that has 0 (zero) interest in asset allocation, rebalancing, tax implications, etc.
I looked at both Wellesley and TRI trying to decide on one or the other or a 50/50 split.
I discarded the 50/50 because I could not see the benefit of 50/50 other than that TRI more closely follows the Boglehead philosophy and if 1/2 of my portfolio held it, well then there is a comfort factor in knowing that I am following a lot of well-thought-out recommendations. All the stuff stated above: diversification, index funds, foreign exposure, TIPs, passive management, etc.
So, to philosophize as to why some folks would do the 50/50, it might be because they don't want to go against all those good reasons for TRI.

Well, I settled on Wellesley alone because of the contrariness of those features. Large Cap focus, small international exposure, no TIPs, it fits our AA and, though it seems heresy, Wellesley tosses off more income than TRI.

Additionally, I cannot imagine a world where Wellesley tanks and TRI does not.

Here's to profitable investing.
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Re: Another Wellesley vs Target Retirement Income Question

Post by momar »

Levett wrote:"People hold Wellesley because of past performance."

The only thing that should be "ridiculed" is a blanket statement without a shred of supporting evidence.

Here's a start: write Vanguard and ask the company to provide information regarding the average holding period of Wellesley investors. That's simple enough, eh?

In the meantime, I believe Morningstar fairly recently produced a study showing that investors in balanced funds tend to capture a higher degree of a fund's reported return (e.g., comparison of investor return v. funds total return). That's not hard to believe because balanced fund investors tend not to chase performance.

Look at the evidence produced by Morningstar re Wellesley:

Trailing Investor Returns VWINX Monthly Quarterly
Trailing Returns (04/30/2013) 1-Year 3-Year 5-Year 10-Year 15-Year
Investor Return % 10.92 10.17 7.80 7.04 6.18
Total Return % 11.54 10.71 8.29 7.63 7.21
% Rank in Category (Inv Rtn) 20 11 18 8 7

Currency is displayed in USD.

(Perhaps someone will align the chart for me).


I could use the example of three generations of my family but that's anecdotal, not evidence. I know the difference.

Lev
Where did I ridicule anyone? And where did I say anything about people jumping into/out of this fund?

Wellesley is a fine fund to own. It has low expenses, low turnover, and an approach that it sticks to.

It seems fairly obvious to me that if Wellesley didn't have a proven track record, many fewer here would own it and we wouldn't see so many people say "I own Wellesley because I like its XYZ".
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Re: Another Wellesley vs Target Retirement Income Question

Post by hoops777 »

I can offer a superior technical analysis supported by 14 major studies as to why people own Wellesley.Because it has been a great balanced fund for many years through thick and thin.I believe I am paraphrasing from Yale or was it MIT.....It is really pretty simple if you think about it and step back a little from the Boglehead doctrine.Probably only a misdemeanor and not a felony :D
K.I.S.S........so easy to say so difficult to do.
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Re: Another Wellesley vs Target Retirement Income Question

Post by bilperk »

dbr wrote:
Splais wrote:In the last couple of months I have read several threads that talk about the Vanguard Wellesley fund and Vanguards Target Retirement Income fund. Numerous times I have come across comments where people are putting their money in both funds. I've looked at the performance of both funds in up market periods and down as far back as I can go with TRI. I cannot figure out why people are putting money in both funds. To me, they seem very similar, except that Wellesley is a bit more aggressive and less diversified. Can anyone explain what you gain by putting money in both funds? Why not just decide which level of risk you can live with and pick that one? Thanks for any help. /Steve
I can't explain it, but probably I am just too simple.
How much simpler can one explain value tilt and corporate bond tilt.
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Re: Another Wellesley vs Target Retirement Income Question

Post by tibbitts »

I don't understand why this is confusing. Wellesley is a bet in favor of large value and corporate bonds. There is no VG balanced index fund with a similar emphasis.

On the other hand, just like many people believe in a small value tilt, but don't invest in that exclusively, not everyone wants all his/her eggs in the Wellesley basket.

Paul
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Re: Another Wellesley vs Target Retirement Income Question

Post by momar »

tibbitts wrote:I don't understand why this is confusing. Wellesley is a bet in favor of large value and corporate bonds. There is no VG balanced index fund with a similar emphasis.

On the other hand, just like many people believe in a small value tilt, but don't invest in that exclusively, not everyone wants all his/her eggs in the Wellesley basket.

Paul
OK, so what is the explanation for using Wellesley instead of Large Value and Corporate Bond indices or funds?
Last edited by momar on Sat May 11, 2013 12:02 pm, edited 1 time in total.
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Re: Another Wellesley vs Target Retirement Income Question

Post by dbr »

bilperk wrote:
dbr wrote:
Splais wrote:In the last couple of months I have read several threads that talk about the Vanguard Wellesley fund and Vanguards Target Retirement Income fund. Numerous times I have come across comments where people are putting their money in both funds. I've looked at the performance of both funds in up market periods and down as far back as I can go with TRI. I cannot figure out why people are putting money in both funds. To me, they seem very similar, except that Wellesley is a bit more aggressive and less diversified. Can anyone explain what you gain by putting money in both funds? Why not just decide which level of risk you can live with and pick that one? Thanks for any help. /Steve
I can't explain it, but probably I am just too simple.
How much simpler can one explain value tilt and corporate bond tilt.
The thing to be explained is not what Wellesley is but why people are so enthusiastic in choosing that fund. I doubt one in a hundred investors choosing that fund are doing so based on any kind of portfolio theory. I could be wrong, of course.

Anyway, I doubt I would choose that particular route to accomplishing value and corporate tilt, but I have not looked in that direction, so who knows?
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Re: Another Wellesley vs Target Retirement Income Question

Post by momar »

dbr wrote: The thing to be explained is not what Wellesley is but why people are so enthusiastic in choosing that fund. I doubt one in a hundred investors choosing that fund are doing so based on any kind of portfolio theory. I could be wrong, of course.

Anyway, I doubt I would choose that particular route to accomplishing value and corporate tilt, but I have not looked in that direction, so who knows?
I agree, it is very hard for me to imagine the scenario "I want to add large value and corporate bond tilts. How can I do that?" leading to Wellesley. More likely the reverse.

Again, nothing wrong with Wellesley.
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Re: Another Wellesley vs Target Retirement Income Question

Post by Default User BR »

tibbitts wrote:I don't understand why this is confusing. Wellesley is a bet in favor of large value and corporate bonds. There is no VG balanced index fund with a similar emphasis.
That's WHAT they hold, but is it WHY they hold it? Not likely. Past performance is the answer most often, I would guess.


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Re: Another Wellesley vs Target Retirement Income Question

Post by Levett »

"OK, so what is the explanation for using Wellesley instead of Large Value and Corporate Bond indices or funds?"

Simplicity. :happy

Lev
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Re: Another Wellesley vs Target Retirement Income Question

Post by dbr »

Levett wrote:"OK, so what is the explanation for using Wellesley instead of Large Value and Corporate Bond indices or funds?"

Simplicity. :happy

Lev
I think it is plausible that many people would choose such a fund exactly due to the simplicity of feeling that everything is taken care of. I still doubt that choice is an explicit election of a portfolio strategy. To answer that we would have to gather a representative sample from all those who have chosen that fund and find out why.
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Re: Another Wellesley vs Target Retirement Income Question

Post by livesoft »

Actually, many folks like a balanced fund because it hides the volatility of a separate equity fund and a bond fund. A value equity fund would perhaps have even more volatility than a total market index fund. Also folks seem to have a difficult time rebalancing. Lots of folks on the forum have stated "I held on and didn't sell anything in 2009" which is good, but not as good as "I rebalanced from bonds to stocks in early 2009". So a balanced fund should overcome the behavior of not rebalancing at market lows as well.

So "simplicity" is another way of saying "overcoming behavioral biases and mental accounting". :)
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Re: Another Wellesley vs Target Retirement Income Question

Post by bilperk »

dbr wrote:
bilperk wrote:
dbr wrote:
Splais wrote:In the last couple of months I have read several threads that talk about the Vanguard Wellesley fund and Vanguards Target Retirement Income fund. Numerous times I have come across comments where people are putting their money in both funds. I've looked at the performance of both funds in up market periods and down as far back as I can go with TRI. I cannot figure out why people are putting money in both funds. To me, they seem very similar, except that Wellesley is a bit more aggressive and less diversified. Can anyone explain what you gain by putting money in both funds? Why not just decide which level of risk you can live with and pick that one? Thanks for any help. /Steve
I can't explain it, but probably I am just too simple.
How much simpler can one explain value tilt and corporate bond tilt.
The thing to be explained is not what Wellesley is but why people are so enthusiastic in choosing that fund. I doubt one in a hundred investors choosing that fund are doing so based on any kind of portfolio theory.
No, that wasn't the question. The question was why not choose one or the other. Another other question was why choose both. If your answer is performance chasing, that doesn't explain why someone would own TRI. If your answer is simplicity, then explain what is being simplified? Simplified only would be to hold only one or the other. To hold both one must be simplifying some allocation strategy. That would lead to asking what allocation strategy is being accomplished in a simplified way by adding Wellesley? Value and corporate bond tilt.
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Re: Another Wellesley vs Target Retirement Income Question

Post by dbr »

bilperk wrote:
No, that wasn't the question. The question was why not choose one or the other. Another other question was why choose both. If your answer is performance chasing, that doesn't explain why someone would own TRI. If your answer is simplicity, then explain what is being simplified? Simplified only would be to hold only one or the other. To hold both one must be simplifying some allocation strategy. That would lead to asking what allocation strategy is being accomplished in a simplified way by adding Wellesley? Value and corporate bond tilt.
You are right. The OP actually asked "Can anyone explain what you gain by putting money in both funds? Your answer is correct. It also would seem from reading what is posted in most conversations about it that this is not the reason most people who do this are doing it.

Without surveying a representative sample of those who have chosen to combine both funds we can't know for sure the reasons for people's choices. A model that might fit the data is performance chasing combined with reluctance to go all in (diversity seeking), but that is just a speculation.
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Re: Another Wellesley vs Target Retirement Income Question

Post by bilperk »

dbr wrote:
bilperk wrote:
No, that wasn't the question. The question was why not choose one or the other. Another other question was why choose both. If your answer is performance chasing, that doesn't explain why someone would own TRI. If your answer is simplicity, then explain what is being simplified? Simplified only would be to hold only one or the other. To hold both one must be simplifying some allocation strategy. That would lead to asking what allocation strategy is being accomplished in a simplified way by adding Wellesley? Value and corporate bond tilt.
You are right. The OP actually asked "Can anyone explain what you gain by putting money in both funds? Your answer is correct. It also would seem from reading what is posted in most conversations about it that this is not the reason most people who do this are doing it.

Without surveying a representative sample of those who have chosen to combine both funds we can't know for sure the reasons for people's choices. A model that might fit the data is performance chasing combined with reluctance to go all in (diversity seeking), but that is just a speculation.
I fully agree that some percentage, maybe even a large percentage, of those who use Wellesley may well be performance chasing. I think there is another percentage who have owned Wellesley for many years and added TRI in some amount as diversification. Once VG adds the ST tips and international bonds I expect even more to add it. Of course, we can't really know all the reasons, and we can only guess at them.

When I read the OPs question, I assumed the question referred to why someone one this board, who likely is knowledable about portfolio theory, would own both. Maybe I'm giving us more credit than we deserve as a community? :oops:

Disclaimer: I only own one, but I'm not telling which :P
Last edited by bilperk on Sat May 11, 2013 2:19 pm, edited 2 times in total.
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Re: Another Wellesley vs Target Retirement Income Question

Post by dharrythomas »

Livesoft described the reason for what I'm doing perfectly.

We've got what I call 8 separate accounts between TSP, IRAs, and a joint taxable account. Each of the 7 tax-free/tax-deferred accounts has a balanced fund in it. 6 contain only one balanced fund. 3xTSP in LifeCycle 2030, 1xTraditional IRA in Target Retirement 2030, 1xTraditional IRA in Target Retirement 2020, 1xRoth Wellington, 1xRoth with some Life Strategy Moderate Growth and some Value Indexes, REIT Indexes, Total International, and PM&M. Our joint taxable account holds only the Total World Stock Index and two start up bank stocks that we invested in along the way. 79% of the portfolio rebalances automatically, 3% never rebalances, 18% I have to play with. 57% of the total (and the part that has the most new contributions) rebalances periodically to a less equity heavy allocation.

I put my wife in Wellington years ago (90s) because of the large value tilt. She has beaten the pants off what I've done in the other account with the only adjustment being the move to admiral shares :annoyed.

I'm sure it's not the cleanest solution and I'm sure that my value indexes would be better if Vanguard believed in value indexing and only used 1/3 or 1/4 of the broader index instead of 1/2, but we're getting there.

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Re: Another Wellesley vs Target Retirement Income Question

Post by Levett »

Yes, livesoft's response is behaviorally astute:

"So "simplicity" is another way of saying "overcoming behavioral biases and mental accounting"

:thumbsup

Lev
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Re: Another Wellesley vs Target Retirement Income Question

Post by stemikger »

MarcMyWord wrote:
Splais wrote:each of these funds has strengths not offered by the other

That is what I would like to know. Could you amplify. thanks.
I don't think I can "amplify" more than the line-by-line, item-by-item comparison in my post above.
+1

:oops: :D :beer
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Re: Another Wellesley vs Target Retirement Income Question

Post by steve roy »

Splais wrote:Steve Roy, what is the "job" Wellesley does for you? And what is it that TRI does for you?
I know others have answered this (and I'm late to the coffee klatch) but here are my reasons:

I started buying Wellesley inside my Roth account years ago, and today I'm in Admiral shares territory. I also have a slug of REITS in the Roth. The plan is, when I retire three years hence, I will move the Wellesley to a traditional IRA, and replace it inside the Roth with Small Cap Value. (The ultimate plan is to be 70% bonds -- tilted to short term bonds/TIPS -- and 30% stocks -- tilted to Small and Value with 40% in foreign, most of it in a Swedroe-style allocation. 15% of the total stock portfolio will be REITS.)

When all the greenbacks flutter to Vanguard and I end the accumulation phase of my life cycle, I will end up with about 60% index funds and 40% "actively managed" funds, but a lot of the non-index sleeve will be in Vanguard Short-Term TIPS and Tax Exempt bond funds that aren't indexes but aren't exactly Wellington, Wellesley or Primecap, either. Where does the Vanguard Target Income enter in? I tried to get the Mrs. into Wellesley, but she climbed aboard during a rough patch for the fund and decided, after nine months of roller coaster, that she didn't want to be in it. I was able to talk her into VTI as a substitute. (She's not as jazzed with slicing and dicing as I am and so a Target Fund on auto pilot is right for her.)

I estimate that 7-9% of Steve Roy/Mrs. Steve Roy total portfolio will be in Wellesley, while 9-12% of the portfolio will be in VTI.
tibbitts
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Re: Another Wellesley vs Target Retirement Income Question

Post by tibbitts »

steve roy wrote:
Splais wrote:Steve Roy, what is the "job" Wellesley does for you? And what is it that TRI does for you?
I tried to get the Mrs. into Wellesley, but she climbed aboard during a rough patch for the fund and decided, after nine months of roller coaster, that she didn't want to be in it. I was able to talk her into VTI as a substitute. (She's not as jazzed with slicing and dicing as I am and so a Target Fund on auto pilot is right for her.)
We rarely see Wellesley described as a roller coaster compared to... almost anything, much less VTI. Perhaps you mean Target Retirement?

Paul
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steve roy
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Re: Another Wellesley vs Target Retirement Income Question

Post by steve roy »

Paul, only thing I can say is Mrs. S.R. complained that Wellesley was "going nowhere" ... and she exited.

Mrs. S.R. can be impatient. Whereas I am an inert mound of calm certitude. (Often wrong, but calm nevertheless.)
YDNAL
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Re: Another Wellesley vs Target Retirement Income Question

Post by YDNAL »

dbr wrote:The thing to be explained is not what Wellesley is but why people are so enthusiastic in choosing that fund. I doubt one in a hundred investors choosing that fund are doing so based on any kind of portfolio theory. I could be wrong, of course.
dbr wrote:I think it is plausible that many people would choose such a fund exactly due to the simplicity of feeling that everything is taken care of. I still doubt that choice is an explicit election of a portfolio strategy. To answer that we would have to gather a representative sample from all those who have chosen that fund and find out why.
It is possible that you are right and "one in a hundred investors choosing...." or "I still doubt the choice is an explicit election of a portfolio strategy."

That said, this is exactly why I owned Wellesley at one point in time. Today it is exclusively IT Investment-Grade VFIDX for this part of the strategy. Some readers may find interesting that Wellesley's 696 Bonds compared to VFIDX 1,686 Bonds, with strinkingly similar credit quality, look like this:

Code: Select all

                       Wellesley / VFIDX
Asset-Backed                  3.1%  7.9% 
Commercial Mortgage-Backed    0.5%  3.6% 
Finance                      27.3% 28.2% 
Foreign                       1.6%  3.3% 
Government Mortgage-Backed    8.2%  0.0% 
Industrial                   36.5% 40.2% 
Other                         5.3%  0.3% 
Short-Term Reserves                 1.2% 
Treasury/Agency              11.9%  8.5% 
Utilities                     5.6%  6.8% 
Total                      100.0% 100.0%
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
Levett
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Re: Another Wellesley vs Target Retirement Income Question

Post by Levett »

"I am an inert mound of calm certitude."

Excellent!

The Buddha awaits.

http://www.burmese-art.com/old-happy-bu ... rma-2423-1

Lev
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Re: Another Wellesley vs Target Retirement Income Question

Post by Professor Emeritus »

if we treat our DB pensions and SS as inflation protected annuities they make up 50% of our financial assets. we have 20% in Wellesley and 27% in Broad based domestic and international index funds. We have 3% in Fidelity and TIAA bonds (legacy 403 b)

If we did not have large DB pensions TRI would be an interesting way to balance overall risk. However given our situation it does not seem to make sense.
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