Bogleheads

[arrow]

As a retireee with hopes of a 15-20 year horizon, I'm trying to reduce my equity exposure even more than my current 40/40/20 stocks/bonds/cash portfolio to approximate 40 stocks/60 bonds and cash). I''ve considered and rejected an annuity (at least until I'm 85) as well as VG payout and target funds. Choosing my risk level via Financial Engines at .68. I've edited its fund allocation suggestions to incorporate ideas the Forum discusses. This is a perhaps unorthodox but simple mix without REITS and with a "value" tilt via Wellesley Income together with some international exposure.
Tax bracket 15-20%. No longer adding to SEP-IRA, no flexibility there.

#1 Portfolio
SEP-IRA (43% of total portfolio)
15% VBIXX Intermediate Term Bond Index
15% VIPSX Inflation Protected Bond Index
15% VXGBX Short Term Federal Index

Individual ( 47% of total portfolio)
29% VWIAX Wellesley Admiral
17% VTSMSX Total Stock Market Index
2.5% VEIEX Emerging Markets Index
2.5% VGTSXX Total International Stock Index
4 % VMMXX Prime Money Market
total 100%

#2 Stock/Bond/Cash Allocation
FYI: Wellesley allocation is 40 stock/60 bond.
Stocks
11% Wellesley Income Fund (6.1% foreign)
17% Total Stock Market Index
5% Foreign Stock (Total International Index/Emerging Markets)
4% Prime Money Market
total 39%

Bonds
17% Wellesley Income Fund
15% Inflation Protected Index
15% Intermediate Bond Index
15% Short Term Federal Index
total 62%

All comments and suggestions welcome, dog days or not!
Thank you
Arrow

[tibbitts]

Something seems off - you have 40/40/20 which is essentially the same as 40/60, particular with a number of short-duration bonds.

I will give my usual caution about Wellesley, which is that it's relatively concentrated on the stock side. Also even more than TSM, it's large cap. And the foreign component has seemed to be almost trivial, at least while I've been watching it. So I would caution against looking at it as offering some kind of free lunch, the way it sometimes seems to be referred to based on some peoples' past experiences with it.

Paul

[YDNAL]

arrow,

I agree with Paul that Wellesley or Wellington are not well diversified holdings, neither Domestic or Foreign. Wellesley, for instance, holds only 54 Stocks and 6% of Stocks are Foreign holdings.

You should consider holding the Total Market and use LC Value for tilting and a separate Bond.

SEP-IRA
15% VBIXX Intermediate Term Bond Index
15% VIPSX Inflation Protected Bond Index
15% VXGBX Short Term Federal Index

Individual <- individual IRA?
5% VIVAX Value Index
20% VTSAX Total Stock Market Admiral (gains Admiral Status)
5% VEIEX Emerging Markets Index
10% VGTSX Total International Stock Index
5% VMMXX Prime Money Market
10% Add a Bond fund
total 100%

Overall: 40/60 Stocks/Bonds,Cash
Stocks: 62.5/37.5 Domestic/Foreign

Regards,
Landy

[arrow]

Thank you, Paul and Landy

To clarify, SEP-IRA is my sole "IRA" (tax-deferred) and "Individual" is my taxable account.

Yes, I lose Admiral status with Wellesley at anything below my given percent.
No, 20% TSM doesn't gain me Admiral status. Right now, I have Admiral status for TSM.

One reason Wellesley is attractive to me is its management of this much money in line with my risk tolerance. Now I do it all myself, with much help from this Forum. But I'm ready to give it over! But not to Target or Pay Out Funds, and not to give it away yet to an annuity and lose access.

I don't think Wellesley is a free lunch, but it does seem to lose less in rough times than TSM, for example. As to International, I used to follow Bogle's old advice to stay clear, and then, as some posters here have noted, I too got caught up in "have to have it." And yes, my money did earn capital gains nicely for a while in Total Int'l. But I remain a skeptic, given our unsettled world. So, I'm happy to maintain a minimum there and be sure that I stay on the far side of 60% bonds.

Nevertheless, I'm considering all that you've offered, and if I may, I'll keep you posted.

Arrow

[dcd]

Wellesley has been an excellent fund but it's a managed fund. Isn't one of the reasons that indexing is superior is that manged fund returns tend to revert to mean over time. If that holds true, then what's ahead for Wellesley?
_________________
Denny

[bill99]

3.54% TSM total return
6.04% Wellesley total return

5yr. returns, without the down years, the tables turn:
7.24% TSM
5.13% Wellesley

Not what you'd expect, but the 2000-2002 downturn hit the all equity blend TSM hard, the value-oriented, balanced Wellesley much less so.

Which is not to say you can't get close to Wellesley in, say, LifeStrategy Conservative Growth. Wellesley is actively managed (new manager for equities portion, so past is no predictor of future, nor would it be in any event), but close to index ER, so the cost difference is not huge.

Just some random thoughts,
Bill

[arrow]

dcd:
Most of the all composite index funds use Total Bond Market (TBM) which I've deliberately avoided, in part because of mortgage risk. Some posters have alluded to "managed" funds" that are "shadow" index funds. On "reversion to the mean," I'll have to leave that for others to speak about technically. See below.
Bill:
The ten-year return figures you cite are what got me thinking "Wellesley" -- they give its new managers a lot to live up to, to be sure. But I only came to Wellesley because none of the Target funds had a mix that I couid live with (all use TBM). And its .15 ER is indeed "index" like in Admiral..

On the LifeStrategy fund: For reasons I can't recall, I believe that the Asset Allocation Fund, which some of those funds use, hasn't had high marks from long-time posters. And it's also a managed fund with a .37ER. Or maybe that was the STAR fund???

Corrections of any of my misconceptions welcome!