W W & TW?

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Topic Author
countdown
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Joined: Thu Jun 27, 2013 2:13 pm

W W & TW?

Post by countdown »

Hi. This is my first question here and would appreciate any comments.

If using Wellington and Wellesley, would it make sense to add Total World to round out portfolio, and for simplicity, or would it be too cumbersome?
I note that TW is about 48 percent US for balance beyond value stock of Wellington, but could potentially overweight International? Higher ER too.

As I write I can already see arguments for Total Stock, and Total International instead?

I see why it is easier to use three fund index. But starting with premise of W and W, any thoughts, advice appreciated.

Thank you.
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G-Money
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Re: W W & TW?

Post by G-Money »

I'm not a big fan of using balanced funds as *part* of a portfolio. Too much calculation needed to get everything balanced. That said, I don't have a choice, since the Vanguard Balanced Index Fund is the only low-cost option in my 401(k) that fits my AA. But I'd much prefer to just use TSM and TBM instead of a 60/40 blend of the two.

Adding Total World to Wellington and Wellesley is even more cumbersome, since Total World is itself a sort of blend of TSM and TISM. Maybe some combination of Total World, Wellington, and Wellesley gives you the precise AA you want.

Another difficulty of your proposal is that Wellington and Wellesley are active funds. They typically have relatively low exposure to international, but I don't know if they're required to do so. It is possible that your international allocation may drift, if, say, Wellington went from 15% international to 35%.

Unless you have substantial unrealized gains in Wellington or Wellesley, if you don't like the allocation of those funds, I'd recommend you pick separate components of domestic stock, international stock, and bonds to suit your needs.
Don't assume I know what I'm talking about.
Topic Author
countdown
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Re: W W & TW?

Post by countdown »

Thank you, G-money.
Topic Author
countdown
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Re: W W & TW?

Post by countdown »

I will need to make a decision re going 3-fund (or possibly 4 with the new int'l bond recommendation at vg), or augmenting Wellington and Wellesley to reach desired allocations, which I realize is a lot of work.

How are people who have decided for whatever reasons to use W and/or W handling this? I would appreciate any comments. Thanks.
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nisiprius
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Re: W W & TW?

Post by nisiprius »

Darned if I understand the rationale for mixing Wellington and Wellesley, although a number of posters seem to be doing it. I don't mean that I see any particular harm in it. But it seems like mixing Duncan Hines devil's food cake mix and Betty Crocker devil's food cake mix in hopes of getting a better flavor than either. Adding Total World seems to be like then, noticing that neither of them contains any carob, and dumping in carob into the mix of mixes. At some point, it's easier to get the flavor you want by mixing the ingredients you like, then trying to adjust and compensate for a premix that isn't quite right.

But you want to start from Wellington and Wellesley as a given. Your issue seems to be that you don't think they have enough international
Wellington (International allocation = 9.19% of total portfolio or 14.0% of equities)
and/or Wellesley (International allocation = 7.55% of whole portfolio or 19.4% of equities)

If you otherwise like the composition of these funds, then the way to disturb it least is simply to add more international, perhaps in the form of Total International. By adding Total World, adding both domestic and international, you are diluting the stock "flavors" of the funds, making Wellington less Wellington-ish and Wellesley less Wellesley-ish. You are also, of course, reducing your bond allocation, and you haven't said why you want to do this; if you don't want to do it, you need to add more bonds somehow.

Anyway, your starting point should be to state, up front, in numbers:

What percentage of your portfolio do you want in stocks? Of stocks, what percent international?
What percentage of your portfolio do you want in bonds? Of bonds, what percent international?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Topic Author
countdown
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Joined: Thu Jun 27, 2013 2:13 pm

Re: W W & TW?

Post by countdown »

Thanks for taking the time to respond, Nisi. Sorry about my delayed reply. I will provide a later detailed response of the foundational questions you raised, and which I should have included in my inquiry.

But I thought this was an interesting post which sort of addresses your question of why some people use both W&W.
I found this post on an early retirement site. A gentleman had left these instructions for his Wife upon his death:

"Invest all IRA amounts (the combined total of both our IRA accounts) in three Vanguard Funds: Wellington, Wellesley and a money market fund.
Put approximately $75,000 in the money market fund (VMMXX). This will be the account used to fund monthly transfers to your checking account.
Invest 60% of the remaining IRA funds in Wellesley (VWIAX)
Invest the final 40% of the IRA funds in Wellington (VWENX)
Through Vanguard, set up the Wellesley and Wellington accounts to have dividends (paid quarterly) and capital gains (paid annually) go to the money market account.

Also through Vanguard, set up a monthly transfer of $ x,xxx to your checking account. This, plus your SS and (small) pension will provide your monthly income.

When the balance of the money market fund decreases below $40,000, consider selling shares of Wellington to 'top up' the money market account to $75,000."
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