When we say Wellington has a track record of 85 years...
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When we say Wellington has a track record of 85 years...
All,
When we say that Wellington has a strong track record of 85 years, what are we REALLY saying?
We're not saying this is due to the individual managers, because they only have 16 & 13 years on the fund. And we're not saying (I don't think) this is due to the Wellington management company itself. And we're not saying that it is due to active management stock or bond selection, because those can change over time (either with different investment managers or slightly different tactical allocations).
Are we really saying that the 65/35 large value/medium investment grade has done well? And why do we select actively managed fund (other than simplicity) rather than engineer our own 65/35 allocation via 2 index funds? (Wellington actually underperformed the composite index for the 1-, 3-, and 5-year periods.)
I'm invested in Wellington (in an IRA)--it was my first fund, based on the high opinion that many on this board have--but I'm trying to figure out exactly WHY I am. I'm comfortable with it, although I wonder if there are more efficient options.
Cheers!
jwf
When we say that Wellington has a strong track record of 85 years, what are we REALLY saying?
We're not saying this is due to the individual managers, because they only have 16 & 13 years on the fund. And we're not saying (I don't think) this is due to the Wellington management company itself. And we're not saying that it is due to active management stock or bond selection, because those can change over time (either with different investment managers or slightly different tactical allocations).
Are we really saying that the 65/35 large value/medium investment grade has done well? And why do we select actively managed fund (other than simplicity) rather than engineer our own 65/35 allocation via 2 index funds? (Wellington actually underperformed the composite index for the 1-, 3-, and 5-year periods.)
I'm invested in Wellington (in an IRA)--it was my first fund, based on the high opinion that many on this board have--but I'm trying to figure out exactly WHY I am. I'm comfortable with it, although I wonder if there are more efficient options.
Cheers!
jwf
If you aren't familiar with Mr. Bogle and his investment philosophy, then you don't know Jack!
Re: When we say Wellington has a track record of 85 years...
OP,
We are saying that somehow Wellington Management Company has a system that works quite well across 85 years.
KlangFool
We are saying that somehow Wellington Management Company has a system that works quite well across 85 years.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: When we say Wellington has a track record of 85 years...
IMHO the only reasonable way to interpret this, and the one that makes the most sense in a world in which there are many alternatives, is to consider the performance (risk and return, though risk can only be indirectly assessed through realized volatility) relative to a roughly equivalent passive benchmark.
If you want the performance of a 65/35 allocation, you can get more direct, less biased, and cheaper exposure via index funds. The only real reason to go for an actively managed fund in this situation is if you think they will outperform in the future by enough of a margin to cover the additional costs, which here are pretty modest. (okay, some other potential reasons include if you have no other decent options, like in a 401k with constrained fund choices, or are too lazy to construct something you deem appropriate with one or more cheaper funds)
If you want the performance of a 65/35 allocation, you can get more direct, less biased, and cheaper exposure via index funds. The only real reason to go for an actively managed fund in this situation is if you think they will outperform in the future by enough of a margin to cover the additional costs, which here are pretty modest. (okay, some other potential reasons include if you have no other decent options, like in a 401k with constrained fund choices, or are too lazy to construct something you deem appropriate with one or more cheaper funds)
Re: When we say Wellington has a track record of 85 years...
I am also a long-time Wellington investor, actually first learned about Wellington way back on the Vanguard Diehards forum, the precursor to the Bogleheads forum. I know why I am invested in it - it was considered a good, solid core holding, it saved me during the 2000 dot-com bubble fiasco and saved me during the 2008-2009 great recession. Perhaps it was not actually the Wellington magic, perhaps it was the 60/40 asset allocation, perhaps there are more efficient options as you say, but I'm not giving up my Wellingtonjuliewongferra wrote:I'm invested in Wellington (in an IRA)--it was my first fund, based on the high opinion that many on this board have--but I'm trying to figure out exactly WHY I am. I'm comfortable with it, although I wonder if there are more efficient options.
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Re: When we say Wellington has a track record of 85 years...
According to John C. Bogle in The Clash of the Cultures: Investment vs. Speculation, appendix V, the equity ratio has been as high as 81% (in 1972) and as low as 47% (in 1931). Make of that what you will. What the heck, I guess it's worth the effort of typing that into Excel and making a chart... I don't quite know what to make of the first three lines, though, "2Q 1929 78%; 3Q 1929 42%; 1929 37%." I'll just call it 37%.juliewongferra wrote:...Are we really saying that the 65/35 large value/medium investment grade has done well?...
I don't know what to make of this exactly, I'm just presenting it for what it's worth.
As to whether it has been "large value/medium investment grade" for eighty-odd years, I don't know about that either. The story of Wellington as Bogle tells it is that departed from a traditional conservatively managed fund to an aggressive speculative style from 1966 to 1974, on Bogle's watch, and it didn't turn out well (and he is apologetic about that). During that time period he says assets dropped from $2.1 billion to $475 million. Bogle quotes the 1967 Annual Report as saying
Bogle talks with great respect of his mentor, Walter L. Morgan, so I suppose that even if the management team changed, there might have been a consistent "corporate culture" in place...[we have] increased our common stock position from 64 percent of resources to 72 percent, with a definite emphasis on growth stocks and a reduction in traditional basic industries...
As for whether Wellington has done well, this is an apples and oranges comparison, but I once set myself the task of finding what I called "Fidelity's Wellington," that is to say a long-term well-established actively managed balanced fund, and the fund I found was the Fidelity Puritan Fund, which to be fair has had a significantly higher stock allocation than Wellington--currently about 73% U.S. and international stock, 27% bonds and cash--and "only" goes back to 1947. But, nevertheless... interesting. Every time I mention it I hope that it will stir up some spirited conversation... really, the two would be pretty similar were it not for the flattish period Bogle calls "the fall" (in his chapter title, "the rise, the fall, and the renaissance...").
Source
Fidelity Puritan, FPURX, blue; Vanguard Wellington, VWELX, orange.
Last edited by nisiprius on Mon Jul 11, 2016 2:26 pm, edited 1 time in total.
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.
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Re: When we say Wellington has a track record of 85 years...
Of course this is a special case of something that's troubled me for a while, which I call the "false assurance of seeming long-term data." When we say that the United States stock market has a track record of 90 (CRSP data) or 146 (add the Cowles Commission data) or 200 (add some academics' guesstimates), what exactly does that mean, anyway? Before the SEC, when stock market manipulation was assumed, and "bulls" and "bears" meant speculators who were trying to move the stock market up or down in order to bankrupt each other, was it really the same thing as it is today... and should we expect it to have quantitatively the same statistical parameters as it does today?
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.
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Re: When we say Wellington has a track record of 85 years...
A factor in why the Wellington fund has done well is its conservative investment approach. Here is how John Bogle put it in Reflections on Wellington Fund’s 75th Birthday
From the very outset, Wellington’s three-fold objective has remained constant: (1) Conservation of Capital, (2) Reasonable Current Income, and (3) Profits Without Undue Risk. These goals have stood the test of time, and have been importantly responsible for the remarkable string of 298 consecutive quarterly dividends paid to the Fund’s shareholders. The Fund’s stalwart consistency in hewing to its conservative investment approach has played a major role in its asset growth and acceptance by millions of investors.
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Re: When we say Wellington has a track record of 85 years...
The "growth of 10K" graphs are useful in certain situations, but it seems not ideal in this case when comparing the track record of two funds over long periods of time. It puts great emphasis on the start point. If you look at that same graph and start in 1985 instead of 1947, you see that Wellington comes out ahead over the 30 year period form 1985-2016 (despite lower stock allocation).nisiprius wrote: As for whether Wellington has done well, this is an apples and oranges comparison, but I once set myself the task of finding what I called "Fidelity's Wellington," that is to say a long-term well-established actively managed balanced fund, and the fund I found was the Fidelity Puritan Fund, which to be fair has had a significantly higher stock allocation than Wellington--currently about 73% U.S. and international stock, 27% bonds and cash--and "only" goes back to 1947. But, nevertheless... interesting. Every time I mention it I hope that it will stir up some spirited conversation... really, the two would be pretty similar were it not for the flattish period Bogle calls "the fall" (in his chapter title, "the rise, the fall, and the renaissance...").
Source
Fidelity Puritan, FPURX, blue; Vanguard Wellington, VWELX, orange.
Re: When we say Wellington has a track record of 85 years...
With Wellington versus other actively managed funds I feel confident that it will not wildy deviate from its core aims. It feels more like an index fund in terms of performing like a balanced index fund should but with some small performance boosts along the way. Coupled with low expenses. It has maintained more or less 60-70% stocks over the course of many years other than a few blips in the earlier half of its years. It also does not chase the trends like fidelity puritan does or have wide freedom to invest in whatever it wants or to speculate. Fidelity puritan just isn't as consistent like most active funds so I feel that even if it has outperformed over a long period it certainly can crash and burn at any moment.
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Re: When we say Wellington has a track record of 85 years...
Is the dip in equity somewhere around 2008 due to stocks losing their value and bond rising therefore taking up more of the fund or an active decision to change the ratio? How about at the end with it dipping a little? If they are messing with the ratio, one would want to know why. I don't think two smart fellows with 10-20 years experience are really that much better at timing the market than a fixed asset allocation portfolio is, hopefully it's just price fluctuations and not intentional market timing attempts.nisiprius wrote:
Where the tides of fortune take us, no man can know.
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Re: When we say Wellington has a track record of 85 years...
Just wanted to say thanks to all who shared their thoughts. I'm thoroughly buying into the index fund mantra, which caused me to reflect on the purpose/intent of my existing investments and tried to make Wellington fit, but couldn't. The reasons that I own the fund seem to run counter to the Boglehead principles of embracing passive management and not investing in something just because others say it's good (with all due respect to the fellow Bogleheads, who I've learned and continue to learn a lot from!).
I thinking that I might move my Wellington IRA money to Vanguard's Balanced fund--fully knowing and accepting that there is no LV tilt and that it is 60/40. To return to my intended allocation, I'll tinker around with my 401k to get more stocks and fewer bonds.
cheers!
jwf
I thinking that I might move my Wellington IRA money to Vanguard's Balanced fund--fully knowing and accepting that there is no LV tilt and that it is 60/40. To return to my intended allocation, I'll tinker around with my 401k to get more stocks and fewer bonds.
cheers!
jwf
If you aren't familiar with Mr. Bogle and his investment philosophy, then you don't know Jack!
Re: When we say Wellington has a track record of 85 years...
One of Taylor's favorite gems of advice is - "there are many roads to Dublin."juliewongferra wrote:The reasons that I own the fund seem to run counter to the Boglehead principles of embracing passive management and not investing in something just because others say it's good (with all due respect to the fellow Bogleheads, who I've learned and continue to learn a lot from!).
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Re: When we say Wellington has a track record of 85 years...
John C. Bogle divides the history of Wellington into three periods. These are section titles from his book:whatistiaa wrote:...The "growth of 10K" graphs are useful in certain situations, but it seems not ideal in this case when comparing the track record of two funds over long periods of time. It puts great emphasis on the start point. If you look at that same graph and start in 1985 instead of 1947, you see that Wellington comes out ahead over the 30 year period form 1985-2016 (despite lower stock allocation)...
1) The Rise: Solid Returns, Later Eroding (1929-1966)
2) The Fall: Wellington Fund's Nadir (1967-1978)
3) The Renaissance (1978-2012).
So what you are saying is that it was inappropriate to include Wellington's entire history (the thread is asking about the "track record of 85 years"), and that Wellington beat Puritan if you throw out the period of time during which Puritan beat Wellington.
You have to use a little left-brain and it would help if we had a way to slide the curves up and down vertically, but what's happening is clear enough. If we look at the space between the two funds, they track together at first, then they steadily diverge from about 1960 to 1985, then, as you say, they are parallel like railroad tracks.
But this speaks to the whole issue of exactly what owners of actively managed funds are supposed to do... as well as the original poster's question about what it means to talk about "Wellington" as having existed for 85 years.
During "the go-go years" Wellington did change management and philosophy, changes which were described as "modernizing" the fund and bringing it into accord with the "new era" by bringing in managers who understood it. Obviously this was a convincing premise--because Wellington was in fact convinced to adopt it. Would you, as a Wellington investor, known not to believe it?
Meanwhile, for whatever it is worth, during the period 1963-1978--Bogle's "later eroding" and "the fall," when Wellington was barely doing more than marking time, Puritan was continuing to make steady progress.
So what do we say? Should we include "the fall" as being an integral part of "the history of Wellington" and include it in the "track record?" Or should we say "we should only count the Wellington 'renaissance'" and thus talk only of Wellington as having a 38-year track record, not 85?"
I don't have any answers. You can't step twice into the same river. Or can we? Can we say that Wellington from 1978-today is "the same river" as Wellington from 1929-1966, but that Wellington from 1966-1978 was "a different river?"
The whole issue of long-term continuity is a puzzle, particularly in periods of time that are longer than manager tenures, or entire careers, or entire lifetimes.
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.