Is Everyone Still Positive on Wellesley?

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Chitowncameraman
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Is Everyone Still Positive on Wellesley?

Post by Chitowncameraman » Tue Sep 25, 2018 4:27 pm

We are retired and have 10% of our nest egg in Wellesley. Considering their average bond duration is 6.5 years and loses money every time the Fed raises interest rates, and it is expected that there will be another 4 or 5 more rate increases, why stay in it? That’s why I got out of the VG Total Bond Fund. What are our options?

Morningstar rates it 5 stars which gives me comfort, but I don’t like the bond situation. Do you passively hold it forever while in retirement? Do we just assume "they know what they're doing"? Here's a recent article extolling the benefits of Wellesley but the writer concerns himself with just bull and bear market issues, rather than the rising interest rate environment:

https://seekingalpha.com/article/420791 ... ds?page=13

What are your thoughts?

Thanks,

Nick

PFInterest
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Re: Is Everyone Still Positive on Wellesley?

Post by PFInterest » Tue Sep 25, 2018 4:30 pm

i dont hold actively managed funds, so no.
im also not old enough to hold Wellesley or Wellington in high regard.....

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vineviz
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Re: Is Everyone Still Positive on Wellesley?

Post by vineviz » Tue Sep 25, 2018 4:32 pm

If you expect to spend the money you have invested in Wellesley in the next five years, the stocks are a much bigger concern than the bonds.

If you don’t expect to sell the position in the next five years, the bonds are not a concern at all.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Ron Scott
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Re: Is Everyone Still Positive on Wellesley?

Post by Ron Scott » Tue Sep 25, 2018 4:32 pm

I don't like it because it attempts to select specific stocks out of the total mix. Stock pickers are not my thing. Plus it costs a lot more than buying a 2-fund portfolio and doing it yourself.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

MotoTrojan
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Re: Is Everyone Still Positive on Wellesley?

Post by MotoTrojan » Tue Sep 25, 2018 4:35 pm

Your given rationale for getting out of Total Bond doesn't quite add up, and your regard for Morningstar ratings is also concerning to me.

HEDGEFUNDIE
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Re: Is Everyone Still Positive on Wellesley?

Post by HEDGEFUNDIE » Tue Sep 25, 2018 4:38 pm

The last time the Fed raised rates significantly was March 2004 to December 2006. The Fed Funds rate went from 1% to 5.25% during this period.

Wellesley returned 7.2% CAGR during this time.

I’d say that’s pretty good performance.

https://www.portfoliovisualizer.com/fun ... F01%2F2006
Last edited by HEDGEFUNDIE on Tue Sep 25, 2018 4:42 pm, edited 1 time in total.

Mr.BB
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Re: Is Everyone Still Positive on Wellesley?

Post by Mr.BB » Tue Sep 25, 2018 4:40 pm

HEDGEFUNDIE wrote:
Tue Sep 25, 2018 4:38 pm
The last time the Fed raised rates significantly was March 2004 to December 2006. The Fed Funds rates went from 1% to 5.25% during this period.

Wellesley returned 7.2% CAGR during this time.

I’d say that’s pretty good performance.

https://www.portfoliovisualizer.com/fun ... F01%2F2006
+1
You stole my stats Hedge!..LOL
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

Grt2bOutdoors
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Re: Is Everyone Still Positive on Wellesley?

Post by Grt2bOutdoors » Tue Sep 25, 2018 4:40 pm

If your objective is to obtain consistent income with some appreciation over the long haul - not 5 or 6 quarters then it’s a fine fund. However, if you think you can second guess the manager/market because you know something they don’t- then funds are not for you. Look at your objectives, read and understand the fund charters, then decide what course you will take and stick with it.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

FactualFran
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Re: Is Everyone Still Positive on Wellesley?

Post by FactualFran » Tue Sep 25, 2018 4:51 pm

Q: Why stay with it?
A: Because I am a long-term buy and hold investor. My past experience at market timing was unsuccessful.

The Morningstar rating of 5 stars is based on past performance and does not indicate what the future performance will be.

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Phineas J. Whoopee
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Re: Is Everyone Still Positive on Wellesley?

Post by Phineas J. Whoopee » Tue Sep 25, 2018 8:34 pm

I don't think Vanguard's Wellesley Income Fund, VWINX, is terrible, but I have never been positive on it, let alone still. I can expectantly achieve the same with lower cost and more diversification by holding total stock plus bonds myself, in a proportion I determine based on my own personal needs.
PJW

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Sheepdog
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Re: Is Everyone Still Positive on Wellesley?

Post by Sheepdog » Tue Sep 25, 2018 8:49 pm

It is my main investment vehicle in retirement and has been for 20 years. 6 years with a loss in 40 plus years, I believe Yes, I am still positive.
It's not what you gather, but what you scatter which tells what kind of life you have lived---Helen Walton

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arcticpineapplecorp.
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Re: Is Everyone Still Positive on Wellesley?

Post by arcticpineapplecorp. » Tue Sep 25, 2018 8:50 pm

it's total return that matters, right?

You could have just as easily been complaining that after 2009 bonds have paid so little, why bother holding them? (as so many did when interest rates were close to zero). People were dumping bonds in favor of riskier assets even though the total return of a stock/bond portfolio was quite respectable.

Now people want to dump bonds because of rising interest rates, even though a diversified portfolio of stocks and bonds could be quite respectable.

By the way, the fed doesn't control the interest rates on the bonds you own. They only control the overnight rate at which banks lend to each other. So why be concerned with what the Fed does? The market decides what rates should be for bonds of varying durations.

Why did you choose this fund in the first place? What were your objectives? Have they been met? Do you suspect the Wellesley fund will not continue to meet its stated objective for some reason? Are you speculating? Market timing?

I don't choose active funds, but this one has been quite respectable for a very long time (40 years). It's fairly conservative 33% stock/ 67% bond. There's always risk, in stocks and bonds and wherever you put your money. The goal is to keep up with or beat inflation. There's no reason to think this fund won't continue to accomplish that. An allocation of 33/67 should yield 3%-4% over time (assuming 7% nominal stock return and 3% nominal bond return that'd yield 4.31% nominal actually). That's exceeding inflation right now and average inflation has been 3%-4% on average over time.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Chitowncameraman
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Re: Is Everyone Still Positive on Wellesley?

Post by Chitowncameraman » Wed Sep 26, 2018 8:46 am

Thanks everyone for your viewpoints. We will stay in Wellesley.

Nick

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