Vanguard Wellesley

[jasperhobbs]

How does everyone feel about this fund now? It has been slow to rebound from disastrous 2022. Has a great track record but wondering if this is a good hold fund for a 62 year old.

[Mr. Potter]

Obviously the answer is it depends.
If you want a fund that’s 35% stock/65% bonds then Wellesley is a fine choice, hopefully you’re able to get admiral shares price at the lower er .16bp. I’ve owned it in the past but sold it, you know you could just buy 35% TSM and 65% TBM and get similar results.

[AlmstRtrd]

How does everyone feel about this fund now? It has been slow to rebound from disastrous 2022. Has a great track record but wondering if this is a good hold fund for a 62 year old.

OP, do you understand what bond duration is and how it works? Duration is essentially a measure of the interest rate risk/sensitivity of a bond. It looks like Wellesley is just over 60% bonds with an average duration of roughly 8 years. If the interest rate on a bond with a duration of 8 goes up by 1% overnight, then the value of that bond drops by about 8%. The opposite is also true (if the interest rate on the same bond falls by 1% overnight, then that bond will go up in price by about 8%). Basically, when interest rates are rising as much and as fast as they did from March of 2022 to July of 2023, you should absolutely expect that bonds with a duration of 8 will get hit hard. Here is an article that shows the dates and amounts of recent Fed rate increases:

https://www.forbes.com/advisor/investin ... e-history/

It's important to realize that as Wellesley's bonds have been maturing over the last two years, they are being replaced by bonds that pay a higher rate of interest. So dumping Wellesley now that interest rates may have peaked would probably be a mistake. If interest rates stay the same, you'll see so-so returns from the bond side of the fund. If interest rates start to fall, you'll see strong returns from the bond side.

Sorry for the lecture, but as has been written on this site many times over the last two years, bonds are performing exactly as expected given the sharp rise in rates. Wellesley will probably do as advertised over a longer time frame.

[thedaybeforetoday]

It has been slow to rebound from disastrous 2022.

??
Wellesley is performing exactly as it is designed to perform, given it's heavy percentage of bond holdings.
Since you asked about Wellesley in 2020 and still have a similar question, you really should research the holdings, specifically the bond side, and you'll see why.

[jasperhobbs]

Tough crowd here.

[dbr]

Tough crowd here.

Investing is a tough business and is not safe. Alternatives such as savings accounts and CDs might be more suitable for many purposes.

But a better answer may well be to post more information following this suggested format:

viewtopic.php?t=6212

Picking funds is the last chore after a lot of other things are figured out.

[Harry Livermore]

How does everyone feel about this fund now? It has been slow to rebound from disastrous 2022. Has a great track record but wondering if this is a good hold fund for a 62 year old.

OP, do you understand what bond duration is and how it works? Duration is essentially a measure of the interest rate risk/sensitivity of a bond. It looks like Wellesley is just over 60% bonds with an average duration of roughly 8 years. If the interest rate on a bond with a duration of 8 goes up by 1% overnight, then the value of that bond drops by about 8%. The opposite is also true (if the interest rate on the same bond falls by 1% overnight, then that bond will go up in price by about 8%). Basically, when interest rates are rising as much and as fast as they did from March of 2022 to July of 2023, you should absolutely expect that bonds with a duration of 8 will get hit hard. Here is an article that shows the dates and amounts of recent Fed rate increases:

https://www.forbes.com/advisor/investin ... e-history/

It's important to realize that as Wellesley's bonds have been maturing over the last two years, they are being replaced by bonds that pay a higher rate of interest. So dumping Wellesley now that interest rates may have peaked would probably be a mistake. If interest rates stay the same, you'll see so-so returns from the bond side of the fund. If interest rates start to fall, you'll see strong returns from the bond side.

Sorry for the lecture, but as has been written on this site many times over the last two years, bonds are performing exactly as expected given the sharp rise in rates. Wellesley will probably do as advertised over a longer time frame.

Excellent summary.
Cheers

[alec]

If you want a balanced fund that focuses on large value stocks and more corporate bonds, then this fund is fine because the fund sticks to its strategy.

[TimeIsYourFriend]

How does everyone feel about this fund now? It has been slow to rebound from disastrous 2022. Has a great track record but wondering if this is a good hold fund for a 62 year old.

9 month drawdowns or more have been observed multiple times in its history with this fund:
2008 1 year 4 months (-18.82%)
2022 9 months (-14.75%)
1999 10 months (-8.44%)
1987 9 months (-8.04%)
1994 10 months (-7.15%)

Extended drawdown periods are to be expected no matter what the fund if the fund is taking enough risk for a decent long-term return. It is not a reason to suddenly question the fund and consider getting out of it. First, you want to understand why it did what it did and that is looking at the average duration of the bonds in the fund (6.7 years), what credit rating these bonds have (17.5% treasuries, rest corporates), what stocks the fund invests in (<100 large value stocks), and the general allocation of stocks to bonds (currently 37/63).

[tibbitts]

Tough crowd here.

The managers of Wellesley are probably also thinking "tough crowd" - referring to some of the people holding the fund, of course.

[farmecologist]

The short answer is...it is too late to sell Wellesley right now. The "damage" of rising interest rates has been done. Once interest rates start dropping ( hopefully this year ), the fund should benefit. If you could have seen the future a few years ago, that would have been the time to make a move. As we all know, nobody can see the future.

There are a few other threads about Wellesley. In fact, one of them was started by yours truly, with many of the same questions.

viewtopic.php?t=410524

I decided to stay the course, and am continuing to DCA into the fund.

[TimeIsYourFriend]

A lot of people talk about interest rates dropping this year solely based on the fed comments. But no one knows what inflation will do. Double dipping into high inflation is certainly possible and you have to be prepared for a roughly 7% drop in this fund for every 1% increase in rates AND the fed will raise rates to control inflation regardless of what they've said in the past. There's no certainty when a portfolio with, in this example, heavy in intermediate bonds, will recover. You have to accept that.

[Elysium]

How does everyone feel about this fund now? It has been slow to rebound from disastrous 2022. Has a great track record but wondering if this is a good hold fund for a 62 year old.

Yes, it is. Keep holding it if you already own it. You need to stay the course to get the benefits of those long term posted returns on the fund page.

[thedaybeforetoday]

Tough crowd here.

It’s true, as someone once told me, help doesn’t always have a smile on it’s face

[arcticpineapplecorp.]

How does everyone feel about this fund now? It has been slow to rebound from disastrous 2022. Has a great track record but wondering if this is a good hold fund for a 62 year old.

nobody asked, so i will...

in what type of account do you hold Wellesley?

[Cocoa Beach Bum]

Maybe the fund's manager, Wellington Management, has adopted an ESG-oriented investment thesis which has recently fallen out of favor?

[alec]

Maybe the fund's manager, Wellington Management, has adopted an ESG-oriented investment thesis which has recently fallen out of favor?

LOL. I highly doubt it. Rather, the higher dividend and large value stocks used in the fund have trailed the large growth stocks that have done well recently.

[Nohbdy]

If you want to hold some low cost active with a long track record and a value tilt it’s a good option.

According to m*, Wellesley is over 5% international. Something to think about.

When bond prices drop it’s a better time to buy.

[jasperhobbs]

How does everyone feel about this fund now? It has been slow to rebound from disastrous 2022. Has a great track record but wondering if this is a good hold fund for a 62 year old.

nobody asked, so i will...

in what type of account do you hold Wellesley?

Rollover IRA

[LaramieWind]

Maybe the fund's manager, Wellington Management, has adopted an ESG-oriented investment thesis which has recently fallen out of favor?

Thanks for this, I was unaware. I will be selling my very small stake in Wellington.

[Nowizard]

Not sure what the comment "tough crowd" means, but will take an anecdotal shot as a retired person. Over time during the accumulation years, we looked at bonds solely as protection, and there was a general relationship that bonds held steady or moved upward some when stocks did the reverse, so they performed as expected. Over the more recent past it appears to us, as long-term investors, that bonds have increasingly been purchased with higher expectations for return with expectations for minimal volatility. Moving from accumulation to anticipating disbursal phases brings different issues into focus, specifically preservation and personal "duration" estimates. As other posters have said, bond funds are currently doing just what they are supposed to do, but the difference may be the volatility that "feels" new for some. Quite literally, we compare bond fund duration to our own, something never in the picture previously. At age 81, is it reasonable to hold a fund that is "losing money" that will recover in about six years or so, perhaps sooner if interest rates drop? That is a question we have answered based on our circumstances. If the volatility and duration issues are primary, then you may currently be interested in CD's or some other asset with predictable return based on your own circumstances.

Tim

[connor]

If you want a balanced fund that focuses on large value stocks and more corporate bonds, then this fund is fine because the fund sticks to its strategy.

+1

OP: I have a big position in Wellesly and I feel fine. I believe in the merits of value stocks and corporate bonds. Sometimes, these sub-assets do better than a plain vanilla VTI/BND approach, and sometimes worse. If you bail when there is underperformance, you lock in the underperformance. If you stay the course, I think you'll be rewarded in the long term. But no one knows for sure. If tracking errors cause regrets, then a two-fund total market approach might be better from an emotional/behavioral standpoint.

[Hacksawdave]

Maybe the fund's manager, Wellington Management, has adopted an ESG-oriented investment thesis which has recently fallen out of favor?

I own the sister fund Wellington in my Roth IRA. Wellesley is more of an income “Cokes and Smokes” industrial kind of portfolio and really would not be considered an ESG fund. Look at the holdings.

It is working as designed. Having it owned in a tax-deferred or Roth space is appropriately located.

[arcticpineapplecorp.]

How does everyone feel about this fund now? It has been slow to rebound from disastrous 2022. Has a great track record but wondering if this is a good hold fund for a 62 year old.

nobody asked, so i will...

in what type of account do you hold Wellesley?

Rollover IRA

ok, so the good news is there's no tax implications if you switch to something else.

what are you considering switching to?

[sambb]

If you want long term high returns then you want a stock index. I think these balanced funds are doing as expected.

[InvestorHowie]

My mom is retired and has a significant percentage of her portfolio in Wellesley and Wellington. Yes, the ride has been bumpy the last couple years but as others have already mentioned the ride up looks a lot brighter from here. Of course nobody knows for sure but she's chosen to ride it out and I agree with her.

[GaryA505]

If I found out today that the only thing I could invest in was Wellesley it wouldn't bother me a bit.

[jasperhobbs]

Not sure what the comment "tough crowd" means, but will take an anecdotal shot as a retired person. Over time during the accumulation years, we looked at bonds solely as protection, and there was a general relationship that bonds held steady or moved upward some when stocks did the reverse, so they performed as expected. Over the more recent past it appears to us, as long-term investors, that bonds have increasingly been purchased with higher expectations for return with expectations for minimal volatility. Moving from accumulation to anticipating disbursal phases brings different issues into focus, specifically preservation and personal "duration" estimates. As other posters have said, bond funds are currently doing just what they are supposed to do, but the difference may be the volatility that "feels" new for some. Quite literally, we compare bond fund duration to our own, something never in the picture previously. At age 81, is it reasonable to hold a fund that is "losing money" that will recover in about six years or so, perhaps sooner if interest rates drop? That is a question we have answered based on our circumstances. If the volatility and duration issues are primary, then you may currently be interested in CD's or some other asset with predictable return based on your own circumstances.

Tim

No offense meant with tough crowd comment but this forum does seem to have a lot of long term posters that are not real welcoming to newcomers. I guess I have to earn my stripes.

[HanSolo]

How does everyone feel about this fund now? It has been slow to rebound from disastrous 2022. Has a great track record but wondering if this is a good hold fund for a 62 year old.

My answer is that I don't feel any different. I've held it for years (in an IRA) and continue to hold it. I think it's done reasonably well within the context of market conditions.

Another recent Wellesley thread (Aug-Dec 2023):

viewtopic.php?t=410524

[dh]

If I found out today that the only thing I could invest in was Wellesley it wouldn't bother me a bit.

Agreed. It is my core holding in my tax differed accounts. Obviously, Wellesley isn't as diversified as a target date retirement fund, but the higher dividend paying value stocks and corporate bonds "fit" my retirement account. I prefer to hold lower dividend paying growth stocks (think the top 10 holdings in the S&P 500) and index funds in my taxable brokerage account. Good luck making the decision that is right for you.

[bog007]

worst year 9% twice in 53 years . not bad

https://finance.yahoo.com/quote/VWinX/performance/

[gips]

How does everyone feel about this fund now? It has been slow to rebound from disastrous 2022. Has a great track record but wondering if this is a good hold fund for a 62 year old.

People are being tough on you because this forum tries to turn typical investor behavior on its head. Most investors see a security with a sharp price price increase and say "Ooh, I have to buy that!" and conversely, when the security suffers a sharp price decrease, they say "Oh no, have to sell that!". So most people end up buying high and selling low.

here on Bogleheads, we think in terms of asset allocation: how much of our portfolio do we want to allocate to equities and how much to fixed income? For someone who is 62, a common asset allocation is somewhere between 40-60 and 60-40. Let's say you choose a 40-60 fixed income-to-equity allocation, we enter a bull market, and your equity allocation, by dint of price appreciation, moves your portfolio to 50-50 so you rebalance by selling equities and investing the proceeds in fixed income. Hey, you realized a gain and made money! Now let's say equities enter a bear run and they become 30% of your portfolio, you sell bonds and buy equities. looking at both use cases, you sold equities high and bought equities low, just the opposite of typical investor behavior.

So really, the replies you received to date about not selling Wellsley are well-intentioned but miss the mark. The important questions to ask yourself are:
- at 62, what is your desired asset allocation?
- what is your current asset allocation?
- what's the optimal way of moving to your desired asset allocation? This may or may not involve selling wellsley

best,

[Metsfan91]

How does everyone feel about this fund now? It has been slow to rebound from disastrous 2022. Has a great track record but wondering if this is a good hold fund for a 62 year old.

I feel still same about this fund as I did before. It is a good fund. I have Wellington in my taxable. If I wanted to go more conservative, I’d be exchanging Wellington for Wellesley. Both Wellington and Wellesley are managed by the same Wellington group.

[dcop]

Own it for the last 6 years. Very happy with the total return which is all I care about. Not sure if you're just talking about the NAV but that gets stunted by divs and CG payouts.

[unwitting_gulag]

Not sure what the comment "tough crowd" means, but will take an anecdotal shot as a retired person. Over time during the accumulation years, we looked at bonds solely as protection, and there was a general relationship that bonds held steady or moved upward some when stocks did the reverse, so they performed as expected. Over the more recent past it appears to us, as long-term investors, that bonds have increasingly been purchased with higher expectations for return with expectations for minimal volatility. ...

No offense meant with tough crowd comment but this forum does seem to have a lot of long term posters that are not real welcoming to newcomers. I guess I have to earn my stripes.

As Nowizard notes, bonds get looked-at, as protection. For some of us, there was perhaps naïve expectation, that while bonds can't be expected to match the cumulative return of stocks over the long term, they're exquisitely good at (1) tamping down volatility, and (2) having negative correlation with stocks. 2022 was aberrant, in that bonds did as badly as stocks. They were highly correlated, and just as volatile. They failed in both naïve expectations. I never held Wellesley, but at present find myself seriously wondering - as have people on many recent threads - whether bonds make any sense whatsoever. In other words, instead hold X% in equities, and 100-X% in cash or cash-equivalents, skipping bonds entirely. While I'm not convinced that this is the magical formula going forward, it does feel increasingly attractive.

The "toughness" of the crowd is perhaps prompted by expression of desire for quick remedy, for an algorithm for how to compensate for recently tumultuous times. The crowd recoils from any lament about mere recency, because the "recent" by definition is evanescent and ought not to either dissuade or encourage us. So much of course is true. But 2022 punctured illusions. Sure, it was freakish and brief. But now that the illusion is gone, we have long-term cause - serious, well-reasoned long-term cause - to reevaluate our allocations. I don't think that the crowd would be "tough", in mulling that.

[jasperhobbs]

How does everyone feel about this fund now? It has been slow to rebound from disastrous 2022. Has a great track record but wondering if this is a good hold fund for a 62 year old.

nobody asked, so i will...

in what type of account do you hold Wellesley?

Rollover IRA

ok, so the good news is there's no tax implications if you switch to something else.

what are you considering switching to?

An advisor suggested an annuity, but I'm not sold on annuities.

[arcticpineapplecorp.]

An advisor suggested an annuity, but I'm not sold on annuities.

be careful here. Without knowing what type of annuity the "advisor" is trying to sell you, an advisor who's suggesting annuities is usually not a fiduciary and likely is trying to get paid to sell you something (an insurance product).

Do you use this advisor for your other assets? If so, you should know this advisor likely does not have to put your interests ahead of him and may be more salesman than advisor.

What are/were you trying to achieve with Wellesley? Are you looking to draw income from this and if so, when? You don't have to draw RMDs yet, but will in the future so what is your plan for this account between then and now, and even thereafter?

[jasperhobbs]

An advisor suggested an annuity, but I'm not sold on annuities.

be careful here. Without knowing what type of annuity the "advisor" is trying to sell you, an advisor who's suggesting annuities is usually not a fiduciary and likely is trying to get paid to sell you something (an insurance product).

Do you use this advisor for your other assets? If so, you should know this advisor likely does not have to put your interests ahead of him and may be more salesman than advisor.

What are/were you trying to achieve with Wellesley? Are you looking to draw income from this and if so, when? You don't have to draw RMDs yet, but will in the future so what is your plan for this account between then and now, and even thereafter?

Would be drawing from it in 4-5 years. Leaning towards letting it ride. Totally ditched the advisor pushing the annuity as he was starting to become like a used car salesman. Talked to another person regarding annuities for another perspective and I think we would be just fine doing a 2% withdrawal from retirement accounts and no annuity.

[dbr]

An advisor suggested an annuity, but I'm not sold on annuities.

be careful here. Without knowing what type of annuity the "advisor" is trying to sell you, an advisor who's suggesting annuities is usually not a fiduciary and likely is trying to get paid to sell you something (an insurance product).

Do you use this advisor for your other assets? If so, you should know this advisor likely does not have to put your interests ahead of him and may be more salesman than advisor.

What are/were you trying to achieve with Wellesley? Are you looking to draw income from this and if so, when? You don't have to draw RMDs yet, but will in the future so what is your plan for this account between then and now, and even thereafter?

Would be drawing from it in 4-5 years. Leaning towards letting it ride. Totally ditched the advisor pushing the annuity as he was starting to become like a used car salesman. Talked to another person regarding annuities for another perspective and I think we would be just fine doing a 2% withdrawal from retirement accounts and no annuity.

A primary purpose of an SPIA annuity (avoid all others) is to manage longevity risk by relying on an insurance pool that allows the long lived annuitants to live on the money abandoned by the short lived annuitants. A person expecting to rely on investments for only a 2% withdrawal rate has so much money relative to need that longevity risk does not exist. Some people seem to like the idea of using the annuity to automate withdrawals, which a person might want, at least they might want it if they fear losing control of cash management such as due to disability or in the case of spendthrift risk.

[bradinsky]

Other than a MYGA or SPIA, most here believe that annuities are a hoser deal. Run away if that is high on a salesperson’s list.

[welderwannabe]

Tough crowd here.

I think all of the responses above this post were respectful, educational, and also correct. If you're looking for educated opinions you came to the right place. If you're looking for pompoms and cheerleaders that will validate your past decisions you didn't.

As to your question, I do not think Welsey is appropriate for a 62 year old. I believe 65% bonds is too many bonds for any age bracket. I may be in the minority in that thinking, but you asked.

I vastly prefer something closer to a 60% stocks 40% bonds allocation for ones entire life. Its a single AA that can take you from cradle to grave.

So something like this:
VBIAX Vanguard Balanced Index Fund Admiral Shares

or this:
VSMGX Vanguard LifeStrategy Moderate Growth Fund

[arcticpineapplecorp.]

Tough crowd here.

I think all of the responses above this post were respectful, educational, and also correct. If you're looking for educated opinions you came to the right place. If you're looking for pompoms and cheerleaders that will validate your past decisions you didn't.

As to your question, I do not think Welsey is appropriate for a 62 year old. I believe 65% bonds is too many bonds for any age bracket. I may be in the minority in that thinking, but you asked.

I vastly prefer something closer to a 60% stocks 40% bonds allocation for ones entire life. Its a single AA that can take you from cradle to grave.

So something like this:
VBIAX Vanguard Balanced Index Fund Admiral Shares

or this:
VSMGX Vanguard LifeStrategy Moderate Growth Fund

I'll respectfully disagree only to the extent that the target date income funds at Vanguard (and most target date funds) get to 30/70 around 7 years past the target date and stay there the rest of one's life. Vanguard has determined that a 30/70 portfolio can at least keep with inflation, historically between 3-4% and last for 25 year withdrawals with a high degree of probability (somewhere between 93%-100% certain):

[welderwannabe]

I'll respectfully disagree only to the extent that the target date income funds at Vanguard (and most target date funds) get to 30/70 around 7 years past the target date and stay there the rest of one's life. Vanguard has determined that a 30/70 portfolio can at least keep with inflation

And Vanguard and other advisors positions on what a proper AA, including the allocation to international stocks and bonds, have changed throughout the years. Some I suspect is to add money into new funds so they can look successful and give them a launch pad.

The target retirement income fund, which is the fund all these target dates turn into in retirement has changed quite a bit. It used to be 5% cash (specifically in their prime money market fund if you remember that one), 75% bonds, 20% stocks. It also held 0 international stocks or bonds.

So was Vanguard right then, or are they right now? Not sure. Im sticking with a 60/40.

[edge]

You may want to consider shorter duration / higher quality bond holdings.

[Sageegirl]

Have held this fund in my IRA for quite a few years now. We appear to have weathered the interest rate rise and if so, the future looks pretty good for the bond allocation, and at age 85 it fits with whatever "game plan" I have left.

[tibbitts]

You may want to consider shorter duration / higher quality bond holdings.

You might want to clarify whether you're suggesting that for any future investments or suggesting moving the existing bond holdings in Wellesley to shorter duration / higher quality.

[edge]

Whichever works for the OP. If it was me and I had this aversion to the bonds in Wellesley, I would exit the fund entirely and separate fixed income and equity holdings. For the FI portion I would choose shorter / higher quality.

You may want to consider shorter duration / higher quality bond holdings.

You might want to clarify whether you're suggesting that for any future investments or suggesting moving the existing bond holdings in Wellesley to shorter duration / higher quality.

[Artsdoctor]

Tough crowd here.

Don't take it personally. You can read between the lines and see the positive interpretations:

1. You mentioned a decent track record in Wellesley's past but many long-term investors are weary of using past performance to make significant decisions going forward.

2. Make sure that you understand what you're investing in and why. Wellesley is an interesting fund and you could do far worse. However, you should understand that investing in value stocks may not necessarily pay off in the long run, and investing in intermediate-term corporates in a volatile interest rate environment can be unnerving if you think you'll need the money in the next couple of years. So although Wellesley is a "conservative" fund, it does have risk.

Don't invest in Wellesley unless you can actually explain why. Once you can do that, everything should fall into place.

[jasperhobbs]

Not looking to withdraw until 2027. Want a conservative fund that hopefully averages 4 or 5 percent. Have other more aggressive funds for growth. Just want portion of portfolio less risky.

[alec]

Not looking to withdraw until 2027. Want a conservative fund that hopefully averages 4 or 5 percent. Have other more aggressive funds for growth. Just want portion of portfolio less risky.

For only 3 years, you may want to consider treasury notes, which are yielding 4-5%.