Was Wondering Why Windsor/Wellesley/Wellington?

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Boglenaut
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Was Wondering Why Windsor/Wellesley/Wellington?

Post by Boglenaut »

Excuse all the W's, but I was wondering why I hear these funds mentioned so often? I know they have been around a very long time so acquired a lot of assets over time. I also know that for active funds, they have low Expense Ratios.

But when I screen for funds, they never even make the first cut. There always seem to be "better" (cheaper, more diversified) index funds that beat them out. So, my question for those that hold these funds, why? I believe John Bogle mentioned he held one of them, but more for sentimental reasons (very understandable for him).

Here are the Funds, Total size, Admiral ER, and year started:

Stock (Large Cap Value)
Vanguard Windsor Fund - $17.3 billion 0.27% 1958
Vanguard Windsor II Fund - $47.6 billion 0.28% 1985

Blend (39/61 Stock/Bond)
Vanguard Wellesley Income Fund - $36.0 billion 0.18% 1970

Blend (~66/34 Stock/Bond)
Vanguard Wellington Fund - $82.1 billion 0.18% 1929


PS - I don't tilt Value...is that what I am missing?
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Boglenaut
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by Boglenaut »

I see part of my answer was just posted yesterday (I actually thought of my question last week, just didn't want to type it up while on my iPad):

http://www.bogleheads.org/forum/viewtop ... st=2023616
I chose Wellington because it's a very stable fund, that has produced good results for several decades.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by Kenkat »

An index fund is almost always going to be cheaper and more diversified than an active fund, so if that's your screening criteria, that would explain the result. If you screen by performance, Wellington beats all of the other Vanguard balanced funds over the past 10 years and most of them over the past 5. When I've looked at this comparison in the past, the numbers showed basically the same.

Windsor II has slightly beaten Value Index and Index 500 over the past 10 years, although it has trailed Total Stock Index.

Wellesley Income is somewhat unique as it is one of the few income-oriented funds that still also holds some stocks, so it is hard to compare.

These funds are popular because they are solid performers. The low cost factor really trumps the index vs. active factor. Low cost, low turnover is what really matters.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by Boglenaut »

Thanks, Ken.

You are right... I don't really look at performance of the funds as much as the index behavior. So that is why I never looked at them and they get screened out right away.

Do you suspect Bogleheads would hold them in lower proportion than the non-Boglehead population?
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by CyberBob »

Bogle does own the Vanguard Wellington fund:
John Bogle wrote:I own a lot because I started working at Wellington Management in 1951. We had a defined contribution pension plan, and 15% of my compensation went into that plan, which is entirely the Wellington Fund. I've been accumulating it for 60 years and I'm not about to stop.
I've kept the original legacy position for two reasons. One, that was the fund I was brought up with. Two, its founder, Walter Morgan, gave me my job at Wellington. I owe it to him.
But Bogle also admits that Wellington isn't the magical fund some people think it is:
John Bogle wrote:In Wellington Fund's case, in the last decade 97% of its return has been determined by the return of the index I put together for them in 1978.
http://news.investors.com/investing-mut ... ut.htm?p=3

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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by keanwood »

Well to start off I would say that if Wellesley and Wellington were the only funds you had access to life would be alright. You could do just fine with those two.

As to why they have so much invested in them when there are cheaper, more diversified index funds from vanguard and others available; I think the reason is two fold.

First, a lot of that money is probably old money. I mean there must be countless people who invested in those funds their whole life and then retired with them. What incentive could you possible offer those people to change?

Second, the names Wellesley and Wellington really role of the tongue nice. I mean just picture talking to your friends while sipping on nice whisky smoking a good cigar talking about your portfolios. "Yes that Wellington chap sure knows how to invest my money. Damn good job I say." But seriously 'Wellington' does sound nicer than 'Total Stock Market'; just roles off the tongue.


I imagine that in the intermediate future the funds will be closed (30-100 years) because vanguard will just phase them out in favor of there other funds.

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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by nisiprius »

I think tradition and history. All of them antedate the 500 Index fund and all of them antedate Vanguard. 07/01/1970 for Wellesley, 10/23/1958 for Windsor, and, of course, 07/01/1929 for Wellington. They belong to the world of Ye Olde Days of actively managed funds and fund names that tell you nothing. (Vanguard was a pioneer in naming funds that told you what was in them, a clever competitive marketing move because by making funds sound more generic draws attention to expense as a distinguishing feature).

They are also big funds. If this odd-looking web page is correct, Wellington is the largest of Vanguard's actively managed funds. It has $82 billion.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by Kenkat »

Boglenaut wrote:Do you suspect Bogleheads would hold them in lower proportion than the non-Boglehead population?
You know, I have no idea. I really only have two datapoints to work from. Datapoint 1 is based on posts here; I would say most posters here would tend much more strongly towards index funds than the average Vanguard investor. Datapoint 2 is based on meetings with local Bogleheads, which is a much smaller sample, but in that situation, people were all over the board. No one really held 100% index funds but rather a wide mix of all kinds of investments, including individual stocks, active and index funds of all types, ETF's, bonds - almost anything you can think of.

I don't think there are really any truly bad choices in the Vanguard fund lineup.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by nedsaid »

I haven't owned these funds myself but the folks on this forum who own them are very pleased. There is a lot to be said for funds that deliver consistently good and steady returns over time. Sometimes the "stodgy" funds are the best. Boring as heck but over time deliver really good results.

Windsor was managed by the legendary John Neff, who I mentioned in another post. I think he retired about 1998 or 1999. But he and his successors have done a good job. Steady, reliable, nothing flashy.

Wellesley and Wellington are balanced funds, one is 40/60 and the other 60/40 or thereabouts. Balanced funds in general are pretty darned good investments. Boring, steady, generate income. Enough bonds in there to dampen the volatility of the stock portion of the portfolio. Add to that the excellent management of these two funds. Something that you could recommend to your elderly mother.

I own a couple of balanced funds (though one is actually a World Allocation Fund but close enough) and have been really pleased with both of them. And also own one of the Fidelity Freedom funds as well. A good mix of stocks and bonds make for a really good, steady investment.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by jlawrence01 »

Couple points:

1) I do not plan on liquidating my positions in Wellington and Windsor II any time soon. To do so would generate some major capital gains. The funds have done well and I have held on to them 15+ years. I have not invested much in them recently.

2) If I was going to invest more in a value fund like Windsor II, I would rather invest it in the Select Value Fund. It seems like they keep dividing Windsor II among more managers.

3) If you held a gun to my head and limited my investments to one fund, it would be Wellington. They seem to capture a good portion of market returns with less risk, just like balanced funds should.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by gwrvmd »

Several people in the thread have got the reasons right: slow, steady, excellent long term performance with low expenses
I bought Windsor in 1978, loved it, bought Windsor 11 in 1986 just after it came out. Still own them both, that's 36 years for Windsor
and 28 for Windsor 11, how many investments have you kept and been happy with for 36 years?
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by 500Kaiser »

Another reason for balanced funds in general, is that as I get older, the risk that something happens to me, and that my spouse will need to take care of our investments is a huge concern. This drives me away from some of the things I do today like REIT or SCV or rebalancing bands, etc. etc.

She has zero interest in this stuff, so even rebalancing a three fund portfolio is not gonna happen. So, getting things setup over time for her, and to not have some charlatan swoop in and take advantage if I am not in the picture is one of my biggest concerns. Balanced funds are going to be a part of how I mtigate this.

In terms of the W's relative to other balanced funds like life strategy or target retirement...... The expenses are about the same, i prefer how they approach bonds better, and i like the focus on dividends. There are a number of things I dont like with the lifestrategy and target retirement funds.

What stage of life one is at changes things and what types of investment vehicles one might need, desire, and use. W's make sense for me now, but did not so in the past. I am turning into an elderly stodgy grandfather!
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by Angelus359 »

What I find really interesting is that wellington has consistently beaten vanguard balanced index fund year over year by nearly 2%.

Balanced index is 40% total bond market, while wellington is 30-40% corporates. Balance index uses total stock market, while wellington uses 100 value largecap stocks.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by Mike Scott »

One thing I find very interesting is that the long term return between the two big W's is very similar despite their different stock:bond ratios. I don't know if this reflects similarities in the way they are managed or just shows that this is one of the reasons for long term buy/hold strategy because you don't know which one will be best over the long haul.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by Johm221122 »

Angelus359 wrote:What I find really interesting is that wellington has consistently beaten vanguard balanced index fund year over year by nearly 2%.

Balanced index is 40% total bond market, while wellington is 30-40% corporates. Balance index uses total stock market, while wellington uses 100 value largecap stocks.
Using Vanguard site, I don't see this.Yes 10 year is close to 2 %.But other time periods way less than 2%.Picking one time period is not very reliable prediction on future.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by investor »

fund ytd 3y 5y 10y 15y (returns in %)

vbinx 2.03 10.32 14.10 6.81 5.44 Balanced Index

vwelx 2.76 11.09 15.07 8.06 7.48 Wellington

using Morningstar growth of $10K
from 11/09/1992 till 04/09/2014
VBINX grew to $55009.90
VWELX grew to $74776.71

source Morningstar

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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by nisiprius »

I haven't checked recently and I can't say I understand it and it's not called out as a specific feature of Wellesley, but at one point it looked to me as if Wellesley were the only Vanguard balanced fund that delivers roughly equal-sized dividends every quarter. So if you want to put your retirement on autopilot, it probably works better than Target Retirement Income or LifeStrategy Income.

This is not to say it is theoretically any better than setting those two for "reinvest," and setting up an automatic periodic withdrawal of some dollar amount that needs to get periodically reviewed and readjusted, or that it is theoretically any better than Managed Payout. But since I don't like the investment strategy behind Managed Payout, I can personally see using Wellesley for convenience.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by barnaclebob »

I bought wellesley up to the point of admiral shares because it was my close to being my first taxable investing and I wanted one fund that was relatively stable to use as a quasi emergency fund. I've since changed the dividends to be invested elsewhere and let is sit as it is.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by RyeWhiskey »

barnaclebob wrote:I bought wellesley up to the point of admiral shares because it was my close to being my first taxable investing and I wanted one fund that was relatively stable to use as a quasi emergency fund. I've since changed the dividends to be invested elsewhere and let is sit as it is.
Interesting choice given how tax inefficient the fund is. Wellesley sports a 15-Yr tax cost ratio of 1.67 (data from M*); given that it's currently yielding 3.12%, that's about half the yield gone to taxes. Any reason why you chose this over a treasury fund or a muni fund?
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by Boglenaut »

RyeWhiskey replied wonderfully "Re: Was Wondering Why Windsor/Wellesley/Wellington?"
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by bertilak »

RyeWhiskey wrote:
barnaclebob wrote:I bought wellesley up to the point of admiral shares because it was my close to being my first taxable investing and I wanted one fund that was relatively stable to use as a quasi emergency fund. I've since changed the dividends to be invested elsewhere and let is sit as it is.
Interesting choice given how tax inefficient the fund is. Wellesley sports a 15-Yr tax cost ratio of 1.67 (data from M*); given that it's currently yielding 3.12%, that's about half the yield gone to taxes. Any reason why you chose this over a treasury fund or a muni fund?
In a lower tax bracket it will not be as bad as that. Nor will it matter in a tax-advantaged account (e.g. IRA).

EDIT: I see barnaclebob was talking about a taxable account so for him the IRA comment doesn't apply, but the OP didn't mention taxable vs tax-advantaged. The OP was a more general question.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by barnaclebob »

bertilak wrote:
RyeWhiskey wrote:
barnaclebob wrote:I bought wellesley up to the point of admiral shares because it was my close to being my first taxable investing and I wanted one fund that was relatively stable to use as a quasi emergency fund. I've since changed the dividends to be invested elsewhere and let is sit as it is.
Interesting choice given how tax inefficient the fund is. Wellesley sports a 15-Yr tax cost ratio of 1.67 (data from M*); given that it's currently yielding 3.12%, that's about half the yield gone to taxes. Any reason why you chose this over a treasury fund or a muni fund?
In a lower tax bracket it will not be as bad as that. Nor will it matter in a tax-advantaged account (e.g. IRA).

EDIT: I see barnaclebob was talking about a taxable account so for him the IRA comment doesn't apply, but the OP didn't mention taxable vs tax-advantaged. The OP was a more general question.
Basically I didn't know any better. The extra taxes over the equivalent TSM/TBM combination are costing me about $200 a year by my rough calculations. I may get around to changing it at some point, especially if bond yields increase.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by sschullo »

nedsaid wrote:I haven't owned these funds myself but the folks on this forum who own them are very pleased. There is a lot to be said for funds that deliver consistently good and steady returns over time. Sometimes the "stodgy" funds are the best. Boring as heck but over time deliver really good results.

Windsor was managed by the legendary John Neff, who I mentioned in another post. I think he retired about 1998 or 1999. But he and his successors have done a good job. Steady, reliable, nothing flashy.

Wellesley and Wellington are balanced funds, one is 40/60 and the other 60/40 or thereabouts. Balanced funds in general are pretty darned good investments. Boring, steady, generate income. Enough bonds in there to dampen the volatility of the stock portion of the portfolio. Add to that the excellent management of these two funds. Something that you could recommend to your elderly mother.

I own a couple of balanced funds (though one is actually a World Allocation Fund but close enough) and have been really pleased with both of them. And also own one of the Fidelity Freedom funds as well. A good mix of stocks and bonds make for a really good, steady investment.
Yes! I want to emphasize that the boring and stodgy "actively managed" funds mentioned here because they follow a strategy, swapping out the value oriented stocks when necessary and selling matured bonds and purchasing new ones. That's all they do. The managers are not trying to beat the market.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by White Coat Investor »

Hard to argue with a fund that survived the great depression and has a long, long track record of great returns and a low ER.

I don't hold it, but it's tough to fault someone who does. Certainly it is one of many "good" investing strategies as outlined in my post here:

http://whitecoatinvestor.com/150-portfo ... han-yours/
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by Dancer »

RyeWhiskey wrote:
barnaclebob wrote:I bought wellesley up to the point of admiral shares because it was my close to being my first taxable investing and I wanted one fund that was relatively stable to use as a quasi emergency fund. I've since changed the dividends to be invested elsewhere and let is sit as it is.
Interesting choice given how tax inefficient the fund is. Wellesley sports a 15-Yr tax cost ratio of 1.67 (data from M*); given that it's currently yielding 3.12%, that's about half the yield gone to taxes. Any reason why you chose this over a treasury fund or a muni fund?
I also own Wellesley in taxable. Wanted a conservative balanced fund, and liked the 40/60 ish allocation. Target Retirement Income was a little low on stocks and high on TIPS for me. I think there was something I didn't like about Lifestrategy Concervative Growth at the time I invested (an asset allocation fund or some such.) Plus I like(d) the Value tilt and track record.

I also don't re-invest dividends and recently paired it with Total World for my two fund taxable portfolio (plus some iBond.)
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by Angelus359 »

I bought wellington because it seemed like a better idea that being the idiot I am.

I also am a bit risk adverse, and seeing things fluctuate less, is less stressful for me.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by Dandy »

Wellington and Wellesley are often given a "free" pass by many on this forum that usually pans active managed funds. Free pass may not do them justice since they do have very good track records and relatively low expenses/turnover. They do not fit the basic Boglehead model of low cost, broadly diversified, passively managed funds. I have about 1/2% in Wellesley and it performs nicely.

I will probably not keep my Wellesley investment since I want to adhere more to the conventional model going forward. I hope to be as satisfied as the Wellington and Wellesley shareowners.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by Ivygirl »

Wellington is going to be the main fund in my Roth IRA. Analysis is not my strong point. I looked at all the funds, read all the pure indexing posts on Bogleheads, perused investing books - and reverted to my preferred way of making decisions. I asked myself, "If I were my money, where would I like to hang out for the next 30 years?" And the answer was Wellington. Though I also hold a REIT fund, VGSIX, in my Roth IRA.

I have a non-Vanguard bond fund (my only bond choice) and Vanguard Equity Income and Vanguard Extended Market Index in my 401(k), because Wellington is not available. Perhaps I should add some small-cap value or international.
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Re: Was Wondering Why Windsor/Wellesley/Wellington?

Post by cfs »

All of the above

All of them are good. I see that Ivygirl is going with Wellington as the main fund for her Roth IRA. The important thing here is making a decision on the investment, and then holding that investment during the ups and downs of the market, finding "perfection" is hard or even impossible to do (the perfect combo is the one that allows you to sleep well at night, so the pillow test is very important in our investment decisions). Good luck to everyone investing in one or all three of the Ws.

Thanks for reading this note.
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