Question about Wellington and Wellesley

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
beammeupscotty
Posts: 181
Joined: Thu Jan 21, 2010 8:13 am
Contact:

Re: Question about Wellington and Wellesley

Post by beammeupscotty » Wed Apr 30, 2014 2:59 pm

dkturner wrote:Congrats! I did a quick check of the returns, unrebalanced, over the last 15 years and you win. I not going to hold it against you that 61% of your portfolio is actively managed (VFITX). 39% indexed is close enough. :beer
If you want to believe that this portfolio beat Wellesley only because the bond portion is technically not indexed, be my guest. It's more diversified and amenable to tax efficiency than Wellesley, has a lower expense ratio, and has no manager risk to speak of. I like Wellesley and owned it for years, but it has no secret sauce.
Last edited by beammeupscotty on Wed Apr 30, 2014 3:02 pm, edited 1 time in total.

User avatar
ogd
Posts: 4854
Joined: Thu Jun 14, 2012 11:43 pm

Re: Question about Wellington and Wellesley

Post by ogd » Wed Apr 30, 2014 3:00 pm

VPP, dkturner, others: if invalidating the boglehead premises was as simple as "check out the performance of this fund", we'd be in trouble. As in, we'd be on Morningstar forums agonizing over the latest FPACX reports, a fund which has handily outperformed the W funds, btw. The darker side of the story is we'd probably be refugees from the Fairholme forum, having sold out of that fund in 2011 at 30+% losses because "its approach is no longer working" after years of stellar performance. I consider that trouble.

I repeat: the reason that the W funds are good is the low cost, the steadfastedness, and suitability as a core holding for most people. The tactical allocation allowance of the funds is not an asset, it's a slight liability to each of these three points, and so is the active management. The funds do not invalidate the core tenets of indexing, quite the contrary -- by sticking close to what makes indexing and stay-the-course asset allocation a good thing, the management teams have done well and are well liked by many. I hope this continues and I do believe it's quite likely considering the primary customer / employer of that management :sharebeer

VPP
Posts: 65
Joined: Sun Apr 13, 2014 6:40 am

Re: Question about Wellington and Wellesley

Post by VPP » Wed Apr 30, 2014 3:17 pm

I won't argue the numbers too much but when I run 85-2013 using 5yr t bills the numbers are neck and neck (Wellsley(9.99), other(9.45) and just as close for 2000-2013. Yes, those four indexes seem to be a nice combo but first you had to think of the combo then you have to track and rebalance four funds when you could do it with one. After much reading of this forum, it is plain to see that we have some incredilbly bright people contributing. However, I also think, we all can overkill all of this sometimes. So I like to break it down to the easiest way to get it done. I have seen people post about 20 different funds which is not good. It is a great discussion and my main point is that you need another reason to bang Wellesley besides "management" because it has an amazing record that transcends managers. I am using Wellesley as the cash portion of a PP portfolio and it works extremely well. When there is a fire sale on the S&P, I will move some from gold and long bonds. Thanks all, you do good work.

dkturner
Posts: 1348
Joined: Sun Feb 25, 2007 7:58 pm

Re: Question about Wellington and Wellesley

Post by dkturner » Wed Apr 30, 2014 3:18 pm

beammeupscotty wrote:
dkturner wrote:Congrats! I did a quick check of the returns, unrebalanced, over the last 15 years and you win. I not going to hold it against you that 61% of your portfolio is actively managed (VFITX). 39% indexed is close enough. :beer
If you want to believe that this portfolio beat Wellesley only because the bond portion is technically not indexed, be my guest. It's more diversified and amenable to tax efficiency than Wellesley, has a lower expense ratio, and has no manager risk to speak of. I like Wellesley and owned it for years, but it has no secret sauce.
I should have added a "wink" rather than a beer. I started using Wellesley last year in place of my Equity Income Fund (which I had held for nearly 14 years) and Intermediate-Term Investment Grade Fund.

Johm221122
Posts: 5072
Joined: Fri May 13, 2011 6:27 pm

Re: Question about Wellington and Wellesley

Post by Johm221122 » Wed Apr 30, 2014 7:48 pm

dkturner wrote:
Johm221122 wrote:
VPP wrote:  The managers have the ability to adjust the bonds and stocks enough to get through anything.
This is the wrong reason to invest in active fund If fund meets your investment goals and style is a better reason.But managers come and go, along with there ability to overperform the market

John
Over the last 44 years the managers of the Wellesley Income Fund have come and gone time and time again, but the fund continues to crank out superior risk adjusted returns. Probably just lucky? :wink:
Try this past post by Nisiprius
http://www.bogleheads.org/forum/viewtop ... wellington


"There's no compelling argument for not holding it. It's a low-priced, well-managed fund. The general opinion here from the cognoscenti is that outperformance is explained mostly by its asset styles, not by management magic.

Here's the point: you only get the long-term performance of a mutual fund or portfolio if you actually do hold it for the long term. That always means holding it for periods of time when it is not doing well, and those periods can easily be as long as a decade. I feel personally that there is some virtue to staying the course and avoiding fiddling as much as possible. So it makes sense to think carefully before committing and then staying committed.

In the case of the Wellington fund, there's one particular step you should take before jumping in. As it happens, Jack Bogle's latest book, The Clash of the Cultures, devotes a long chapter, Chapter 8, to "The Rise, the Fall, and the Renaissance of Wellington Fund." I suggest you read it, from start to finish. It's a history of the fund from the point of view of someone who was closely associated with it. Naturally, it can't be objective, but he is reasonably hard on himself. The point is that once you get into active management, you can't insulate yourself from paying attention to how the fund is managed. He talks of three distinct eras:

"1929-1966, when "when Wellington first carved out a singular advantage, an advantage that persisted through 1960, only to fall to the very bottom of the pack over the next six years."

The next one deserves highlighting: "1967-1978, beginning when Wellington Management Company merged with a group of aggressive, growth-oriented speculative managers, who moved the Fund to a risk-exposure level far higher than ever before."

Then 1978-2012, when Wellington "returned to its traditional values."

So the problem with any actively managed fund is that when you get a 1967-1978, do you say "this is a time when I ignore the short-term underperformance, hang in there and stay the course," or do you say "the management has changed, it's time to sell the fund," or what? I think it's psychologically easier to stay the course in an index fund, where management is forced to stick to a very specific and objectively defined strategy, than in an actively managed fund."




John

haban01
Posts: 654
Joined: Thu Mar 01, 2007 9:55 pm
Location: Wisconsin

Re: Question about Wellington and Wellesley

Post by haban01 » Wed Apr 30, 2014 9:00 pm

I like both of the Wellington and Wellesley funds along with the other Vanguard balanced funds such as Balanced Index and Life strategy funds. The reality is that most people are NON Bogleheads and don't have the ability to stay the course and not tinker with a portfolio. A hands off approach that can balance risk/reward and can still get you to the end game. I think Vanguard's lineup of Balanced Funds are just what non-boglehead spouses need if we kick the bucket!
Eric Haban | | "Stay the Course" | "Press on Regardless" | | Wisconsin Bogleheads Chapter Coordinator

Post Reply