Active or Not, I Love Wellington

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
Topic Author
TheTimeLord
Posts: 8266
Joined: Fri Jul 26, 2013 2:05 pm

Active or Not, I Love Wellington

Post by TheTimeLord »

Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
Beth*
Posts: 734
Joined: Wed Apr 30, 2014 9:57 am

Re: Active or Not, I Love Wellington

Post by Beth* »

TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
Dividends and capital gains distributions if you hold it in a taxable account. I've held Wellington for a long time in a taxable account so there would be serious tax implications if I sold it but I'm not contributing any more money to it because of the taxable income it generates each year.
User avatar
nedsaid
Posts: 13955
Joined: Fri Nov 23, 2012 12:33 pm

Re: Active or Not, I Love Wellington

Post by nedsaid »

TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
No. It is the classic low-cost boring investment. It does a great job of being the classic balanced 60/40 fund. Balanced funds tend to be great investments over time.
A fool and his money are good for business.
User avatar
Topic Author
TheTimeLord
Posts: 8266
Joined: Fri Jul 26, 2013 2:05 pm

Re: Active or Not, I Love Wellington

Post by TheTimeLord »

Beth* wrote:
TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
Dividends and capital gains distributions if you hold it in a taxable account. I've held Wellington for a long time in a taxable account so there would be serious tax implications if I sold it but I'm not contributing any more money to it because of the taxable income it generates each year.
Considering it holds around 35% bonds and the VTI yields about 1.7% I don't think Wellington's dividends are an issue for taxable versus say a 3 fund portfolio. Cap Gains may be another issue but if you are someone who needs income out of you portfolio then that becomes a non-issue also. But in my case I hold Wellington in a tax-deferred account.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
User avatar
Topic Author
TheTimeLord
Posts: 8266
Joined: Fri Jul 26, 2013 2:05 pm

Re: Active or Not, I Love Wellington

Post by TheTimeLord »

nedsaid wrote:
TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
No. It is the classic low-cost boring investment. It does a great job of being the classic balanced 60/40 fund. Balanced funds tend to be great investments over time.
Wish there was a Fidelity equivalent.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
User avatar
Topic Author
TheTimeLord
Posts: 8266
Joined: Fri Jul 26, 2013 2:05 pm

Re: Active or Not, I Love Wellington

Post by TheTimeLord »

nedsaid wrote:
TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
No. It is the classic low-cost boring investment. It does a great job of being the classic balanced 60/40 fund. Balanced funds tend to be great investments over time.
Do you know anything about the Dodge and Cox Balanced Fund? Expenses seem a touch on the high side but turnover is good.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
dbr
Posts: 33863
Joined: Sun Mar 04, 2007 9:50 am

Re: Active or Not, I Love Wellington

Post by dbr »

TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
Wellington is concentrated in 100 large cap value stocks and a portfolio of intermediate duration bonds centering in the lower ranks of the A grades for quality. If those are not the asset allocation you want, then that is a legit reason to avoid this fund. It is not the AA I want, and I would not have a reason to hold this fund. I would also not hold this fund because it would not fit the way I have located my investments for tax efficiency.
User avatar
BlueEars
Posts: 3852
Joined: Sat Mar 10, 2007 12:15 am
Location: West Coast

Re: Active or Not, I Love Wellington

Post by BlueEars »

I'm impressed by Wellington's returns. They seem not to be easy to match with a set of index funds that somewhat mimic the exposures. I build a benchmark portfolio for myself which contains Wellington. It's been very tough to beat.

But we have to remember that Wellington will most likely shine when large cap US is doing well compared to mid/small caps and also when US stocks are doing well compared to international. Also Wellington's bonds have a fairly high average duration of 6.5 years (Total Bond Mkt is 5.6 years) and I don't know how much they manage that duration. Perhaps long time owners can add some analysis insight here?
gwrvmd
Posts: 820
Joined: Wed Dec 02, 2009 8:34 pm
Location: Calabash NC

Re: Active or Not, I Love Wellington

Post by gwrvmd »

If someone over 50 asks me for some quick investment advise, I give them a one word answer "Wellington"
For the past 30 years it has been excellent advise........Gordon
Disciple of John Neff
dbr
Posts: 33863
Joined: Sun Mar 04, 2007 9:50 am

Re: Active or Not, I Love Wellington

Post by dbr »

I would add that in addition to evaluating if that AA is what you want, if you believe active management has benefited the performance of Wellington, then by definition you are accepting manager risk, namely the risk that the fund's active management will also fail over any specific time period. That did happen in the past.
John3754
Posts: 1289
Joined: Tue Mar 19, 2013 8:56 pm

Re: Active or Not, I Love Wellington

Post by John3754 »

I can think of a couple of reasons: I don't want a large cap value tilt, I don't want manger risk, it complicates rebalancing b/c it contains both stocks and bonds, and most of my investments are taxable and it would be less tax efficient.
User avatar
CyberBob
Posts: 3335
Joined: Tue Feb 20, 2007 2:53 pm

Re: Active or Not, I Love Wellington

Post by CyberBob »

Meh, Wellington is only 3% awesome...
  • 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. -- John Bogle
User avatar
Topic Author
TheTimeLord
Posts: 8266
Joined: Fri Jul 26, 2013 2:05 pm

Re: Active or Not, I Love Wellington

Post by TheTimeLord »

CyberBob wrote:Meh, Wellington is only 3% awesome...
  • 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. -- John Bogle
Wonder if Mr Bogle meant the S&P 500 index instead of Total Stock Market since I don't think that index existed in 1978 and the fund is large Cap.

IBD: Do you still own shares in Vanguard Wellington Fund ? If so, aren't you a shareholder in an actively managed fund?

Bogle: First, let me make one point clear. 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.

IBD: It's not exactly a gonzo actively managed fund is it?

Bogle: The typical fund, 85% of its performance is determined by action of the stock market. 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.

It consists 35% of a corporate bond index fund, I think it's the Barclays Aggregate now. And 65% is the total stock market index fund. So 3% of its performance is due to active management.

This is less than traitorous of me (regarding his advocacy of index investing). Basically, it's close to a balanced index fund
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
tibbitts
Posts: 12282
Joined: Tue Feb 27, 2007 6:50 pm

Re: Active or Not, I Love Wellington

Post by tibbitts »

TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
People have said the same thing about many other active funds that have subsequently underperformed for long periods of time.

The problem with underperformance (and wellington has been experiencing slight underperformance for some time now relative to its admittedly probably inappropriate benchmark) is that you don't know when to bail. Obviously not a after a few months, but what about a year or two? Three? I'm sure you're aware of wellington's long period of horrible underperformance (relatively to almost any reasonable benchmark, actually) the fund suffered years ago. Would you have held on? Really? I know I wouldn't have.
Mike Scott
Posts: 1474
Joined: Fri Jul 19, 2013 2:45 pm

Re: Active or Not, I Love Wellington

Post by Mike Scott »

It is what it is. Buy it or don't buy it. It's been doing good things for me and it meshes well with my strategy.
tibbitts
Posts: 12282
Joined: Tue Feb 27, 2007 6:50 pm

Re: Active or Not, I Love Wellington

Post by tibbitts »

TheTimeLord wrote:
nedsaid wrote:
TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
No. It is the classic low-cost boring investment. It does a great job of being the classic balanced 60/40 fund. Balanced funds tend to be great investments over time.
Wish there was a Fidelity equivalent.
Fidelity Puritan has roughly the same asset mix and has outperformed Wellington over its entire lifetime (since the 1940s.)

Admittedly, puritan outperformed mostly in the first half of that period - performance has been more similar during the latter half. While it may not share the same value emphasis, if equity/fixed allocation is what you care about, I'm not seeing where you'd be missing anything in terms of performance.
anil686
Posts: 1089
Joined: Thu May 08, 2014 12:33 pm

Re: Active or Not, I Love Wellington

Post by anil686 »

TheTimeLord wrote:People have said the same thing about many other active funds that have subsequently underperformed for long periods of time.

The problem with underperformance (and wellington has been experiencing slight underperformance for some time now relative to its admittedly probably inappropriate benchmark) is that you don't know when to bail. Obviously not a after a few months, but what about a year or two? Three? I'm sure you're aware of wellington's long period of horrible underperformance (relatively to almost any reasonable benchmark, actually) the fund suffered years ago. Would you have held on? Really? I know I wouldn't have.
+ 1 for me as well. It is not that I doubt the "manager" of some of these low cost actively managed funds because they are probably very good. In fact I think many of VG's and D/C's actively managed funds are excellent. But during long periods (defined by me to be 1-2 years or longer personally), I would have doubts about sticking with the fund. I know I should not and stay the course - but I find that is easier to do with a three fund portfolio that is indexed. I just tell myself that I am accepting the market return and not think about it.

I don't think I am alone, however. If you read M*'s review of (just an example), Dodge and Cox Stock Fund - it's time weighted returns over 10 years are 8.6% (similar to TSM) but the dollar weighted returns of their investors over the past 10 years were 6% - that is a significant difference IMHO based on lack of confidence in the manager/strategy versus indexing - JMO though...
User avatar
Topic Author
TheTimeLord
Posts: 8266
Joined: Fri Jul 26, 2013 2:05 pm

Re: Active or Not, I Love Wellington

Post by TheTimeLord »

tibbitts wrote:
TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
People have said the same thing about many other active funds that have subsequently underperformed for long periods of time.

The problem with underperformance (and wellington has been experiencing slight underperformance for some time now relative to its admittedly probably inappropriate benchmark) is that you don't know when to bail. Obviously not a after a few months, but what about a year or two? Three? I'm sure you're aware of wellington's long period of horrible underperformance (relatively to almost any reasonable benchmark, actually) the fund suffered years ago. Would you have held on? Really? I know I wouldn't have.
Unless you can cite a specific benchmark it is difficult to jusdge the validity of your post. It is slightly ahead of the S&P 500 for the last 10 years even though it holds roughly 35% bonds. Since 7/1/1929 it has 8.32% return which is almost the same as its 10 year return of 8.38%.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
BigPrince
Posts: 202
Joined: Sun Jul 06, 2014 2:51 pm

Re: Active or Not, I Love Wellington

Post by BigPrince »

My dad has about 20% of his assets in Wellington. He has invested in for over 25 years.
dbr
Posts: 33863
Joined: Sun Mar 04, 2007 9:50 am

Re: Active or Not, I Love Wellington

Post by dbr »

TheTimeLord wrote:
CyberBob wrote:Meh, Wellington is only 3% awesome...
  • 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. -- John Bogle
Wonder if Mr Bogle meant the S&P 500 index instead of Total Stock Market since I don't think that index existed in 1978 and the fund is large Cap.
The fund description is here: https://personal.vanguard.com/us/funds/ ... =INT#tab=2

There is a comparison of the actual holdings of the fund to the S&P 500 and to Barclays US Credit A or Better Idx. I don't know if those are the so called index that he put together for them, but the current fund composition is certainly different from a blend of those indices. How well the fund has tracked those indices would have to be investigated if one actually cared. I assume Mr. Bogle is saying the fund performance did not differ by more than relatively 3% from the blended performance of those indices. That does not mean 8% vs 5% or 2% vs 5% but 5.15% or 4.85% vs 5%, or whatever.

Someone who is really interested in holding the fund should explore the prospectus in detail.
hoops777
Posts: 3330
Joined: Sun Apr 10, 2011 12:23 pm

Re: Active or Not, I Love Wellington

Post by hoops777 »

I read The Bogle comments twice and I still have no idea what he is talking about regarding Wellington being 97 pct based on indexes. :confused :confused :confused It certainly is not based on what he said.
K.I.S.S........so easy to say so difficult to do.
John3754
Posts: 1289
Joined: Tue Mar 19, 2013 8:56 pm

Re: Active or Not, I Love Wellington

Post by John3754 »

TheTimeLord wrote:
tibbitts wrote:
TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
People have said the same thing about many other active funds that have subsequently underperformed for long periods of time.

The problem with underperformance (and wellington has been experiencing slight underperformance for some time now relative to its admittedly probably inappropriate benchmark) is that you don't know when to bail. Obviously not a after a few months, but what about a year or two? Three? I'm sure you're aware of wellington's long period of horrible underperformance (relatively to almost any reasonable benchmark, actually) the fund suffered years ago. Would you have held on? Really? I know I wouldn't have.
Unless you can cite a specific benchmark it is difficult to jusdge the validity of your post. It is slightly ahead of the S&P 500 for the last 10 years even though it holds roughly 35% bonds. Since 7/1/1929 it has 8.32% return which is almost the same as its 10 year return of 8.38%.
From inception to date it has nearly matched the S&P500, but it has had very long periods of underperformance.

http://remonsy.com/daily/vanguard-etf-f ... -analyzed/
dbr
Posts: 33863
Joined: Sun Mar 04, 2007 9:50 am

Re: Active or Not, I Love Wellington

Post by dbr »

hoops777 wrote:I read The Bogle comments twice and I still have no idea what he is talking about regarding Wellington being 97 pct based on indexes. :confused :confused :confused
I believe this means that the managers have added an increment above and beyond the performance of the index amounting to 3% of the return of the fund. The ten year return of the fund has been 8.38% and the return of the composite index has been 7.30%, for an increase alleged due to management of an additional 1.18%. In that case management accounted for 14% of the return and the index for 86% of the return. Mr. Bogle has that at 3% and 97% for some period of time he has in mind.
User avatar
jimb_fromATL
Posts: 2278
Joined: Sun Nov 10, 2013 12:00 pm
Location: Atlanta area & Piedmont Triad NC and Interstate 85 in between.

Re: Active or Not, I Love Wellington

Post by jimb_fromATL »

Regardless of theories about asset allocation, I've lost track of the number of portfolios ranging from fairly simple to incredibly complex that have been touted by articles on the web, in newspapers, magazines, and newsletters, and suggested by individual posters on websites that upon closer scrutiny turn out to not have performed as well as Wellington over any reasonably long period of time in modern history ... namely the career of most folks here.

While it is true that past performance is no guarantee of future performance, a very long history of relatively good performance is probably a lot better indicator than most guesses that things are going to be all that much different in the next several cycles of the market.

jimb
User avatar
Topic Author
TheTimeLord
Posts: 8266
Joined: Fri Jul 26, 2013 2:05 pm

Re: Active or Not, I Love Wellington

Post by TheTimeLord »

John3754 wrote:
TheTimeLord wrote:
tibbitts wrote:
TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
People have said the same thing about many other active funds that have subsequently underperformed for long periods of time.

The problem with underperformance (and wellington has been experiencing slight underperformance for some time now relative to its admittedly probably inappropriate benchmark) is that you don't know when to bail. Obviously not a after a few months, but what about a year or two? Three? I'm sure you're aware of wellington's long period of horrible underperformance (relatively to almost any reasonable benchmark, actually) the fund suffered years ago. Would you have held on? Really? I know I wouldn't have.
Unless you can cite a specific benchmark it is difficult to jusdge the validity of your post. It is slightly ahead of the S&P 500 for the last 10 years even though it holds roughly 35% bonds. Since 7/1/1929 it has 8.32% return which is almost the same as its 10 year return of 8.38%.
From inception to date it has nearly matched the S&P500, but it has had very long periods of underperformance.

http://remonsy.com/daily/vanguard-etf-f ... -analyzed/
I used the S&P 500 as an example the fund's performance I would not consider it the appropriate benchmark for a fund with significant bond holdings.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
tibbitts
Posts: 12282
Joined: Tue Feb 27, 2007 6:50 pm

Re: Active or Not, I Love Wellington

Post by tibbitts »

TheTimeLord wrote:
tibbitts wrote:
TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
People have said the same thing about many other active funds that have subsequently underperformed for long periods of time.

The problem with underperformance (and wellington has been experiencing slight underperformance for some time now relative to its admittedly probably inappropriate benchmark) is that you don't know when to bail. Obviously not a after a few months, but what about a year or two? Three? I'm sure you're aware of wellington's long period of horrible underperformance (relatively to almost any reasonable benchmark, actually) the fund suffered years ago. Would you have held on? Really? I know I wouldn't have.
Unless you can cite a specific benchmark it is difficult to jusdge the validity of your post. It is slightly ahead of the S&P 500 for the last 10 years even though it holds roughly 35% bonds. Since 7/1/1929 it has 8.32% return which is almost the same as its 10 year return of 8.38%.
You could just look at the 1yr, 3yr, and 5yr values from VG's own website. VG has determined what it believes is an appropriate benchmark; whether you agree with it may be another issue:

https://personal.vanguard.com/us/funds/ ... IntExt=INT
Last edited by tibbitts on Sun Nov 16, 2014 12:53 pm, edited 1 time in total.
dbr
Posts: 33863
Joined: Sun Mar 04, 2007 9:50 am

Re: Active or Not, I Love Wellington

Post by dbr »

jimb_fromATL wrote:Regardless of theories about asset allocation, I've lost track of the number of portfolios ranging from fairly simple to incredibly complex that have been touted by articles on the web, in newspapers, magazines, and newsletters that upon closer scrutiny turn out to not have performed as well as Wellington over any reasonably long period of time in modern history ... namely the career of most folks here.

While it is true that past performance is no guarantee of future performance, a very long history of relatively good performance is probably a lot better indicator than most guesses that things are going to be all that much different in the next several cycles of the market.

jimb
Asset allocation is about risk and return. When one uses the word performance it almost always means only return. The question would be what data exactly are we thinking of in which Wellington performs a lot better than a universe of alternative suggestions. Also by what criterion should we represent these two contradictory measures of what portfolios do? That said, it would not be a surprise that the risk and return characteristics of large cap value stocks and intermediate duration investment grade bonds 65/35 would be a good match to what a lot of people want.

I will grant you that there are lots and lots of investment suggestions that could be found that were and are terrible ideas to which Wellington would have been a better choice, but that is not a very severe challenge.
miles monroe
Posts: 1279
Joined: Mon Jan 20, 2014 12:14 pm

Re: Active or Not, I Love Wellington

Post by miles monroe »

gwrvmd wrote:If someone over 50 asks me for some quick investment advise, I give them a one word answer "Wellington"
For the past 30 years it has been excellent advise........Gordon
i don't disagree.

but i say "target date retirement" and "hire a fee only financial planner".
lululu
Posts: 1378
Joined: Thu Apr 10, 2014 4:23 pm

Re: Active or Not, I Love Wellington

Post by lululu »

tibbitts wrote: The problem with underperformance (and wellington has been experiencing slight underperformance for some time now relative to its admittedly probably inappropriate benchmark) is that you don't know when to bail. Obviously not a after a few months, but what about a year or two? Three? I'm sure you're aware of wellington's long period of horrible underperformance (relatively to almost any reasonable benchmark, actually) the fund suffered years ago. Would you have held on? Really? I know I wouldn't have.
If you look at the ten year graph on Vanguard's website and plot Wellington, Wellesley, and the S&P, what jumps out at me as a conservative investor is the sleepless nights the S&P would give me compared to those two, and not enough performance difference to make up for that.
User avatar
Topic Author
TheTimeLord
Posts: 8266
Joined: Fri Jul 26, 2013 2:05 pm

Re: Active or Not, I Love Wellington

Post by TheTimeLord »

tibbitts wrote:
TheTimeLord wrote:
tibbitts wrote:
TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
People have said the same thing about many other active funds that have subsequently underperformed for long periods of time.

The problem with underperformance (and wellington has been experiencing slight underperformance for some time now relative to its admittedly probably inappropriate benchmark) is that you don't know when to bail. Obviously not a after a few months, but what about a year or two? Three? I'm sure you're aware of wellington's long period of horrible underperformance (relatively to almost any reasonable benchmark, actually) the fund suffered years ago. Would you have held on? Really? I know I wouldn't have.
Unless you can cite a specific benchmark it is difficult to jusdge the validity of your post. It is slightly ahead of the S&P 500 for the last 10 years even though it holds roughly 35% bonds. Since 7/1/1929 it has 8.32% return which is almost the same as its 10 year return of 8.38%.
You could just look at the 1yr, 3yr, and 5yr values from VG's own website:

https://personal.vanguard.com/us/funds/ ... IntExt=INT
What good does that do in validating your statement of Wellington's long period of horrible underperformance?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
dbr
Posts: 33863
Joined: Sun Mar 04, 2007 9:50 am

Re: Active or Not, I Love Wellington

Post by dbr »

lululu wrote:
tibbitts wrote: The problem with underperformance (and wellington has been experiencing slight underperformance for some time now relative to its admittedly probably inappropriate benchmark) is that you don't know when to bail. Obviously not a after a few months, but what about a year or two? Three? I'm sure you're aware of wellington's long period of horrible underperformance (relatively to almost any reasonable benchmark, actually) the fund suffered years ago. Would you have held on? Really? I know I wouldn't have.
If you look at the ten year graph on Vanguard's website and plot Wellington, Wellesley, and the S&P, what jumps out at me as a conservative investor is the sleepless nights the S&P would give me compared to those two, and not enough performance difference to make up for that.
That has everything to do with holding 35% in bonds while S&P 500 is all stocks. There must be a major confusion here that the comparison is between Wellington and S&P 500. The index we are talking about is a composite of S&P 500 and a Barclay's bond index reflecting the stock/bond allocation that Wellington uses. The issue under discussion is whether or not Wellington is actually buying that index and if not by how much active management differs in return and in risk from that index. Also, note return AND risk and not just return.
User avatar
whaleknives
Posts: 1218
Joined: Sun Jun 24, 2012 7:19 pm

Re: Active or Not, I Love Wellington

Post by whaleknives »

TheTimeLord wrote:Do you know anything about the Dodge and Cox Balanced Fund? Expenses seem a touch on the high side but turnover is good.
Image
Dodge & Cox Balanced (DODBX) was heavily invested in mortgage-backed CDO's in 2007. More than Wellington (VWELX), I guess.
"I'm an indexer. I own the market. And I'm happy." (John Bogle, "BusinessWeek", 8/17/07) ☕ Maritime signal flag W - Whiskey: "I require medical assistance."
dbr
Posts: 33863
Joined: Sun Mar 04, 2007 9:50 am

Re: Active or Not, I Love Wellington

Post by dbr »

whaleknives wrote: Dodge & Cox Balanced (DODBX) was heavily invested in mortgage-backed CDO's in 2007. More than Wellington (VWELX), I guess.
That being the case we have a good example of manager risk.
tibbitts
Posts: 12282
Joined: Tue Feb 27, 2007 6:50 pm

Re: Active or Not, I Love Wellington

Post by tibbitts »

TheTimeLord wrote:
tibbitts wrote:
TheTimeLord wrote:
tibbitts wrote:
TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
People have said the same thing about many other active funds that have subsequently underperformed for long periods of time.

The problem with underperformance (and wellington has been experiencing slight underperformance for some time now relative to its admittedly probably inappropriate benchmark) is that you don't know when to bail. Obviously not a after a few months, but what about a year or two? Three? I'm sure you're aware of wellington's long period of horrible underperformance (relatively to almost any reasonable benchmark, actually) the fund suffered years ago. Would you have held on? Really? I know I wouldn't have.
Unless you can cite a specific benchmark it is difficult to jusdge the validity of your post. It is slightly ahead of the S&P 500 for the last 10 years even though it holds roughly 35% bonds. Since 7/1/1929 it has 8.32% return which is almost the same as its 10 year return of 8.38%.
You could just look at the 1yr, 3yr, and 5yr values from VG's own website:

https://personal.vanguard.com/us/funds/ ... IntExt=INT
What good does that do in validating your statement of Wellington's long period of horrible underperformance?
I was addressing the shortfall I had cited in recent periods specifically, although the data at VG shows the shortfall vs. the benchmark goes back even further (1, 3, and 5yrs) than I'd originally indicated.

Although not detailed in his discussion, Bogle alluded to Wellington's significant underperformance in specific years of the 1960s and 1970s (and to some extent the entire period) here:

http://johncbogle.com/wordpress/wp-cont ... F_Memo.pdf

I'm not aware that fund managers even declared benchmarks in the pre-vanguard era, but let's face it, Bogle wouldn't have been fired if Wellington (the firm in general, but also the funds it managed) had continued to be the poster-boy for investment management it had become (briefly) in the mid-1960s.
investor
Posts: 1010
Joined: Mon Feb 19, 2007 10:50 pm

Re: Active or Not, I Love Wellington

Post by investor »

who cares about benchmarks and returns of other funds ? Wellington has a good record of steady returns and is an excellent holding within a tax deferred account. I invest to make money, not beat a benchmark. Have held Wellington for >> 20 years

investor
tibbitts
Posts: 12282
Joined: Tue Feb 27, 2007 6:50 pm

Re: Active or Not, I Love Wellington

Post by tibbitts »

investor wrote:who cares about benchmarks and returns of other funds ? Wellington has a good record of steady returns and is an excellent holding within a tax deferred account. I invest to make money, not beat a benchmark. Have held Wellington for >> 20 years

investor
You may invest more to beat a benchmark under certain economic conditions.

What you're saying is that if you get 11% over your investing lifetime and the index returns 12%, you won't care, and probably nobody else would either. And more or less you're correct, which is one reason the whole industry was able to build itself around 1.5+% annual fees.

But if you get 2% and the index returns 3% over your investing lifetime, almost everybody will care if they have that 30%+ shortfall to the benchmark, except those who have either very little or very much to invest.
investor
Posts: 1010
Joined: Mon Feb 19, 2007 10:50 pm

Re: Active or Not, I Love Wellington

Post by investor »

I am now retired (for 18 years) and not trying to shoot for the moon.

investor
tibbitts
Posts: 12282
Joined: Tue Feb 27, 2007 6:50 pm

Re: Active or Not, I Love Wellington

Post by tibbitts »

investor wrote:I am now retired (for 18 years) and not trying to shoot for the moon.

investor
Wanting to match a reasonable benchmark isn't most people's definition of "shooting for the moon." But it's true that when you get to a point of having relatively few years left to invest, what you do (within reason) probably won't matter very much, since small differences won't have much time to compound.
lululu
Posts: 1378
Joined: Thu Apr 10, 2014 4:23 pm

Re: Active or Not, I Love Wellington

Post by lululu »

TheTimeLord wrote:Well it is another great year for Wellington (up 8.98% YTD ER 0.18% Admiral). To me this fund continues to demonstrate active management with low fees can work. Seriously is there any legit reason to avoid this fund with its very long history of success?
I have a mix of Investor and Admiral shares in Wellesley, due to holding it in different accounts, and by my Excel spreadsheet, as of Friday, my mix of Wellesley was up 7.2% year to date.
investor wrote:I am now retired (for 18 years) and not trying to shoot for the moon.

investor
+1
User avatar
tennisplyr
Posts: 2721
Joined: Tue Jan 28, 2014 1:53 pm
Location: Sarasota, FL

Re: Active or Not, I Love Wellington

Post by tennisplyr »

lululu wrote:
tibbitts wrote: The problem with underperformance (and wellington has been experiencing slight underperformance for some time now relative to its admittedly probably inappropriate benchmark) is that you don't know when to bail. Obviously not a after a few months, but what about a year or two? Three? I'm sure you're aware of wellington's long period of horrible underperformance (relatively to almost any reasonable benchmark, actually) the fund suffered years ago. Would you have held on? Really? I know I wouldn't have.
If you look at the ten year graph on Vanguard's website and plot Wellington, Wellesley, and the S&P, what jumps out at me as a conservative investor is the sleepless nights the S&P would give me compared to those two, and not enough performance difference to make up for that.
Yes I hold both as well and am satisfied overall
Those who move forward with a happy spirit will find that things always work out.
hoops777
Posts: 3330
Joined: Sun Apr 10, 2011 12:23 pm

Re: Active or Not, I Love Wellington

Post by hoops777 »

I still do not get the index issue.Wellington is composed of about 100 stocks plus the 35 pct or so in bonds.The managers pick the stocks....what am I missing?There is nothing index about this fund other than trying to maintain the 65/35 allocation.
K.I.S.S........so easy to say so difficult to do.
dbr
Posts: 33863
Joined: Sun Mar 04, 2007 9:50 am

Re: Active or Not, I Love Wellington

Post by dbr »

hoops777 wrote:I still do not get the index issue.Wellington is composed of about 100 stocks plus the 35 pct or so in bonds.The managers pick the stocks....what am I missing?There is nothing index about this fund other than trying to maintain the 65/35 allocation.
Go here: https://personal.vanguard.com/us/funds/ ... =INT#tab=2

Scroll down and investigate an item called the Wellington Composite Index* a combination of Barclays US Credit A or Better Idx* and S&P 500 Index*
hoops777
Posts: 3330
Joined: Sun Apr 10, 2011 12:23 pm

Re: Active or Not, I Love Wellington

Post by hoops777 »

Thanks dbr
K.I.S.S........so easy to say so difficult to do.
hoops777
Posts: 3330
Joined: Sun Apr 10, 2011 12:23 pm

Re: Active or Not, I Love Wellington

Post by hoops777 »

Ok.I looked at the page.Wellington owns about 100 stocks that were each handpicked by the managers as well as 500 bonds.So how is that any different from any other fund where someone chooses all of the stocks.My idea of an index is all inclusive with no stock picking.I really do not get it.Sorry.
K.I.S.S........so easy to say so difficult to do.
Professor Emeritus
Posts: 2628
Joined: Mon Aug 13, 2012 6:43 am

Re: Active or Not, I Love Wellington

Post by Professor Emeritus »

hoops777 wrote:Ok.I looked at the page.Wellington owns about 100 stocks that were each handpicked by the managers as well as 500 bonds.So how is that any different from any other fund where someone chooses all of the stocks.My idea of an index is all inclusive with no stock picking.I really do not get it.Sorry.
This is actually a different issue. You don't actually need to "own" all the stocks in a market to "index" . What you do is have a system for picking a set of stocks that match the index. It's a statistical sampling issue. I'm not suggesting this is the Wellington strategy but if it is you could implement it with about 100 stocks.
User avatar
VictoriaF
Posts: 19500
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: Active or Not, I Love Wellington

Post by VictoriaF »

Bogleheads are too frivolous in the expression of their love. I would find it difficult cuddling with a Wellington fund, "active or not."

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
Levett
Posts: 4177
Joined: Fri Feb 23, 2007 2:10 pm
Location: upper Midwest

Re: Active or Not, I Love Wellington

Post by Levett »

tibbitts observed:

"But it's true that when you get to a point of having relatively few years left to invest, what you do (within reason) probably won't matter very much, since small differences won't have much time to compound."

This grandpa agrees.

Thank you for stating where I'm at so succinctly! :thumbsup

Lev
User avatar
bottlecap
Posts: 6562
Joined: Tue Mar 06, 2007 11:21 pm
Location: Tennessee

Re: Active or Not, I Love Wellington

Post by bottlecap »

VictoriaF wrote:Bogleheads are too frivolous in the expression of their love. I would find it difficult cuddling with a Wellington fund, "active or not."

Victoria
Yeah, I try not too get too emotionally involved with anything I will eventually consume....

JT
tibbitts
Posts: 12282
Joined: Tue Feb 27, 2007 6:50 pm

Re: Active or Not, I Love Wellington

Post by tibbitts »

hoops777 wrote:Ok.I looked at the page.Wellington owns about 100 stocks that were each handpicked by the managers as well as 500 bonds.So how is that any different from any other fund where someone chooses all of the stocks.My idea of an index is all inclusive with no stock picking.I really do not get it.Sorry.
What everyone is referring to is that Wellington's managers, and VG, benchmark their performance against an index, the composite index shown on the page you visited. That has nothing to do with Wellington being indexed; it has to do with whether you would have (over those historical periods) been better off holding the index itself. Whether you agree with the index they've chosen is another matter, as is whether Wellington achieved the returns it did with more or less risk. Those factors can be more difficult to determine. Also, no costs are taken out of the benchmark index, so you'd have to subtract a tiny percentage for the expense ration of similar index funds to get a fair comparison.

The point of this process is to determine whether Wellington's management is adding any value vs. just blindly picking securities. Some people say that they like the results from the fund, but maybe what they mean is that they like the results from the combination of asset classes it invests in.
dbr
Posts: 33863
Joined: Sun Mar 04, 2007 9:50 am

Re: Active or Not, I Love Wellington

Post by dbr »

tibbitts wrote:
hoops777 wrote:Ok.I looked at the page.Wellington owns about 100 stocks that were each handpicked by the managers as well as 500 bonds.So how is that any different from any other fund where someone chooses all of the stocks.My idea of an index is all inclusive with no stock picking.I really do not get it.Sorry.
What everyone is referring to is that Wellington's managers, and VG, benchmark their performance against an index, the composite index shown on the page you visited. That has nothing to do with Wellington being indexed; it has to do with whether you would have (over those historical periods) been better off holding the index itself. Whether you agree with the index they've chosen is another matter, as is whether Wellington achieved the returns it did with more or less risk. Those factors can be more difficult to determine. Also, no costs are taken out of the benchmark index, so you'd have to subtract a tiny percentage for the expense ration of similar index funds to get a fair comparison.

The point of this process is to determine whether Wellington's management is adding any value vs. just blindly picking securities. Some people say that they like the results from the fund, but maybe what they mean is that they like the results from the combination of asset classes it invests in.
Excellent explanation. Also, didn't this discussion start with a question about Mr. Bogle referring to an index and something about S&P 500? As Tibbets says there are two indices that are combined and used as a benchmark, as explained above, and one of them is indeed the S&P 500. It is absolutely not true that THE benchmark is the S&P 500.
Post Reply