Amazed by Vanguard Wellington's Performance

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azanon
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Amazed by Vanguard Wellington's Performance

Post by azanon » Tue Aug 22, 2017 8:44 am

Are there any active funds that really cause you to consider that maybe it really is possible to outperform indexes? For me, Wellington definitely has to be one of them.

Just for fun, I occasionally sometimes go to www.portfoliovisualizer.com and run comparisons. About a week or two ago, I wanted to see if I could hand pick ANY Vanguard large-cap Value fund (Vanguard has 6), and pair that up with ANY high or medium quality, intermediate-term vanguard bond fund and outperform Wellington (I used 65% stock, 35% bond proportions). I forget the exact numbers, but I think the closest I could get to Wellington's performance was 50 basis points of under-performance, and the length that I looked at varied depending on the two funds I picked (I just used the longest available lengths).

Now in some cases, the risk (volatility) was also lower than Wellington too, so in those cases I increased the stock percentage until I matched Wellington's volatility, but once I got them matched, they were still under-performing.

Anyway, it's this sort of thing that does cause me to question the mantra that index funds/ETFs are always better. People get concerned about not knowing the out-performers before-hand but Wellington (and it's sister Wellesley) have outperformed for a very long time and show no signs of stopping.

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Re: Amazed by Vanguard Wellington's Performance

Post by alfaspider » Tue Aug 22, 2017 9:09 am

Like the Harvard endowment, it will beat the market until it doesn't.

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Re: Amazed by Vanguard Wellington's Performance

Post by azanon » Tue Aug 22, 2017 9:51 am

alfaspider wrote:
Tue Aug 22, 2017 9:09 am
Like the Harvard endowment, it will beat the market until it doesn't.
The market (I assume you mean the stock market) and Harvard endowment, use completely different asset classes in their portfolios. I compared the same asset classes in the same proportions. I'm not against analogies as long as they're not false.

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Re: Amazed by Vanguard Wellington's Performance

Post by alfaspider » Tue Aug 22, 2017 9:53 am

azanon wrote:
Tue Aug 22, 2017 9:51 am
alfaspider wrote:
Tue Aug 22, 2017 9:09 am
Like the Harvard endowment, it will beat the market until it doesn't.
The market (I assume you mean the stock market) and Harvard endowment, use completely different asset classes in their portfolios. I compared the same asset classes in the same proportions. I'm not against analogies as long as they're not false.
I recognize that Harvard invests in different asset classes, but the point is that they were lauded for beating the stock market rate of return for many years, until they didn't.

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Re: Amazed by Vanguard Wellington's Performance

Post by azanon » Tue Aug 22, 2017 10:00 am

alfaspider wrote:
Tue Aug 22, 2017 9:53 am
azanon wrote:
Tue Aug 22, 2017 9:51 am
alfaspider wrote:
Tue Aug 22, 2017 9:09 am
Like the Harvard endowment, it will beat the market until it doesn't.
The market (I assume you mean the stock market) and Harvard endowment, use completely different asset classes in their portfolios. I compared the same asset classes in the same proportions. I'm not against analogies as long as they're not false.
I recognize that Harvard invests in different asset classes, but the point is that they were lauded for beating the stock market rate of return for many years, until they didn't.
I'm not aware if anyone is "lauding" Wellington or Wellesley. I just ran a screener and made an observation that I found pretty shocking. Certainly anyone that doesn't believe in coincidences and rare repeatable, multi-decade long lucky streaks despite an active fee headwind would find it shocking too. If i cant beat it with "take my pick" any LC value fund and an IT bond fund rearward-looking, then what chance do I have beating it forward looking with only one choice? They're paying themselves about a 30bp premium for active, and then adding a good 50-100bp of performance net of fees, at comparably low volatility levels by most of my comparisons.

Maybe for fun, I'll expand my search to non-Vanguard funds; see if I can find any "LC Value US" stock fund and IT, investment-grade bond fund, at 65/35 proportions, and beat Wellington (and at equal or lower risk levels as measured by Sharpe or Sortino).

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Re: Amazed by Vanguard Wellington's Performance

Post by thangngo » Tue Aug 22, 2017 10:13 am

azanon wrote:
Tue Aug 22, 2017 8:44 am
Are there any active funds that really cause you to consider that maybe it really is possible to outperform indexes? For me, Wellington definitely has to be one of them.

Just for fun, I occasionally sometimes go to www.portfoliovisualizer.com and run comparisons. About a week or two ago, I wanted to see if I could hand pick ANY Vanguard large-cap Value fund (Vanguard has 6), and pair that up with ANY high or medium quality, intermediate-term vanguard bond fund and outperform Wellington (I used 65% stock, 35% bond proportions). I forget the exact numbers, but I think the closest I could get to Wellington's performance was 50 basis points of under-performance, and the length that I looked at varied depending on the two funds I picked (I just used the longest available lengths).

Now in some cases, the risk (volatility) was also lower than Wellington too, so in those cases I increased the stock percentage until I matched Wellington's volatility, but once I got them matched, they were still under-performing.

Anyway, it's this sort of thing that does cause me to question the mantra that index funds/ETFs are always better. People get concerned about not knowing the out-performers before-hand but Wellington (and it's sister Wellesley) have outperformed for a very long time and show no signs of stopping.
Wellington is a decent active managed fund for a tax deferred account. I invested in the fund (for 10% of my portfolio). But Wellington has not performed well this 2017 YTD. It seems to revert back to the mean.

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Re: Amazed by Vanguard Wellington's Performance

Post by azanon » Tue Aug 22, 2017 10:30 am

thangngo wrote:
Tue Aug 22, 2017 10:13 am
Wellington is a decent active managed fund for a tax deferred account. I invested in the fund (for 10% of my portfolio). But Wellington has not performed well this 2017 YTD. It seems to revert back to the mean.
Decent? wow. Know any balanced funds or ETFs you'd consider "great" at similar stock/bond levels? :shock: How good can this get!

We might disagree over what I'm about to say, and that'd be fine with, but I'd find an intra-year YTD performance of any fund (index or active) to be useless. I seriously doubt that's the only 8 month stretch of under-performance you could find in Wellington's history. I think that's why a lot of investors looking for an active wouldn't even consider a fund with less than a 5 year history and preferably 10 years or more.

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Re: Amazed by Vanguard Wellington's Performance

Post by chicagoan23 » Tue Aug 22, 2017 10:44 am

azanon wrote:
Tue Aug 22, 2017 8:44 am
Just for fun, I occasionally sometimes go to www.portfoliovisualizer.com and run comparisons. About a week or two ago, I wanted to see if I could hand pick ANY Vanguard large-cap Value fund (Vanguard has 6), and pair that up with ANY high or medium quality, intermediate-term vanguard bond fund and outperform Wellington (I used 65% stock, 35% bond proportions). I forget the exact numbers, but I think the closest I could get to Wellington's performance was 50 basis points of under-performance, and the length that I looked at varied depending on the two funds I picked (I just used the longest available lengths).

Now in some cases, the risk (volatility) was also lower than Wellington too, so in those cases I increased the stock percentage until I matched Wellington's volatility, but once I got them matched, they were still under-performing.
I'm not sure if you accounted for this, but doesn't the result largely depend on the time period that you are using to measure performance? For example, Warren Buffett has 21% compounded annual returns at Berkshire since 1965, compared to 10% for the S&P 500. He is not just outperforming the market but has lapped the market, over a 50+ year time period. But if you pick a different starting point and, say, go back to the start of this bull market (March 10, 2009) Berkshire is well behind the market, losing 17.8% to 14.9% in average annual return since then. I understand that Berkshire's focus changed over that time and it's hard to generate large returns on a company with a market cap of $420 billion, but you'd have been significantly worse off staying in Berkshire as opposed to an index fund over the past 8+ years.

I think a more accurate measure of relative outperformance would be an annual comparison to the market/indexed return, with that analysis starting over each year. Is that data available from Wellington and does it show it beating the market year after year? Or over rolling five and ten-year periods?

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Re: Amazed by Vanguard Wellington's Performance

Post by Iliketoridemybike » Tue Aug 22, 2017 10:44 am

For allocation type funds, Fidelity Puritan (almost 4% higher YTD) is similar and Fidelity Contra outperforms, almost 13% higher YTD. Similar if you look at 10 year performance. Puritan is just below Wellington and Contra is well above.

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Re: Amazed by Vanguard Wellington's Performance

Post by Nowizard » Tue Aug 22, 2017 10:56 am

Interesting thread that may reflect differences between strict Bogleheads and those who ascribe to most or many or the concepts but with some variance at times.

Tim

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Re: Amazed by Vanguard Wellington's Performance

Post by friar1610 » Tue Aug 22, 2017 11:01 am

I've done a number of those Portfolio Vizualizer comparisons, although using Wellesley rather than Wellington. Although I'm primarily an indexer, there just seems to be such a good a track record from W&W over long periods that I have to think Wellington Management has a magic touch.
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Re: Amazed by Vanguard Wellington's Performance

Post by pkcrafter » Tue Aug 22, 2017 11:07 am

azanon, you have brought up something I find very puzzling. Yes, W and W and very good active funds, as are other Vanguard active funds, and so are Dodge and Cox, TRPrice, and even American. My question is why, out of ~10,000 mutual funds, can we identify these few as outstanding? Vanguard has the low cost working for them, D/C is moderate, but TRP and Am are rather high cost by comparison. Even if there are twice that many good long term funds, even if there are 10 times that many, it would still 1-2%.

The only thing I see is all of these funds remain consistent in their investing philosophy--they don't change strategies and chase performance. They don't have "star" managers either. All have multiple managers, and they stay on track. For instance, In the late 90's bubble, D/C, which uses a value philosophy, got buried for years, but they stayed with the plan, and were big winners in the early 2000s. The market, and the investors, came to them.

So, if these funds can do it, why don't we see a lot more funds with good long term performance? Are the vast majority of fund companies so eager to make/chase a buck today that just don't care about long term performance? Certainly, if they can provide some fireworks now they will pull in lots of running investors and their $$ now. That seems to be the game.

Paul
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Re: Amazed by Vanguard Wellington's Performance

Post by dwickenh » Tue Aug 22, 2017 11:10 am

friar1610 wrote:
Tue Aug 22, 2017 11:01 am
I've done a number of those Portfolio Vizualizer comparisons, although using Wellesley rather than Wellington. Although I'm primarily an indexer, there just seems to be such a good a track record from W&W over long periods that I have to think Wellington Management has a magic touch.
I think the magic touch as of late is low costs and a raging bond market for 30 years. Don't expect the bond side to produce as well in the future. I own 20% of my portfolio in Wellesley as a defensive measure for 5-10 year funds. Management is not bad, the excessive cost of management is bad for returns. So a low cost, well managed fund is a good balance to an 80% indexed portfolio.

Just my 2 cents worth,

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

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Re: Amazed by Vanguard Wellington's Performance

Post by aristotelian » Tue Aug 22, 2017 11:15 am

A lot of people on this board also love PRIMECAP. Of course, you never know when any of these funds may stop outperforming.

For years I had T Rowe Price Mid Cap Value (TRMCX) which did quite well for me, and won the Morningstar manager of the year award last year. I luckily decided to cash in my chips on that one and sold it to pay off our mortgage--now it is only up 5% YTD.

I also have TRP Blue Chip Stock (TRBCX), which is up 23% YTD and about 300% since I have owned it, despite a .74% ER. I plan to liquidate early next year as I have realized a lot of gains this year. Hopefully my luck holds out a few more months.

Unfortunately Wellesley the best fund offered in my TIAA plan with lower expenses than my index fund offerings, so I will still have one active fund in my portfolio once TRBCX is gone.

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Re: Amazed by Vanguard Wellington's Performance

Post by Grt2bOutdoors » Tue Aug 22, 2017 11:27 am

Iliketoridemybike wrote:
Tue Aug 22, 2017 10:44 am
For allocation type funds, Fidelity Puritan (almost 4% higher YTD) is similar and Fidelity Contra outperforms, almost 13% higher YTD. Similar if you look at 10 year performance. Puritan is just below Wellington and Contra is well above.
Will Danoff plays in the Large Cap Growth space, also his fund is 100% equity, so given the bull market and his impressive stock picking skills I would expect him to be well above in terms of performance.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Amazed by Vanguard Wellington's Performance

Post by Grt2bOutdoors » Tue Aug 22, 2017 11:30 am

thangngo wrote:
Tue Aug 22, 2017 10:13 am
azanon wrote:
Tue Aug 22, 2017 8:44 am
Are there any active funds that really cause you to consider that maybe it really is possible to outperform indexes? For me, Wellington definitely has to be one of them.

Just for fun, I occasionally sometimes go to www.portfoliovisualizer.com and run comparisons. About a week or two ago, I wanted to see if I could hand pick ANY Vanguard large-cap Value fund (Vanguard has 6), and pair that up with ANY high or medium quality, intermediate-term vanguard bond fund and outperform Wellington (I used 65% stock, 35% bond proportions). I forget the exact numbers, but I think the closest I could get to Wellington's performance was 50 basis points of under-performance, and the length that I looked at varied depending on the two funds I picked (I just used the longest available lengths).

Now in some cases, the risk (volatility) was also lower than Wellington too, so in those cases I increased the stock percentage until I matched Wellington's volatility, but once I got them matched, they were still under-performing.

Anyway, it's this sort of thing that does cause me to question the mantra that index funds/ETFs are always better. People get concerned about not knowing the out-performers before-hand but Wellington (and it's sister Wellesley) have outperformed for a very long time and show no signs of stopping.
Wellington is a decent active managed fund for a tax deferred account. I invested in the fund (for 10% of my portfolio). But Wellington has not performed well this 2017 YTD. It seems to revert back to the mean.
The best time to buy Wellington is when the equities they own are "out of favor". It's in the WSJ this morning that value stocks have fallen behind growth stocks and momentum plays, but that will not last forever. Stay the course, if you are in it and it's strategy works for you there is no reason to bail now. I own it in my Roth, will continue to hold it.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Amazed by Vanguard Wellington's Performance

Post by thangngo » Tue Aug 22, 2017 11:46 am

azanon wrote:
Tue Aug 22, 2017 10:30 am
thangngo wrote:
Tue Aug 22, 2017 10:13 am
Wellington is a decent active managed fund for a tax deferred account. I invested in the fund (for 10% of my portfolio). But Wellington has not performed well this 2017 YTD. It seems to revert back to the mean.
Decent? wow. Know any balanced funds or ETFs you'd consider "great" at similar stock/bond levels? :shock: How good can this get!

We might disagree over what I'm about to say, and that'd be fine with, but I'd find an intra-year YTD performance of any fund (index or active) to be useless. I seriously doubt that's the only 8 month stretch of under-performance you could find in Wellington's history. I think that's why a lot of investors looking for an active wouldn't even consider a fund with less than a 5 year history and preferably 10 years or more.
No, I agree with you that past performance is not an indicator for future performance, regardless of YTD, 5 years, 10 years, 40 years record of performance. I admire Wellington because of their investing principles. But it does not mean to I have 100% in Wellington.

You might disagree with me on this. But performance is not a sole or deciding factor when I evaluate a fund/ETF. The decision to invest in a fund/ETF is driven by my goals, investing principles and my timing horizon. I keep Vanguard Wellington (10% of my portfolio) for a 15-20 years horizon for my children education/housing/discretionary purchases. I keep the majority of my retirement assets in 3 passive index funds for a 30-60 year time horizon.

Note that I chose Wellington over Vanguard balanced index fund :beer so we're in agreement.

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Re: Amazed by Vanguard Wellington's Performance

Post by azanon » Tue Aug 22, 2017 1:21 pm

Nowizard wrote:
Tue Aug 22, 2017 10:56 am
Interesting thread that may reflect differences between strict Bogleheads and those who ascribe to most or many or the concepts but with some variance at times.

Tim
Just a couple of nights ago, I was browsing through youtubes where Bogle was being interviewed, and I recall one where he was discussing both the history of Wellington as well as Windsor, and then later Windsor II, and his direct involvement in the evolution of these funds. So Bogle himself certainly supports these types of funds. So it calls into question what is a strict Boglehead, when Bogle himself supports these funds.

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Re: Amazed by Vanguard Wellington's Performance

Post by azanon » Tue Aug 22, 2017 1:33 pm

pkcrafter wrote:
Tue Aug 22, 2017 11:07 am
azanon, you have brought up something I find very puzzling. Yes, W and W and very good active funds, as are other Vanguard active funds, and so are Dodge and Cox, TRPrice, and even American. My question is why, out of ~10,000 mutual funds, can we identify these few as outstanding? Vanguard has the low cost working for them, D/C is moderate, but TRP and Am are rather high cost by comparison. Even if there are twice that many good long term funds, even if there are 10 times that many, it would still 1-2%.

The only thing I see is all of these funds remain consistent in their investing philosophy--they don't change strategies and chase performance. They don't have "star" managers either. All have multiple managers, and they stay on track. For instance, In the late 90's bubble, D/C, which uses a value philosophy, got buried for years, but they stayed with the plan, and were big winners in the early 2000s. The market, and the investors, came to them.

So, if these funds can do it, why don't we see a lot more funds with good long term performance? Are the vast majority of fund companies so eager to make/chase a buck today that just don't care about long term performance? Certainly, if they can provide some fireworks now they will pull in lots of running investors and their $$ now. That seems to be the game.

Paul
I think this is where I'm at, and I imagine this sort of thing has been discussed a 1000 times here. The last time I saw a statistic on it (which wasn't long ago) the average active fund was charging on the order of 1.25% ER, so when one compares that level of headwind vs. a sub 0.2%ER Index fund, then Index funds are going to come out looking incredible unless an active is really lucky, and that's not even getting into the typically higher turnover of an active.

But as you say, if you can find a situation where most of the detrimental issues of the typical active fund are addressed, such as the higher expenses, excesses turnover, changing philosophies, etc, then all of a sudden the standard active vs. passive comparison changes quite a bit. So maybe I'm starting to lean towards a management philosophy can potentially add value provided that the added costs aren't insurmountable.

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Re: Amazed by Vanguard Wellington's Performance

Post by columbia » Tue Aug 22, 2017 1:40 pm

azanon wrote:
Tue Aug 22, 2017 10:00 am

I'm not aware if anyone is "lauding" Wellington or Wellesley. I just ran a screener and made an observation that I found pretty shocking. Certainly anyone that doesn't believe in coincidences and rare repeatable, multi-decade long lucky streaks despite an active fee headwind would find it shocking too. If i cant beat it with "take my pick" any LC value fund and an IT bond fund rearward-looking, then what chance do I have beating it forward looking with only one choice? They're paying themselves about a 30bp premium for active, and then adding a good 50-100bp of performance net of fees, at comparably low volatility levels by most of my comparisons.

Maybe for fun, I'll expand my search to non-Vanguard funds; see if I can find any "LC Value US" stock fund and IT, investment-grade bond fund, at 65/35 proportions, and beat Wellington (and at equal or lower risk levels as measured by Sharpe or Sortino).
Out of curiosity 1994 to 2017 (via Portfolio Visualizer):

Wellington: 100%

vs.

VIVAX: 65%
VFICX: 35%


https://www.portfoliovisualizer.com/bac ... tion3_2=35


YMMV...

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Re: Amazed by Vanguard Wellington's Performance

Post by azanon » Tue Aug 22, 2017 1:42 pm

chicagoan23 wrote:
Tue Aug 22, 2017 10:44 am
azanon wrote:
Tue Aug 22, 2017 8:44 am
Just for fun, I occasionally sometimes go to www.portfoliovisualizer.com and run comparisons. About a week or two ago, I wanted to see if I could hand pick ANY Vanguard large-cap Value fund (Vanguard has 6), and pair that up with ANY high or medium quality, intermediate-term vanguard bond fund and outperform Wellington (I used 65% stock, 35% bond proportions). I forget the exact numbers, but I think the closest I could get to Wellington's performance was 50 basis points of under-performance, and the length that I looked at varied depending on the two funds I picked (I just used the longest available lengths).

Now in some cases, the risk (volatility) was also lower than Wellington too, so in those cases I increased the stock percentage until I matched Wellington's volatility, but once I got them matched, they were still under-performing.
I'm not sure if you accounted for this, but doesn't the result largely depend on the time period that you are using to measure performance? For example, Warren Buffett has 21% compounded annual returns at Berkshire since 1965, compared to 10% for the S&P 500. He is not just outperforming the market but has lapped the market, over a 50+ year time period. But if you pick a different starting point and, say, go back to the start of this bull market (March 10, 2009) Berkshire is well behind the market, losing 17.8% to 14.9% in average annual return since then. I understand that Berkshire's focus changed over that time and it's hard to generate large returns on a company with a market cap of $420 billion, but you'd have been significantly worse off staying in Berkshire as opposed to an index fund over the past 8+ years.

I think a more accurate measure of relative outperformance would be an annual comparison to the market/indexed return, with that analysis starting over each year. Is that data available from Wellington and does it show it beating the market year after year? Or over rolling five and ten-year periods?
This was just something I did really quick, and not some sort of in-depth study. Most of the runs I was getting were over a decade, and they were vs. funds that matched Wellington's style (LC Value/IT investment-grade bonds), so I felt like there was at least some degree of meaningful observation being made.

But I think in the case of a fund run by just one man (Warren), vs. a philosophy, then yeah I'm going to be far more cautious about presuming similar performance in the future from comparisons to the past. Now you say Berkshire is behind "the market" during this huge bull market since 09', and I know that "value" tends to underperform during bulls so are you really surprised by that? From what I remember of Warren, where he really excelled is when everyone was getting crushed, such as 00'-02'. The more fair comparison for Warren would be to pit him against other LC Value stock funds, not "the market", akin to what I'm doing here.

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Re: Amazed by Vanguard Wellington's Performance

Post by azanon » Tue Aug 22, 2017 1:44 pm

columbia wrote:
Tue Aug 22, 2017 1:40 pm
azanon wrote:
Tue Aug 22, 2017 10:00 am

I'm not aware if anyone is "lauding" Wellington or Wellesley. I just ran a screener and made an observation that I found pretty shocking. Certainly anyone that doesn't believe in coincidences and rare repeatable, multi-decade long lucky streaks despite an active fee headwind would find it shocking too. If i cant beat it with "take my pick" any LC value fund and an IT bond fund rearward-looking, then what chance do I have beating it forward looking with only one choice? They're paying themselves about a 30bp premium for active, and then adding a good 50-100bp of performance net of fees, at comparably low volatility levels by most of my comparisons.

Maybe for fun, I'll expand my search to non-Vanguard funds; see if I can find any "LC Value US" stock fund and IT, investment-grade bond fund, at 65/35 proportions, and beat Wellington (and at equal or lower risk levels as measured by Sharpe or Sortino).
Out of curiosity 1994 to 2017 (via Portfolio Visualizer):

Wellington: 100%

vs.

VIVAX: 65%
VFICX: 35%


https://www.portfoliovisualizer.com/bac ... tion3_2=35


YMMV...
Yeah I know, right? Over an extra 100bp of performance for 23 years measured. That's what I'm saying. Wow.

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Re: Amazed by Vanguard Wellington's Performance

Post by BBSpartan » Tue Aug 22, 2017 2:08 pm

According to Morningstar Fund Investor, August 2017 issue, the T. Rowe Price Capital Appreciation Fund has outperformed the Wellington Fund over the past 3, 5 and 10 year periods. It is the top fund in Morningstar Fund Investor's Allocation Fund category. It has Morningstar's ratings of Gold and 5-stars just as Wellington does.

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Re: Amazed by Vanguard Wellington's Performance

Post by bada bing » Tue Aug 22, 2017 2:18 pm

I've done some portfoliovisualizer runs in the past looking
at exactly the same thing: comparing Wellington and Wellesley
to an indexed Equity/Fixed split. There definitely was some "magic"
in the past for those funds.

One of the things I did was investigate playing with the bond piece
of the portfolio. If you want to see another active fund that will make
you scratch your head over past performance, look at PIMIX. Only a
ten year track record, but impressive. I started by looking at PIMIX as
a replacement of the bond index in a Wellesley replacement, but the
rear view mirror view is that PIMIX has smoked Wellesley and Wellington
over the past ten years all by itself. But it is only academic interest,
you can not buy the past.

Portfolio visualizer

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Re: Amazed by Vanguard Wellington's Performance

Post by Iliketoridemybike » Tue Aug 22, 2017 2:31 pm

Grt2bOutdoors wrote:
Tue Aug 22, 2017 11:27 am
Iliketoridemybike wrote:
Tue Aug 22, 2017 10:44 am
For allocation type funds, Fidelity Puritan (almost 4% higher YTD) is similar and Fidelity Contra outperforms, almost 13% higher YTD. Similar if you look at 10 year performance. Puritan is just below Wellington and Contra is well above.
Will Danoff plays in the Large Cap Growth space, also his fund is 100% equity, so given the bull market and his impressive stock picking skills I would expect him to be well above in terms of performance.
You're right about Contra. I was thinking it was an allocation fund. Puritan is the more accurate comparable in the 50%-70% equity allocation class.

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Re: Amazed by Vanguard Wellington's Performance

Post by pkcrafter » Tue Aug 22, 2017 3:52 pm

More interesting information on Wellington.

https://money.usnews.com/funds/mutual-f ... fund/vwelx


Paul
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wassabi
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Re: Amazed by Vanguard Wellington's Performance

Post by wassabi » Thu Aug 24, 2017 8:01 pm

One thing I've noticed when backtesting Wellington on portfoliovisualizer.com is that the income is significantly higher than other similar funds and index allocations (e.g., 65% VTSMX and 35% VBMFX). If I run $100,000 from 1994-2017, the income from the fund in recent years is somewhere around 5-6% per year (you have to select the option to display income).

Does anyone know why the income from Wellington is so high compared to index funds? I thought it might have to do with dividend stocks and long-term bonds, but 5-6% seems high.

mongstradamus
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Re: Amazed by Vanguard Wellington's Performance

Post by mongstradamus » Thu Aug 24, 2017 8:56 pm

I was looking at wellington numbers compared to the other "popular balanced funds", like puritan, fidelity balanced, and vanguard balanced index. Wellington seems to best them with relatively less risk when compared to the fidelity funds. I am not exactly sure how they do it for such long period of times.

bklyn96
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Re: Amazed by Vanguard Wellington's Performance

Post by bklyn96 » Thu Aug 24, 2017 9:00 pm

wassabi wrote:
Thu Aug 24, 2017 8:01 pm
Does anyone know why the income from Wellington is so high compared to index funds? I thought it might have to do with dividend stocks and long-term bonds, but 5-6% seems high.
I suspect you're right that it's a combination of dividend stocks and bonds. However, the 5%-6% income is not that unusual—the mean income is 6.35% for the period 1970-1993.

Wellington Total Investment Returns
For years ending Dec. 31
Source: 1994 Annual Report, page 9
========================
Year Capital Income
1970 +2.0% +4.4%
1971 +4.8% +4.1%
1972 +7.1% +3.9%
1973 -15.5% +3.7%
1974 -22.3% +4.6%
1975 +18.6% +6.6%
1976 +17.4% +6.0%
1977 -9.3% +4.9%
1978 -0.8% +6.1%
1979 +5.5% +8.0%
1980 +13.7% +8.9%
1981 -5.6% +8.5%
1982 +14.4% +10.1%
1983 +15.1% +8.5%
1984 +2.8% +7.9%
1985 +20.3% +8.2%
1986 +11.7% +6.7%
1987 -3.5% +5.8%
1988 +9.5% +6.6%
1989 +14.9% +6.7%
1990 -8.5% +5.7%
1991 +17.2% +6.4%
1992 +2.7% +5.2%
1993 +8.5% +5.0%

daveydoo
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Re: Amazed by Vanguard Wellington's Performance

Post by daveydoo » Thu Aug 24, 2017 9:20 pm

Not an expert, but aren't some of these the "gotcha" funds that unexpectedly spin out large CGs -- especially in the face of market corrections, etc., when they are forced to sell their winners? So it's very hard to estimate your real-world after-tax performance, especially if you are in a higher bracket and a high-tax state. I've been burned many times by these over the years. I do have a few that I'm still holding on to mostly out of affection (Contrafund and Wellington), but that's only in tax-deferred accounts.

bklyn96
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Re: Amazed by Vanguard Wellington's Performance

Post by bklyn96 » Thu Aug 24, 2017 9:21 pm

wassabi wrote:
Thu Aug 24, 2017 8:01 pm
Does anyone know why the income from Wellington is so high compared to index funds? I thought it might have to do with dividend stocks and long-term bonds, but 5-6% seems high.
Stock dividends provided 60% of Wellington's income in recent years
Source: 2014-2016 Annual Reports, Statements of Operations
=================
2014
Dividends 58.3%
Interest 41.5%
Securities lending 0.2%

2015
Dividends 59.4%
Interest 40.4%
Securities lending 0.2%

2016
Dividends 61.7%
Interest 37.9%
Securities lending 0.5%

AlohaJoe
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Re: Amazed by Vanguard Wellington's Performance

Post by AlohaJoe » Fri Aug 25, 2017 5:14 am

azanon wrote:
Tue Aug 22, 2017 8:44 am
Are there any active funds that really cause you to consider that maybe it really is possible to outperform indexes? For me, Wellington definitely has to be one of them.
I'm surprised that no one has mentioned "factors" in the thread so far. When I run a 5-factor regression against Wellington I get an alpha of only 3.30 basis points (with a t-stat of only 0.674, so not significant).

That seems to imply that building a replicating portfolio using indexes to match that factor exposure would give the same results, right?

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alec
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Re: Amazed by Vanguard Wellington's Performance

Post by alec » Fri Aug 25, 2017 5:59 am

AlohaJoe wrote:
Fri Aug 25, 2017 5:14 am
azanon wrote:
Tue Aug 22, 2017 8:44 am
Are there any active funds that really cause you to consider that maybe it really is possible to outperform indexes? For me, Wellington definitely has to be one of them.
I'm surprised that no one has mentioned "factors" in the thread so far. When I run a 5-factor regression against Wellington I get an alpha of only 3.30 basis points (with a t-stat of only 0.674, so not significant).

That seems to imply that building a replicating portfolio using indexes to match that factor exposure would give the same results, right?
Yes. Large Value, high dividend paying stocks. Intermediate corporate bonds. Here the stategy and policy from Vanguard's website:
The fund invests 60% to 70% of its assets in dividend-paying, and, to a lesser extent, non-dividend-paying common stocks of established medium-size and large companies. In choosing these companies, the advisor seeks those that appear to be undervalued but to have prospects for improvement. These stocks are commonly referred to as value stocks. The remaining 30% to 40% of fund assets are invested mainly in investment-grade corporate bonds, with some exposure to U.S. Treasury and government agency bonds, as well as mortgage-backed securities.
"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair

Iliketoridemybike
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Re: Amazed by Vanguard Wellington's Performance

Post by Iliketoridemybike » Fri Aug 25, 2017 7:30 am

mongstradamus wrote:
Thu Aug 24, 2017 8:56 pm
I was looking at wellington numbers compared to the other "popular balanced funds", like puritan, fidelity balanced, and vanguard balanced index. Wellington seems to best them with relatively less risk when compared to the fidelity funds. I am not exactly sure how they do it for such long period of times.
Your statement is true only for one time frame. Puritan this year alone is 4% plus on Wellington. That's a significant difference. You have to go out 10 years before Wellington takes a .5% lead.

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Re: Amazed by Vanguard Wellington's Performance

Post by JW-Retired » Fri Aug 25, 2017 9:00 am

daveydoo wrote:
Thu Aug 24, 2017 9:20 pm
Not an expert, but aren't some of these the "gotcha" funds that unexpectedly spin out large CGs -- especially in the face of market corrections, etc., when they are forced to sell their winners? So it's very hard to estimate your real-world after-tax performance, especially if you are in a higher bracket and a high-tax state. I've been burned many times by these over the years. I do have a few that I'm still holding on to mostly out of affection (Contrafund and Wellington), but that's only in tax-deferred accounts.
Yep, these active funds realizing large CGs has been a big "gotcha" deal for us. We have held a highly appreciated Contrafund in a taxable account for decades. It's darn capital gains distributions have already finished burning up our whole carryover losses bank from 2008/09. :oops:
JW
Retired at Last

MIpreRetirey
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Re: Amazed by Vanguard Wellington's Performance

Post by MIpreRetirey » Fri Aug 25, 2017 10:02 am

Both Well. and Welles. have high LT Cap Gains, which seem to be only in market boom years (and not in recessions.) I mean like CGs almost equivalent to total year div yield ( maybe about 3/4 of that.)
The Eq.Inc Fd., managed also by Wellington Mngmnt. does the same at a lesser degree ( maybe 1/2 as high of a CG %.)

VEIPX stock holding categories, according to M*, are not really tilted from the broad sector exposures of other LC Val funds. (Cyclical, Sensitive, Defensive.)
VWELX has a concentration in Fin.Serv(Cyclical), and Heathcare(Defensive).
VWINX has a concentration in Defensive (in Consumer, Heathcare, Utilities).

Both VWELX, VWINX's bonds are about 2/3 or 3/4 corp 'A" avg., 6.5 yr dur. (similar to IT corp bond fund, VFICX).

I might guess that VWELX and VWINX stock holdings are just part of the same one's VEIPX holds. VWELX tilted to the lower yielding, more cyclical; VWINX to the higher yielding defensive with utilities.

It's hard to try to duplicate them even using portions of high yield stocks (VEIPX or VHDYX) and corp bonds. Especially VWINX. Maybe just because they are active(probably not extremely) with both at 31% turnover; and VEIPX holds about 180 stocks, VWELX holds about 100 stocks, VWINX about 62 stocks, and VWELX and VWINX hold 46 and 27 in the category called other-long.

The VG active div grth fund is VDIGX, also managed by Wellington Mngmnt. It has about 50 equities.

FactualFran
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Re: Amazed by Vanguard Wellington's Performance

Post by FactualFran » Fri Aug 25, 2017 1:40 pm

wassabi wrote:
Thu Aug 24, 2017 8:01 pm
One thing I've noticed when backtesting Wellington on portfoliovisualizer.com is that the income is significantly higher than other similar funds and index allocations (e.g., 65% VTSMX and 35% VBMFX). If I run $100,000 from 1994-2017, the income from the fund in recent years is somewhere around 5-6% per year (you have to select the option to display income).
In recent years, the income from the fund has been around 3% (taking the income distributions in cash). The total distributions (income and capital gains) have been around 5-6% for some of the years. However, capital gain distributions can vary widely from year-to-year. The fund did not make capital gain distributions from 2008 through 2011. During 2010 the distributions were 2.95% (of the end of 2009 balance of an account for which the only transactions were taking the distributions in cash).

wassabi
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Re: Amazed by Vanguard Wellington's Performance

Post by wassabi » Fri Aug 25, 2017 1:49 pm

FactualFran wrote:
Fri Aug 25, 2017 1:40 pm
wassabi wrote:
Thu Aug 24, 2017 8:01 pm
One thing I've noticed when backtesting Wellington on portfoliovisualizer.com is that the income is significantly higher than other similar funds and index allocations (e.g., 65% VTSMX and 35% VBMFX). If I run $100,000 from 1994-2017, the income from the fund in recent years is somewhere around 5-6% per year (you have to select the option to display income).
In recent years, the income from the fund has been around 3% (taking the income distributions in cash). The total distributions (income and capital gains) have been around 5-6% for some of the years. However, capital gain distributions can vary widely from year-to-year. The fund did not make capital gain distributions from 2008 through 2011. During 2010 the distributions were 2.95% (of the end of 2009 balance of an account for which the only transactions were taking the distributions in cash).
Here's an example of Wellington compared to 65/35 stock/bond index. In 2015, it looks like Wellington paid out around 6% in income. Any idea how when bond rates were so low then and high yield dividend stock were paying half that on average? I'm confused about Wellington's income.
[Link here]

FactualFran
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Re: Amazed by Vanguard Wellington's Performance

Post by FactualFran » Fri Aug 25, 2017 2:13 pm

wassabi wrote:
Fri Aug 25, 2017 1:49 pm
Here's an example of Wellington compared to 65/35 stock/bond index. In 2015, it looks like Wellington paid out around 6% in income. Any idea how when bond rates were so low then and high yield dividend stock were paying half that on average? I'm confused about Wellington's income.
[Link here]
In 2015, the Wellington fund did not pay out around 6% in income. The 6% figure includes 3.5% in capital gain (distributions of $1.389 per share on the end of 2014 NAV of $39.15). The fund paid out 2.6% in income (distributions of $1.003 per share on the end of 2014 NAV of $39.15).

A more valid comparison between a portfolio of funds that pay little, if any, capital gain distributions and the Wellington Fund would be to use a year between 2008 and 2011. Between those years the Wellington Fund did not make any capital gain distributions.

wassabi
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Re: Amazed by Vanguard Wellington's Performance

Post by wassabi » Fri Aug 25, 2017 2:19 pm

FactualFran wrote:
Fri Aug 25, 2017 2:13 pm
wassabi wrote:
Fri Aug 25, 2017 1:49 pm
Here's an example of Wellington compared to 65/35 stock/bond index. In 2015, it looks like Wellington paid out around 6% in income. Any idea how when bond rates were so low then and high yield dividend stock were paying half that on average? I'm confused about Wellington's income.
[Link here]
In 2015, the Wellington fund did not pay out around 6% in income. The 6% figure includes 3.5% in capital gain (distributions of $1.389 per share on the end of 2014 NAV of $39.15). The fund paid out 2.6% in income (distributions of $1.003 per share on the end of 2014 NAV of $39.15).

A more valid comparison between a portfolio of funds that pay little, if any, capital gain distributions and the Wellington Fund would be to use a year between 2008 and 2011. Between those years the Wellington Fund did not make any capital gain distributions.
Ah, yes, so the capital gains distributions caused the higher payout. Thank you very much for clearing that up for me.

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Re: Amazed by Vanguard Wellington's Performance

Post by CedarWaxWing » Fri Aug 25, 2017 5:12 pm

mongstradamus wrote:
Thu Aug 24, 2017 8:56 pm
I was looking at wellington numbers compared to the other "popular balanced funds", like puritan, fidelity balanced, and vanguard balanced index. Wellington seems to best them with relatively less risk when compared to the fidelity funds. I am not exactly sure how they do it for such long period of times.


Vanguard Balanced Index vs Wellington post tax is not so big a difference. (I hope the spacing stays true on sending. :)


Tax-adjusted Return * (Morningstar)

YTD 1-Yr 3-Yr 5-Yr 10-Yr 15-yr
VWENX 6.97 9.32 5.77 8.57 5.87 7.29
VBAIX 7.28 8.19 6.61 8.78 6.10 6.97

Richard1580
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Re: Amazed by Vanguard Wellington's Performance

Post by Richard1580 » Thu Oct 19, 2017 2:23 pm

I have been sold on the superiority of index funds for going on 20 years. I only recently discovered the Bogleheads forum and have been reading through it and the related wiki pages over the last couple of months. Simba's backtest spreadsheet was an especially interesting find, and I have been playing with that, along with Portfolio Visualizer to experiment with various AA's.

In doing so I was stunned to see how well Wellington has performed. According to the data in Simba's spreadsheet, compared to the "Lazy Portfolios," Wellington had the best CAGR for 16 out of 32 years. It was second in 9 years, third in 4 years and fourth, fifth and sixth in the remaining three years.

That period encompasses more than a single manager, which leads me to believe that there is something about their process that is responsible for their stellar results. My knee jerk reaction was to move everything into Wellington and go back to playing Spider Solitaire, but after further reflection I decided that moving towards a 10% position was more prudent. :happy

In any event, it has made me reconsider my opinion of at least one managed fund - particularly when the Admiral shares have an expense of only 0.16%.

I was going to open a new thread, but uncovered this one while doing some research. It seems that every time I think to post a question, a quick search of the forum yields the answer (or at least a discussion about the question). I only wish I had discovered Bogleheads years ago.

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Re: Amazed by Vanguard Wellington's Performance

Post by rustymutt » Thu Oct 19, 2017 2:40 pm

azanon wrote:
Tue Aug 22, 2017 8:44 am
Are there any active funds that really cause you to consider that maybe it really is possible to outperform indexes? For me, Wellington definitely has to be one of them.

Just for fun, I occasionally sometimes go to www.portfoliovisualizer.com and run comparisons. About a week or two ago, I wanted to see if I could hand pick ANY Vanguard large-cap Value fund (Vanguard has 6), and pair that up with ANY high or medium quality, intermediate-term vanguard bond fund and outperform Wellington (I used 65% stock, 35% bond proportions). I forget the exact numbers, but I think the closest I could get to Wellington's performance was 50 basis points of under-performance, and the length that I looked at varied depending on the two funds I picked (I just used the longest available lengths).

Now in some cases, the risk (volatility) was also lower than Wellington too, so in those cases I increased the stock percentage until I matched Wellington's volatility, but once I got them matched, they were still under-performing.

Anyway, it's this sort of thing that does cause me to question the mantra that index funds/ETFs are always better. People get concerned about not knowing the out-performers before-hand but Wellington (and it's sister Wellesley) have outperformed for a very long time and show no signs of stopping.

Congratulations on such great long term growth of your fund. But the chances of this fund outperforming the markets, for any length of time, into the future is less, and less as time goes forward. But certainly does command market conditions top funds list.
Knowledge is knowing that the Tomato is a fruit. Wisdom is knowing better than to put the tomato in a fruit salad.

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Re: Amazed by Vanguard Wellington's Performance

Post by azanon » Thu Oct 19, 2017 4:47 pm

I'm focusing more on the Global versions of these funds now. I was interested in discussing this way back in August though!

Richard1580
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Re: Amazed by Vanguard Wellington's Performance

Post by Richard1580 » Thu Oct 19, 2017 5:03 pm

azanon wrote:
Thu Oct 19, 2017 4:47 pm
I'm focusing more on the Global versions of these funds now. I was interested in discussing this way back in August though!
Saw that. It is an interesting variant, and will be worth watching.

Of course, whenever I see an attractive managed fund blink its eyes and wiggle its hips at me, I can't help but think ... Magellan. :-)

ljb1234
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Re: Amazed by Vanguard Wellington's Performance

Post by ljb1234 » Thu Oct 19, 2017 5:34 pm

columbia wrote:
Tue Aug 22, 2017 1:40 pm
azanon wrote:
Tue Aug 22, 2017 10:00 am

I'm not aware if anyone is "lauding" Wellington or Wellesley. I just ran a screener and made an observation that I found pretty shocking. Certainly anyone that doesn't believe in coincidences and rare repeatable, multi-decade long lucky streaks despite an active fee headwind would find it shocking too. If i cant beat it with "take my pick" any LC value fund and an IT bond fund rearward-looking, then what chance do I have beating it forward looking with only one choice? They're paying themselves about a 30bp premium for active, and then adding a good 50-100bp of performance net of fees, at comparably low volatility levels by most of my comparisons.

Maybe for fun, I'll expand my search to non-Vanguard funds; see if I can find any "LC Value US" stock fund and IT, investment-grade bond fund, at 65/35 proportions, and beat Wellington (and at equal or lower risk levels as measured by Sharpe or Sortino).


Out of curiosity 1994 to 2017 (via Portfolio Visualizer):

Wellington: 100%

vs.

VIVAX: 65%
VFICX: 35%


https://www.portfoliovisualizer.com/bac ... tion3_2=35


YMMV...
Well, I added Oakmark Equity Income to the mix (I owned it for years) and you can see that it is just behind TRowe Capital Appreciation in terms of return, but it has had a better downside protection (higher Sortino Ratio). Note, it had a poor 2015 result.
Once again, you can backtest and find things like this, but what about going forward?
No one knows...

https://www.portfoliovisualizer.com/bac ... ion5_2=100

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Re: Amazed by Vanguard Wellington's Performance

Post by azanon » Thu Oct 19, 2017 6:37 pm

Richard1580 wrote:
Thu Oct 19, 2017 5:03 pm
azanon wrote:
Thu Oct 19, 2017 4:47 pm
I'm focusing more on the Global versions of these funds now. I was interested in discussing this way back in August though!
Saw that. It is an interesting variant, and will be worth watching.

Of course, whenever I see an attractive managed fund blink its eyes and wiggle its hips at me, I can't help but think ... Magellan. :-)
I try to look at the fund and see if there's a particular reason it's been successful. Wellington/Wellesley has been successful for similar reasons that Buffett has been successful; the well documented value factor. That, and probably to a much lesser extent the slightly longer than medium term bonds combined with falling rates. So for me, it would stand to reason that forward-looking, there would be reason for concern if you think the value factor is going away. I don't think so and neither does Swedroe.

TBH, I haven't studied Magellan's history and theories as to why it was successful then stopped being so. It's heyday with Peter Lynch predated my investment/working career. Since you brought it up, maybe it would be interesting for me to go back and see if there's a consensus on why it worked for so long, then suddenly stopped working.

This whole targetting Wellesley/Wellington though is actually insufficient. Vanguard published a paper a few years back where they compared, in aggregate, the performance of all of their actives vs. passive benchmarks. If I recall correctly, in aggregate over a 30-year period, their actives are outperforming by some 30+bp, even after fees. Can you get lucky across an entire host of funds for 30 years? I couldn't be convinced of that.

JBTX
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Re: Amazed by Vanguard Wellington's Performance

Post by JBTX » Thu Oct 19, 2017 7:15 pm

It could be that W and W have hit a sweet spot in tilting towards large solid value stocks and medium high quality bonds with slightly longer duration.

There was a 5ish year period late 70s early 80s where they significantly lagged their peers. This was a high inflation time where interest rates skyrocketed and large cap stocks lagged. Small caps did relatively better during that period.

I have money in both. I like the risk return tradeoff they have exhibited.

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Re: Amazed by Vanguard Wellington's Performance

Post by avalpert » Thu Oct 19, 2017 7:24 pm

Compared to Vanguards own chosen blended benchmark index Wellington hasn't had any meaningful outerpformance over the last decade (it underperformed over 3 and 5 years), when I compare it to a 65/35 mix of Vanguard's Total Market and Total Bond funds I don't see any outperformance our better risk characteristics, when I run a 5-factor regression there is no statistically significant alpha (and depending on the time frame what is there varies from negative to positive). So no, I'm not amazed by it - I'm not ever sure it is really there.

That said, I would not be amazed to find a fund outperform an appropriate benchmark even over a long period - I would be more amazed if someone could isolate which fund that would be ahead of time.

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Re: Amazed by Vanguard Wellington's Performance

Post by Dead Man Walking » Thu Oct 19, 2017 7:29 pm

rustymutt wrote:
Thu Oct 19, 2017 2:40 pm
azanon wrote:
Tue Aug 22, 2017 8:44 am
Are there any active funds that really cause you to consider that maybe it really is possible to outperform indexes? For me, Wellington definitely has to be one of them.

Just for fun, I occasionally sometimes go to www.portfoliovisualizer.com and run comparisons. About a week or two ago, I wanted to see if I could hand pick ANY Vanguard large-cap Value fund (Vanguard has 6), and pair that up with ANY high or medium quality, intermediate-term vanguard bond fund and outperform Wellington (I used 65% stock, 35% bond proportions). I forget the exact numbers, but I think the closest I could get to Wellington's performance was 50 basis points of under-performance, and the length that I looked at varied depending on the two funds I picked (I just used the longest available lengths).

Now in some cases, the risk (volatility) was also lower than Wellington too, so in those cases I increased the stock percentage until I matched Wellington's volatility, but once I got them matched, they were still under-performing.

Anyway, it's this sort of thing that does cause me to question the mantra that index funds/ETFs are always better. People get concerned about not knowing the out-performers before-hand but Wellington (and it's sister Wellesley) have outperformed for a very long time and show no signs of stopping.

Congratulations on such great long term growth of your fund. But the chances of this fund outperforming the markets, for any length of time, into the future is less, and less as time goes forward. But certainly does command market conditions top funds list.
Some probably questioned how long Wellington's performance would last in the 1930's, 1940's, 1950's, 1960's, 1970's, 1980's, 1990's, 2000's, and 2010's. I suspect that the outperformance will end sometime in its ninth decade of existence.

DMW

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