Indexing beats Wellington and Wellesley right?

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tibbitts
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Re: Indexing beats Wellington and Wellesley right?

Post by tibbitts » Sat Apr 13, 2019 10:38 am

DB2 wrote:
Sat Apr 13, 2019 10:16 am
tibbitts wrote:
Sat Apr 13, 2019 10:00 am
DB2 wrote:
Sat Apr 13, 2019 9:46 am
ruralavalon wrote:
Sat Apr 13, 2019 9:42 am
teelainen wrote:
Fri Mar 15, 2019 10:44 pm
If everyone agrees that indexing is superior to actively-managed funds, then why is Wellington and Wellesley still so popular? Not to mention that Wellington and Wellesley have higher expenses as well.

Doesn't it make sense to just skip Wellington/Wellesley and build your own "Three-Fund or Four-Fund Portfolio" using the best Vanguard index funds with the same allocations as Wellington/Wellesley?

I'm just curious why so many people still love Wellington and Wellesley. I'm sure there must be good reasons, thanks.
They are well diversified balanced funds, have low expense ratios (0.21% and 0.16%), have low turnover rates (33% and 36%, so are not very "active"), and have had a very long history of good performance.
Well said.

Hard to argue against a balanced fund which has averaged an 8.26% yearly rate of return since 1929.
Not a lot of people would have held on through the years when Wellington tanked relative to almost everything in the '60s.

Having said that I've had the fund for a while now and have no plans to get rid of it, but I know I wouldn't have had the stomach to hold on through those years. I would have bailed on it just like I did on U.S. Growth a generation later. So, I own the fund, but recognize that there's almost no rational justification for doing so.
I recall Jack Bogle saying how it was struggling in the 1970s until he got involved with it. Sounds like the fund has been on track since.

I suppose in theory the Vanguard Balanced Admiral Index or even the more conservative Tax Managed Balanced Index (for taxable account and depending on tax bracket) might be better choices today.
Wellington and Bogle go back farther than that, and while he might not have been the only reason for Wellington's struggles, he was definitely a major contributor to its problems. But yes in a sense he threw more than a few bones Wellington's way not that long after Wellington fired him.

hoops777
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Re: Indexing beats Wellington and Wellesley right?

Post by hoops777 » Sat Apr 13, 2019 2:54 pm

These funds are simple to understand and simple to invest in and get an allocation you desire.
They have a very long term record of success.
They allow you to be a rebel and go against the index only grain and feel good :D
People like being associated with winners.
Income.
There you go.
K.I.S.S........so easy to say so difficult to do.

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Starchild
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Re: Indexing beats Wellington and Wellesley right?

Post by Starchild » Wed Oct 09, 2019 10:27 pm

I have a large position in Wellington in taxable (no choice, money from house sale). Say what you want about past performance, but this fund has been through all of the Great Depression, the financial crisis, and every other meltdown for the past 90 years and has still given an average return of over 8%, with doable volatility. It's also easy for me to understand: app 60/40 mix, with companies I know and a sprinkle of int'l for diversity along with a good yield. I'll take it, and I'm not concerned so much with beating an index or anything else.

rj49
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Re: Indexing beats Wellington and Wellesley right?

Post by rj49 » Thu Oct 10, 2019 12:43 am

Judging based on Wellington's being around so long is a fallacy. First of all, it's been through many different compositions and goals and management teams, so you're in no way investing in what it was even 20 years ago, or when it decided to include a lot of growth stocks, like Alphabet, instead of being a pure large-value fund.

Secondly, if you equate worth of investing by longevity, then you should have put all your money in Lehman Brothers, which had been around since 1850--until it suddenly stopped existing.

Third, Wellington became hugely popular, when all the magazines and people here touted its superb historical return, which meant it got so big it had to close itself to new investors, managers had billions to spend in the limited number of stocks to choose from, so it got too big to offer an active investing advantage, and by opening itself to growth stocks like Alphabet, it became a stealth index fund. All reasons why Mr. Bogle and others warn against active investing.

Fourth, Wellesley and Wellington used to pay out very large yields, so they became very popular with retirees looking for yield with safety and reasonable return. But there was no magic, since they benefited both from higher yields on value stocks and the longest bond bull market in history. If you invest in them for yield now, you get maybe 1% higher yield over TSM. People also thought that they would magically avoid recessions, because the managers are so smart and because of their bonds. But they lost 20% and 30% respectively in 2008.

Most importantly, those who invested based on past returns ignored all the other warnings that they don't guarantee future performance, which has played out, since if you look at the fund profile it shows it's lagged an equivalent index for 3, 5, and 10 years, and that doesn't even include the capital gains taxes from all the buying and selling they've done in order to lag their index.

chipperd
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Re: Indexing beats Wellington and Wellesley right?

Post by chipperd » Tue Oct 15, 2019 9:52 am

Re: "People also thought that they would magically avoid recessions, because the managers are so smart and because of their bonds. But they lost 20% and 30% respectively in 2008."
That's quite a bit off:
In 2008 the Wilshire 5000 lost 38.68%,(http://www.1stock1.com/1stock1_795.htm),
while in 2008 Wellington lost 22.3%( https://finance.yahoo.com/quote/vwelx/performance/) and Wellesely lost just 9.84% (https://finance.yahoo.com/quote/vwinx/performance/).
Fairly significant difference I'd say.

hoops777
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Re: Indexing beats Wellington and Wellesley right?

Post by hoops777 » Tue Oct 15, 2019 2:09 pm

Took the words right out of my mouth
K.I.S.S........so easy to say so difficult to do.

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Nate79
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Re: Indexing beats Wellington and Wellesley right?

Post by Nate79 » Wed Oct 16, 2019 6:13 am

It is a fallacy to make a blanket statement that Bogleheads are against active funds. Costs matter and these are low cost funds. Vanguard is a big proponent of active funds and continues to promote, push, and build new active funds.

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Re: Indexing beats Wellington and Wellesley right?

Post by rkhusky » Wed Oct 16, 2019 8:00 am

Starchild wrote:
Wed Oct 09, 2019 10:27 pm
I have a large position in Wellington in taxable (no choice, money from house sale).
Hopefully you use the distributions that Wellington forces on you for expenses and not for reinvestment, because it is very tax-inefficient otherwise. Even so, only 60% of dividends are qualified, so it would be better to be in Total Stock Market and pay LTCG rates on 95% of the dividends, as well as on withdrawals.

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Jerry55
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Re: Indexing beats Wellington and Wellesley right?

Post by Jerry55 » Wed Oct 16, 2019 5:57 pm

Maybe it depends on your position in life. Looking for Big Growth, Go-Go annual performance and Low cost ? Do your indexing if you feel that way.
Remember, not everyone feels that way, depending on what point they are in their life possibly, and what other options they have.

My Wellington Admiral Taxable fund is six figures with an ER of 0.17%, and my Wellesley Admiral (also 6 figures) is in a ROTH IRA with an ER of 0.16%.
I consider that not very expensive at all, compared to other "Managed Funds". However, those only make up about 25% of my overall totals, because my TSP, being the other 75% is in the C fund (80%) and the S fund (10%) and the International Fund (10%)

They are my sleep well funds, as the TSP is usually all over the map and very volatile, so each one serves the purpose I want.

If you're looking for Go-Go shoot-em-up, low cost performance, the choice is there for you. Enjoy, and remember...we're all out here doing our own thing, something not all may agree with, but then again....who really cares ??? :sharebeer
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

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willthrill81
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Re: Indexing beats Wellington and Wellesley right?

Post by willthrill81 » Wed Oct 16, 2019 7:01 pm

Nate79 wrote:
Wed Oct 16, 2019 6:13 am
It is a fallacy to make a blanket statement that Bogleheads are against active funds. Costs matter and these are low cost funds. Vanguard is a big proponent of active funds and continues to promote, push, and build new active funds.
Correct. Even Bogle was not opposed to active management as long as the costs were low. There are many index funds out there that are far more expensive than Wellington and Wellesley, especially for the Admiral shares of the latter two.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

bearcub
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Re: Indexing beats Wellington and Wellesley right?

Post by bearcub » Wed Oct 16, 2019 7:08 pm

For many of my working years I held the Wellington fund in my 401K. I was happy with it. Could of maybe done better, but could of done much worse also.

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hdas
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Re: Indexing beats Wellington and Wellesley right?

Post by hdas » Wed Oct 16, 2019 7:57 pm

willthrill81 wrote:
Sun Mar 31, 2019 11:15 am
I calculated the probability that Wellesley Income's historic out-performance of passive funds is due to random chance not long ago.
willthrill81 wrote:
Mon Dec 31, 2018 7:23 pm
vineviz wrote:
Mon Dec 31, 2018 7:00 pm
willthrill81 wrote:
Mon Dec 31, 2018 5:36 pm
vineviz wrote:
Tue Dec 04, 2018 8:05 am

They’re not guilty of mismanagement, merely of being lucky.
From a statistical standpoint, I don't believe that's accurate. The likelihood of their performance being as good as it has been for as long as it has due to random chance is miniscule.
Believe it. The likelihoods are easy to calculate for yourself.
Okay.

According to MarketWatch, only 7.8% of large-cap funds beat the S&P 500 between 2002-2017. Roughly speaking, Wellesley has been around three times that long. So the likelihood of a large cap fund beating the S&P 500 by any margin whatsoever for 45 years is .00047 (.078^3), or roughly 1 in 2,128. Now Wellesley is obviously not an all stock fund, but it has handily beaten a 30/70 split of large-cap stocks and intermediate term bonds of any flavor that I have found.

Perhaps you are calculating this differently.
Now which is more likely, that Wellesley Income's performance has been just random chance or that they have indeed had some 'secret sauce' (i.e. ability to produce some alpha)?
This is not the apt way to test your hypothesis. Take all the monthly returns of Wellesley and compare them with the monthly returns of the benchmark, see if the difference is significant. Even better, take all the monthly (daily better) returns of the benchmark and create 10000 simulated paths, then check how many of those are better than your Wellesley sample. Cheers :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

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Jerry55
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Re: Indexing beats Wellington and Wellesley right?

Post by Jerry55 » Wed Oct 16, 2019 9:44 pm

hdas wrote:
Wed Oct 16, 2019 7:57 pm
Take all the monthly returns of Wellesley and compare them with the monthly returns of the benchmark, see if the difference is significant. Even better, take all the monthly (daily better) returns of the benchmark and create 10000 simulated paths, then check how many of those are better than your Wellesley sample. Cheers :greedy

A good point made by hdas ~

YTD returns on my Wellington = 16.52%

YTD returns on my Wellesley = 13.73%

Not bad at all, and I slept well. :beer
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

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Starchild
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Re: Indexing beats Wellington and Wellesley right?

Post by Starchild » Thu Oct 17, 2019 4:29 am

rkhusky wrote:
Wed Oct 16, 2019 8:00 am
Starchild wrote:
Wed Oct 09, 2019 10:27 pm
I have a large position in Wellington in taxable (no choice, money from house sale).
Hopefully you use the distributions that Wellington forces on you for expenses and not for reinvestment, because it is very tax-inefficient otherwise. Even so, only 60% of dividends are qualified, so it would be better to be in Total Stock Market and pay LTCG rates on 95% of the dividends, as well as on withdrawals.
Appreciate the input, but I'm not changing my asset allocation, investment strategy, or risk, on account of taxes. I'm not going 100% stock with these figures. Taxes are inevitable. I'll let my accountant handle it.

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Re: Indexing beats Wellington and Wellesley right?

Post by mjb » Thu Oct 17, 2019 5:16 am

So, it isn't that index funds are better, the actual fact is after fees, ~80% of active funds lag the market. Wellington and Wellesley have very low fees for an active fund.

Index funds have very low turnover and a common trait of all funds that out perform is low turnover. This is an indication of longer term investment views. And funds that have low turnover tend to closely match an index. These two funds can be roughly approximated with a dividend-growth/wide most index fund and an intermediate to long term investment grade corporate bond fund. Bogle himself even said W and W are basically closet index funds.

There are several others like them at outer companies, but this style of fund isn't popular for managers because it underperforms in good times and overperforms in bad times missing the hype but also missing chances for fund inflows

rkhusky
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Re: Indexing beats Wellington and Wellesley right?

Post by rkhusky » Thu Oct 17, 2019 7:32 am

Starchild wrote:
Thu Oct 17, 2019 4:29 am
rkhusky wrote:
Wed Oct 16, 2019 8:00 am
Starchild wrote:
Wed Oct 09, 2019 10:27 pm
I have a large position in Wellington in taxable (no choice, money from house sale).
Hopefully you use the distributions that Wellington forces on you for expenses and not for reinvestment, because it is very tax-inefficient otherwise. Even so, only 60% of dividends are qualified, so it would be better to be in Total Stock Market and pay LTCG rates on 95% of the dividends, as well as on withdrawals.
Appreciate the input, but I'm not changing my asset allocation, investment strategy, or risk, on account of taxes. I'm not going 100% stock with these figures. Taxes are inevitable. I'll let my accountant handle it.
I'm sure that you're locked in with embedded capital gains at this point, but for other that might be reading, let's run some back-of-the-envelope numbers.

Last year Wellington spun off about 6.4% in LTCG and 2.8% in dividends, of which about 60% were qualified. At the 22% income and 15% LTCG rates, each $100K in Wellington cost about $1500 in taxes.

Total Stock Market had no capital gains and about 1.9% in dividends, of which about 95% were qualified. Same tax rates cost TSM investors about $300 for each $100K.

It's not quite a fair comparison since Wellington is 40% bonds, which are known to be tax inefficient. But if you just consider the 6.4% in LTCG, that alone cost almost $1000 in extra taxes compared to TSM (at the 15% LTCG rate), which hasn't distributed capital gains for years. Now, if you are in the 0% LTCG bracket (12% or lower income tax bracket), the Wellington LTCG distribution might not matter much.

Vanguard's Balanced Fund, which is 60/40 like Wellington, had no cap gains and about 2.2% in dividends, of which 50% were qualified. In the same tax bracket, that cost about $400 per $100K invested.

Vanguard's LifeStrategy Moderate Growth, which is also 60/40, had 1.3% in LTCG and 2.8% in dividends, of which 50% were qualified. In the same tax bracket, that cost about $700 per $100K invested. (Not sure if you can claim the foreign tax credit here for the int'l stocks)

Note that the above doesn't include state taxes and many states lump LTCG in with income.

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Starchild
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Re: Indexing beats Wellington and Wellesley right?

Post by Starchild » Thu Oct 17, 2019 7:15 pm

rkhusky wrote:
Thu Oct 17, 2019 7:32 am
Starchild wrote:
Thu Oct 17, 2019 4:29 am
rkhusky wrote:
Wed Oct 16, 2019 8:00 am
Starchild wrote:
Wed Oct 09, 2019 10:27 pm
I have a large position in Wellington in taxable (no choice, money from house sale).
Hopefully you use the distributions that Wellington forces on you for expenses and not for reinvestment, because it is very tax-inefficient otherwise. Even so, only 60% of dividends are qualified, so it would be better to be in Total Stock Market and pay LTCG rates on 95% of the dividends, as well as on withdrawals.
Appreciate the input, but I'm not changing my asset allocation, investment strategy, or risk, on account of taxes. I'm not going 100% stock with these figures. Taxes are inevitable. I'll let my accountant handle it.
I'm sure that you're locked in with embedded capital gains at this point, but for other that might be reading, let's run some back-of-the-envelope numbers.

Last year Wellington spun off about 6.4% in LTCG and 2.8% in dividends, of which about 60% were qualified. At the 22% income and 15% LTCG rates, each $100K in Wellington cost about $1500 in taxes.

Total Stock Market had no capital gains and about 1.9% in dividends, of which about 95% were qualified. Same tax rates cost TSM investors about $300 for each $100K.

It's not quite a fair comparison since Wellington is 40% bonds, which are known to be tax inefficient. But if you just consider the 6.4% in LTCG, that alone cost almost $1000 in extra taxes compared to TSM (at the 15% LTCG rate), which hasn't distributed capital gains for years. Now, if you are in the 0% LTCG bracket (12% or lower income tax bracket), the Wellington LTCG distribution might not matter much.

Vanguard's Balanced Fund, which is 60/40 like Wellington, had no cap gains and about 2.2% in dividends, of which 50% were qualified. In the same tax bracket, that cost about $400 per $100K invested.

Vanguard's LifeStrategy Moderate Growth, which is also 60/40, had 1.3% in LTCG and 2.8% in dividends, of which 50% were qualified. In the same tax bracket, that cost about $700 per $100K invested. (Not sure if you can claim the foreign tax credit here for the int'l stocks)

Note that the above doesn't include state taxes and many states lump LTCG in with income.
Again, appreciate it. Am I getting this right? Are the capital gains higher really because Wellington made money last year and VTSAX didn't? I'm fine paying the taxes. This is my allocation.

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Re: Indexing beats Wellington and Wellesley right?

Post by rkhusky » Thu Oct 17, 2019 8:53 pm

Starchild wrote:
Thu Oct 17, 2019 7:15 pm
Am I getting this right? Are the capital gains higher really because Wellington made money last year and VTSAX didn't?
No. The higher capital gain difference is due to
1) Wellington turnover rate is 34% versus 3.4% for VTSAX (i.e. Wellington does a lot more trading) and
2) Vanguard's patented process of washing any VTSAX capital gains through its associated ETF VTI, such that it has not distributed any cap gains in years (see viewtopic.php?t=292801).

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Re: Indexing beats Wellington and Wellesley right?

Post by dbr » Fri Oct 18, 2019 8:27 am

rkhusky wrote:
Thu Oct 17, 2019 8:53 pm
Starchild wrote:
Thu Oct 17, 2019 7:15 pm
Am I getting this right? Are the capital gains higher really because Wellington made money last year and VTSAX didn't?
No. The higher capital gain difference is due to
1) Wellington turnover rate is 34% versus 3.4% for VTSAX (i.e. Wellington does a lot more trading) and
2) Vanguard's patented process of washing any VTSAX capital gains through its associated ETF VTI, such that it has not distributed any cap gains in years (see viewtopic.php?t=292801).
Right, and every time they trade they have to pay a broker to do it, and that cost is not included in the expense ratio. One should never think that because a fund has large distributions of dividends or capital gains that this means the fund has performed well. In a taxable account the effect is actually the opposite.

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Starchild
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Re: Indexing beats Wellington and Wellesley right?

Post by Starchild » Wed Oct 23, 2019 7:04 am

dbr wrote:
Fri Oct 18, 2019 8:27 am
rkhusky wrote:
Thu Oct 17, 2019 8:53 pm
Starchild wrote:
Thu Oct 17, 2019 7:15 pm
Am I getting this right? Are the capital gains higher really because Wellington made money last year and VTSAX didn't?
No. The higher capital gain difference is due to
1) Wellington turnover rate is 34% versus 3.4% for VTSAX (i.e. Wellington does a lot more trading) and
2) Vanguard's patented process of washing any VTSAX capital gains through its associated ETF VTI, such that it has not distributed any cap gains in years (see viewtopic.php?t=292801).
Right, and every time they trade they have to pay a broker to do it, and that cost is not included in the expense ratio. One should never think that because a fund has large distributions of dividends or capital gains that this means the fund has performed well. In a taxable account the effect is actually the opposite.
I hardly think a .17 ER is high enough to change my investment strategy, or calling Wellington a poor performing fund. I also except that as an American, I have to pay taxes and I don't find making an investment primarily based on taxes wise advice. I don't want 100% stock exposure. Obviously, having it in a tax advantaged account would be optimum, but that would take 100 years to do.

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Re: Indexing beats Wellington and Wellesley right?

Post by pyld76 » Wed Oct 23, 2019 4:20 pm

sambb wrote:
Sat Mar 30, 2019 8:29 pm
To the OP:

Bogleheads are not one voice, but yes W an W are well liked. If they were Fidelity funds, people may trash them here . In other words, there could be an illogical bias towards vanguard occasionally here,
So, I don't have a Vanguard bias (and moved almost the whole shop to Fido in the past year), but the bias towards Vanguard's active relative to Fidelity isn't illogical. Fido's active funds, on balance, are significantly more expensive than Vanguard's.

Cost still matters in active. Fido's active costs are generally higher.

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Re: Indexing beats Wellington and Wellesley right?

Post by ruralavalon » Wed Oct 23, 2019 7:51 pm

pyld76 wrote:
Wed Oct 23, 2019 4:20 pm
sambb wrote:
Sat Mar 30, 2019 8:29 pm
To the OP:

Bogleheads are not one voice, but yes W an W are well liked. If they were Fidelity funds, people may trash them here . In other words, there could be an illogical bias towards vanguard occasionally here,
So, I don't have a Vanguard bias (and moved almost the whole shop to Fido in the past year), but the bias towards Vanguard's active relative to Fidelity isn't illogical. Fido's active funds, on balance, are significantly more expensive than Vanguard's.

Cost still matters in active. Fido's active costs are generally higher.
Costs matter for either type of fund, from any provider.

Index funds are good not just because of their wide diversification, but also because of their low expenses.

Vanguard offers some very good actively managed funds like Wellington and Wellesley, good in large part because of their low expense ratios.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Indexing beats Wellington and Wellesley right?

Post by smectym » Wed Oct 23, 2019 11:21 pm

sambb wrote:
Sat Mar 30, 2019 8:29 pm
To the OP:

Bogleheads are not one voice, but yes W an W are well liked. If they were Fidelity funds, people may trash them here . In other words, there could be an illogical bias towards vanguard occasionally here,
“...illogical bias toward Vanguard...” Perhaps at one time; less the case today, I’ve seen a fair amount of potshots leveled at Vanguard on this forum of late. And to the extent there may be a bias, it would only be partly “irrational,” because there have been and perhaps still are rational reasons to prefer Vanguard.

Yes, I think Wellesley and Wellington’s “throwback” vibe is part of their appeal. Perhaps one day that will be the funds’ undoing; it will turn out that Wellesley and/or Wellington held views or did things a bit TOO throwback, and we simply must strike those names from the funds. I don’t doubt that Vanguard will promptly scramble to comply

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Re: Indexing beats Wellington and Wellesley right?

Post by bertilak » Thu Oct 24, 2019 2:58 pm

Bogle himself said that it's not the Efficient Market Hypothesis (EMH) that makes index funds good, but the Cost Matters Hypotheses (CMH) that is important. Wellington and Wellesley are very low cost, not much higher than index funds. They do one thing for you index funds don't do: maintain their AA. That does simplify things a bit. One may or may not think that is worth the few extra basis points.

Somewhere Bogle said that he set those funds up to use two indexes he created -- one for stocks and one for bonds. I may not have that exactly right and a quick search did not turn up where I read it. Maybe it was in one of his books. Maybe things have changed.

I used to own both Ws (at 50/50) in my IRA but switched to pure index funds when I started a taxable account so I could separate stock and bond funds.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

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Re: Indexing beats Wellington and Wellesley right?

Post by bluquark » Thu Oct 24, 2019 3:27 pm

Wellington today is a bit less than 20% international (mostly Europe) so the S&P500 isn't quite the right benchmark for its performance. I don't know when they diversified past the US, but if it was more than a decade ago, its recent underperformance might be largely attributable to that.

Miriam2
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Re: Indexing beats Wellington and Wellesley right?

Post by Miriam2 » Thu Oct 24, 2019 4:26 pm

rkhusky wrote: . . . for others that might be reading, let's run some back-of-the-envelope numbers.

Last year Wellington spun off about 6.4% in LTCG and 2.8% in dividends, of which about 60% were qualified. At the 22% income and 15% LTCG rates, each $100K in Wellington cost about $1500 in taxes.

Total Stock Market had no capital gains and about 1.9% in dividends, of which about 95% were qualified. Same tax rates cost TSM investors about $300 for each $100K.

It's not quite a fair comparison since Wellington is 40% bonds, which are known to be tax inefficient. But if you just consider the 6.4% in LTCG, that alone cost almost $1000 in extra taxes compared to TSM (at the 15% LTCG rate), which hasn't distributed capital gains for years. Now, if you are in the 0% LTCG bracket (12% or lower income tax bracket), the Wellington LTCG distribution might not matter much.

Vanguard's Balanced Fund, which is 60/40 like Wellington, had no cap gains and about 2.2% in dividends, of which 50% were qualified. In the same tax bracket, that cost about $400 per $100K invested.

Vanguard's LifeStrategy Moderate Growth, which is also 60/40, had 1.3% in LTCG and 2.8% in dividends, of which 50% were qualified. In the same tax bracket, that cost about $700 per $100K invested. (Not sure if you can claim the foreign tax credit here for the int'l stocks)

Note that the above doesn't include state taxes and many states lump LTCG in with income.
Dear rkhusky,

Thank you very much for this tax information on the various funds - very helpful for me to conceptualize the tax efficiency issues.

I'm sure you have this information upstairs in your marbles :D but is there a calculator or website we can use to run numbers like this whenever we want to know the basic tax consequences of different funds?

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goingup
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Re: Indexing beats Wellington and Wellesley right?

Post by goingup » Thu Oct 24, 2019 5:23 pm

bluquark wrote:
Thu Oct 24, 2019 3:27 pm
Wellington today is a bit less than 20% international (mostly Europe) so the S&P500 isn't quite the right benchmark for its performance. I don't know when they diversified past the US, but if it was more than a decade ago, its recent underperformance might be largely attributable to that.
According to Vanguard, foreign equity holdings are 10.4% and foreign bonds are 4.6% of bond holdings. So, overall, Wellington has about 8% foreign equity/fixed income.

YTD Wellington (admiral shares) has outpaced Balanced Fund, Star Fund, and Life Strategy Moderate Growth, which are the usual Vanguard peer comparisons. At present, it has also done better over 1, 3 and 10 year time periods. Of course, this can change at anytime. :shock:

It's considered a combination value (equity) and corporate bond fund. I'm a fan, having held it for 15 years. It works well for us in tax-deferred while we keep broad market index funds in taxable account.

rkhusky
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Re: Indexing beats Wellington and Wellesley right?

Post by rkhusky » Thu Oct 24, 2019 6:14 pm

Miriam2 wrote:
Thu Oct 24, 2019 4:26 pm
is there a calculator or website we can use to run numbers like this whenever we want to know the basic tax consequences of different funds?
triceratop created a spreadsheet that looked at tax efficiency that is discussed here:
viewtopic.php?t=242137

AlohaJoe did an update (or a new spreadsheet?) that is linked here:
viewtopic.php?f=10&t=242137&start=100#p4788420

I haven't used the spreadsheet(s), so can't offer any help there.

PS. I just used the Vanguard distribution tab to get a rough estimate of the different rates.
Last edited by rkhusky on Thu Oct 24, 2019 6:16 pm, edited 1 time in total.

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fortyofforty
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Re: Indexing beats Wellington and Wellesley right?

Post by fortyofforty » Thu Oct 24, 2019 6:15 pm

goingup wrote:
Thu Oct 24, 2019 5:23 pm
bluquark wrote:
Thu Oct 24, 2019 3:27 pm
Wellington today is a bit less than 20% international (mostly Europe) so the S&P500 isn't quite the right benchmark for its performance. I don't know when they diversified past the US, but if it was more than a decade ago, its recent underperformance might be largely attributable to that.
According to Vanguard, foreign equity holdings are 10.4% and foreign bonds are 4.6% of bond holdings. So, overall, Wellington has about 8% foreign equity/fixed income.

YTD Wellington (admiral shares) has outpaced Balanced Fund, Star Fund, and Life Strategy Moderate Growth, which are the usual Vanguard peer comparisons. At present, it has also done better over 1, 3 and 10 year time periods. Of course, this can change at anytime. :shock:

It's considered a combination value (equity) and corporate bond fund. I'm a fan, having held it for 15 years. It works well for us in tax-deferred while we keep broad market index funds in taxable account.
There is no real apples-to-apples fund comparison to Wellington. Wellington has more stocks than Balanced Index, STAR, and LifeStrategy Moderate Growth. It's about 75% equities, or so. Also, Wellington is really a large cap value fund, on the equity side. I wish Vanguard offered balanced index-based funds at the 75/25 and 70/30 points.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

rkhusky
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Re: Indexing beats Wellington and Wellesley right?

Post by rkhusky » Thu Oct 24, 2019 6:18 pm

fortyofforty wrote:
Thu Oct 24, 2019 6:15 pm
It's about 75% equities, or so.
According to Vanguard, Wellington is 65.56% stocks.

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fortyofforty
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Re: Indexing beats Wellington and Wellesley right?

Post by fortyofforty » Thu Oct 24, 2019 6:46 pm

rkhusky wrote:
Thu Oct 24, 2019 6:18 pm
fortyofforty wrote:
Thu Oct 24, 2019 6:15 pm
It's about 75% equities, or so.
According to Vanguard, Wellington is 65.56% stocks.
Yes, less than I thought. Not sure where I got the higher figure. Thanks for the correction.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

tibbitts
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Re: Indexing beats Wellington and Wellesley right?

Post by tibbitts » Thu Oct 24, 2019 7:01 pm

fortyofforty wrote:
Thu Oct 24, 2019 6:15 pm
goingup wrote:
Thu Oct 24, 2019 5:23 pm
bluquark wrote:
Thu Oct 24, 2019 3:27 pm
Wellington today is a bit less than 20% international (mostly Europe) so the S&P500 isn't quite the right benchmark for its performance. I don't know when they diversified past the US, but if it was more than a decade ago, its recent underperformance might be largely attributable to that.
According to Vanguard, foreign equity holdings are 10.4% and foreign bonds are 4.6% of bond holdings. So, overall, Wellington has about 8% foreign equity/fixed income.

YTD Wellington (admiral shares) has outpaced Balanced Fund, Star Fund, and Life Strategy Moderate Growth, which are the usual Vanguard peer comparisons. At present, it has also done better over 1, 3 and 10 year time periods. Of course, this can change at anytime. :shock:

It's considered a combination value (equity) and corporate bond fund. I'm a fan, having held it for 15 years. It works well for us in tax-deferred while we keep broad market index funds in taxable account.
There is no real apples-to-apples fund comparison to Wellington. Wellington has more stocks than Balanced Index, STAR, and LifeStrategy Moderate Growth. It's about 75% equities, or so. Also, Wellington is really a large cap value fund, on the equity side. I wish Vanguard offered balanced index-based funds at the 75/25 and 70/30 points.
Obviously we need a 73.85/26.15 fund, but why those other two?

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fortyofforty
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Re: Indexing beats Wellington and Wellesley right?

Post by fortyofforty » Thu Oct 24, 2019 7:03 pm

tibbitts wrote:
Thu Oct 24, 2019 7:01 pm
fortyofforty wrote:
Thu Oct 24, 2019 6:15 pm
goingup wrote:
Thu Oct 24, 2019 5:23 pm
bluquark wrote:
Thu Oct 24, 2019 3:27 pm
Wellington today is a bit less than 20% international (mostly Europe) so the S&P500 isn't quite the right benchmark for its performance. I don't know when they diversified past the US, but if it was more than a decade ago, its recent underperformance might be largely attributable to that.
According to Vanguard, foreign equity holdings are 10.4% and foreign bonds are 4.6% of bond holdings. So, overall, Wellington has about 8% foreign equity/fixed income.

YTD Wellington (admiral shares) has outpaced Balanced Fund, Star Fund, and Life Strategy Moderate Growth, which are the usual Vanguard peer comparisons. At present, it has also done better over 1, 3 and 10 year time periods. Of course, this can change at anytime. :shock:

It's considered a combination value (equity) and corporate bond fund. I'm a fan, having held it for 15 years. It works well for us in tax-deferred while we keep broad market index funds in taxable account.
There is no real apples-to-apples fund comparison to Wellington. Wellington has more stocks than Balanced Index, STAR, and LifeStrategy Moderate Growth. It's about 75% equities, or so. Also, Wellington is really a large cap value fund, on the equity side. I wish Vanguard offered balanced index-based funds at the 75/25 and 70/30 points.
Obviously we need a 73.85/26.15 fund, but why those other two?
For the same reason we need 60/40 and 80/20.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

dbr
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Re: Indexing beats Wellington and Wellesley right?

Post by dbr » Fri Oct 25, 2019 7:37 am

Over all the years on this forum no one has ever resolved that W & W are a better or worse ideas than something else. That much discussion with no clear conclusion is in fact a sure fire conclusion that it doesn't matter.

People who like the idea of being invested the way the W's are invested should do it and be happy. People who like the idea of being invested in index funds should do that and be happy.

Anyone who is convinced that one choice or the other is clearly superior should invest that way and also be happy.

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Re: Indexing beats Wellington and Wellesley right?

Post by tibbitts » Fri Oct 25, 2019 7:59 am

fortyofforty wrote:
Thu Oct 24, 2019 7:03 pm
tibbitts wrote:
Thu Oct 24, 2019 7:01 pm
fortyofforty wrote:
Thu Oct 24, 2019 6:15 pm
goingup wrote:
Thu Oct 24, 2019 5:23 pm
bluquark wrote:
Thu Oct 24, 2019 3:27 pm
Wellington today is a bit less than 20% international (mostly Europe) so the S&P500 isn't quite the right benchmark for its performance. I don't know when they diversified past the US, but if it was more than a decade ago, its recent underperformance might be largely attributable to that.
According to Vanguard, foreign equity holdings are 10.4% and foreign bonds are 4.6% of bond holdings. So, overall, Wellington has about 8% foreign equity/fixed income.

YTD Wellington (admiral shares) has outpaced Balanced Fund, Star Fund, and Life Strategy Moderate Growth, which are the usual Vanguard peer comparisons. At present, it has also done better over 1, 3 and 10 year time periods. Of course, this can change at anytime. :shock:

It's considered a combination value (equity) and corporate bond fund. I'm a fan, having held it for 15 years. It works well for us in tax-deferred while we keep broad market index funds in taxable account.
There is no real apples-to-apples fund comparison to Wellington. Wellington has more stocks than Balanced Index, STAR, and LifeStrategy Moderate Growth. It's about 75% equities, or so. Also, Wellington is really a large cap value fund, on the equity side. I wish Vanguard offered balanced index-based funds at the 75/25 and 70/30 points.
Obviously we need a 73.85/26.15 fund, but why those other two?
For the same reason we need 60/40 and 80/20.
So perhaps Vanguard will implement a variable-ratio fund, where you can trade (but not really) daily (intra-day with an ETF) and change your ratio. I can see it now, somebody will drop their equities by 2% just before lunch every day, then bump them back up when they finish eating.

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fortyofforty
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Re: Indexing beats Wellington and Wellesley right?

Post by fortyofforty » Fri Oct 25, 2019 8:12 am

tibbitts wrote:
Fri Oct 25, 2019 7:59 am
fortyofforty wrote:
Thu Oct 24, 2019 7:03 pm
tibbitts wrote:
Thu Oct 24, 2019 7:01 pm
fortyofforty wrote:
Thu Oct 24, 2019 6:15 pm
goingup wrote:
Thu Oct 24, 2019 5:23 pm

According to Vanguard, foreign equity holdings are 10.4% and foreign bonds are 4.6% of bond holdings. So, overall, Wellington has about 8% foreign equity/fixed income.

YTD Wellington (admiral shares) has outpaced Balanced Fund, Star Fund, and Life Strategy Moderate Growth, which are the usual Vanguard peer comparisons. At present, it has also done better over 1, 3 and 10 year time periods. Of course, this can change at anytime. :shock:

It's considered a combination value (equity) and corporate bond fund. I'm a fan, having held it for 15 years. It works well for us in tax-deferred while we keep broad market index funds in taxable account.
There is no real apples-to-apples fund comparison to Wellington. Wellington has more stocks than Balanced Index, STAR, and LifeStrategy Moderate Growth. It's about 75% equities, or so. Also, Wellington is really a large cap value fund, on the equity side. I wish Vanguard offered balanced index-based funds at the 75/25 and 70/30 points.
Obviously we need a 73.85/26.15 fund, but why those other two?
For the same reason we need 60/40 and 80/20.
So perhaps Vanguard will implement a variable-ratio fund, where you can trade (but not really) daily (intra-day with an ETF) and change your ratio. I can see it now, somebody will drop their equities by 2% just before lunch every day, then bump them back up when they finish eating.
Maybe. Or maybe just create a few more funds in the fashion of their Balanced Index fund. It wouldn't be hard for Vanguard, and would follow in its tradition of the LifeStrategy funds, which are at 20/80, 40/60, 60/40 and 80/20. Some would say Vanguard doesn't need all those choices, of course, and people can create their own balanced mix.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

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