Wellesley Income performance

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jim3
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Wellesley Income performance

Post by jim3 » Sat Feb 10, 2018 2:16 pm

Wellesley Income on a YTD basis is -3% versus -2% SP500. I know duration/ average maturity is longer (6/9) but is the energy overweight causing this massive underperformance (92% percentile)

TropikThunder
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Re: Wellesley Income performance

Post by TropikThunder » Sat Feb 10, 2018 2:45 pm

jim3 wrote:
Sat Feb 10, 2018 2:16 pm
Wellesley Income on a YTD basis is -3% versus -2% SP500. I know duration/ average maturity is longer (6/9) but is the energy overweight causing this massive underperformance (92% percentile)
Duration of what? “S&P500” doesn’t have any bonds. Besides, Wellesley doesn’t track the S&P500, so comparing their performance isn’t useful. Wellesley only holds 66 stocks, strongly tilted to Large Cap Value. The S&P500 is 507 stocks with a mild Large Cap Growth tilt.

And I wouldn’t use “massive” to compare 3% v 2% over ~6 weeks.

BHUser27
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Re: Wellesley Income performance

Post by BHUser27 » Sat Feb 10, 2018 2:47 pm

Well, first of all, Wellesley is not an SP500 index fund, so I wouldn't expect it to behave like the SP500.
What about the bonds Wellesley holds?

This chart shows VWINX (VG Wellesley Investors Shares) and SPX

VWINX did not drop as far as SPX during the recent correction, but it had not risen as much prior either (as one would expect for a 30~50% equities, balanced fund).

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
Last edited by BHUser27 on Sat Feb 10, 2018 3:01 pm, edited 1 time in total.

tibbitts
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Re: Wellesley Income performance

Post by tibbitts » Sat Feb 10, 2018 2:55 pm

jim3 wrote:
Sat Feb 10, 2018 2:16 pm
Wellesley Income on a YTD basis is -3% versus -2% SP500. I know duration/ average maturity is longer (6/9) but is the energy overweight causing this massive underperformance (92% percentile)
I guess you've missed all the posts about Wellington and Wellesley having magic sauce and how they protect you in downturns. It turns out the fans are fickle, I guess.

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cinghiale
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Re: Wellesley Income performance

Post by cinghiale » Sat Feb 10, 2018 3:02 pm

We’re really having a discussion about six weeks of performance? And we’re drawing meaningful conclusions from the data?

Really?

Kahneman and Tversky’s “Law of Small Numbers” is obviously alive and well.
"We don't see things as they are; we see them as we are." Anais Nin | | "Sometimes the first duty of intelligent men is the restatement of the obvious." George Orwell

JBTX
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Re: Wellesley Income performance

Post by JBTX » Sat Feb 10, 2018 3:22 pm

I think Wellesley is an interest rate sensitive fund, both in terms of stocks and bonds. For the bonds their duration is slightly longer and their quality is slightly worse. I am guessing the stocks may be more cyclical.

If you look backward Wellesley income did great most of the last 40 years but lagged it’s peers mid 70s to early 80s when interest rates were high/going up.

http://quotes.morningstar.com/chart/fun ... ture=en_US

Change chart setting to maximum.

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Electron
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Re: Wellesley Income performance

Post by Electron » Sat Feb 10, 2018 4:38 pm

The bond duration is certainly one factor. Another factor may be the current stock holdings.

https://personal.vanguard.com/us/funds/ ... true#tab=2

Scroll down the page for the list of the top ten holdings. Wellesley appears to be holding stocks with a higher beta compared with the earlier history of the fund. Utilities currently represent only 7.7% of the equity holdings. Information technology is at 15.2%.
Electron

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dccboone
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Re: Wellesley Income performance

Post by dccboone » Sat Feb 10, 2018 11:05 pm

jim3 wrote:
Sat Feb 10, 2018 2:16 pm
Wellesley Income on a YTD basis is -3% versus -2% SP500. I know duration/ average maturity is longer (6/9) but is the energy overweight causing this massive underperformance (92% percentile)
Jim3 - You and I are clearly cut from different cloth. Why invest in something if your commitment can be undermined after a few weeks of questionable analysis? Thirteen percent of my portfolio is in Wellesley Income Fund Admiral Shares. I haven't done more than a cursory review of its performance in the last 6 months, much less 6 weeks. To each his own! :o

Grt2bOutdoors
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Re: Wellesley Income performance

Post by Grt2bOutdoors » Sat Feb 10, 2018 11:09 pm

Second guessing the actual portfolio manager is not a good way of attaining your goals, whatever they may be.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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eye.surgeon
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Re: Wellesley Income performance

Post by eye.surgeon » Sun Feb 11, 2018 12:56 am

I actually tax loss harvested what Wellesly I had bought a few months ago this week for a $1800 loss. Unfortunate but I'd rather take the credit and start fresh.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett

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Electron
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Re: Wellesley Income performance

Post by Electron » Sun Feb 11, 2018 2:59 pm

Dividend stocks have been in great demand in recent years with the low interest rates, and this has undoubtedly had an impact on Wellesley Income. If you look at the top portfolio holdings, you will see quite a few mature growth companies with a dividend yield in the area of 2% or higher.

Depending on other variables, these companies may meet the criteria for a value stock, or at least a company with good prospects for dividend increases in the years ahead.

These same companies may retain the volatility of growth stocks. Note also that the dividend yield on the S&P 500 is currently in the area of 1.8%.
Electron

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Sheepdog
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Re: Wellesley Income performance

Post by Sheepdog » Sun Feb 11, 2018 3:23 pm

dccboone wrote:
Sat Feb 10, 2018 11:05 pm


Jim3 - You and I are clearly cut from different cloth. Why invest in something if your commitment can be undermined after a few weeks of questionable analysis? Thirteen percent of my portfolio is in Wellesley Income Fund Admiral Shares. I haven't done more than a cursory review of its performance in the last 6 months, much less 6 weeks. To each his own! :o
I obviously agree. I (present age 84) am comfortable with my 60% Wellesley (including my allocation of Global Wellesley). [I made a recent 30% conversion of my existing Wellesley to Global Wellesley when it was introduced.] By the way, I bought my first Wellesley only after retiring. I believed it would be good for retirement income...and it has been.
It's not what you gather, but what you scatter which tells what kind of life you have lived---Helen Walton

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Toons
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Re: Wellesley Income performance

Post by Toons » Sun Feb 11, 2018 3:26 pm

Measure performance in decade intervals at minimum.
Relax :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

rj49
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Re: Wellesley Income performance

Post by rj49 » Sun Feb 11, 2018 3:26 pm

Wellesley is the epitome of the danger of buying a fund based on past performance, since it's been in 65% long-duration bonds during a 30-year bull market for bonds, and for much of its history their dividend-heavy stocks have paid out well and active management has given them the chance to buy and sell to react to market conditions (with the cost of heavy, unexpected capital gains bills).

But the days of getting gains from falling bond prices are likely over, and with cheap and easy investing in the entire world of stocks, Wellesley invests in 50 or so stocks, mostly US, mostly value, and their bonds are longer-duration, mostly corporates, so the cost of a growing yield with rising interest rates is loss of bond value. i too bought Wellesley in the past, based on its stellar past performance, with very few years of negative returns. But as a retiree, I don't want my bonds coupled with stocks, because I want the flexibility to withdraw from different asset classes, based on performance. I also want the freedom to invest in cash, CDs, crowdsourcing/p2p fixed income, TSP G fund, and other things that don't lose value with rising interest rates and that don't lose value through NAV declines.

If you search for past posts by TrevH, he did plenty of fancy graphs showing that a combination of Wellesley/Wellington would have outperformed other portfolios over time, including index funds, but I just can't see that sort of performance going forward into the future, given interest rate levels, desperate desires for yield pushing up dividend stock prices, the lack of diversification by size and country, and Wellington having become a mammoth closet index fund. If someone believes, against everything Mr. Bogle and most other knowledgeable financial expert says, that Wellington Management has some magical knowledge that will outperform the market for the rest of your life, then you can avoid the drag of bond declines by simply buying Equity Income (managed by Wellington and containing many of the Wellesley/Wellington stocks) and then the fixed income of your choice.

tibbitts
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Re: Wellesley Income performance

Post by tibbitts » Sun Feb 11, 2018 3:33 pm

rj49 wrote:
Sun Feb 11, 2018 3:26 pm
If someone believes, against everything Mr. Bogle and most other knowledgeable financial expert says, that Wellington Management has some magical knowledge that will outperform the market for the rest of your life, then you can avoid the drag of bond declines by simply buying Equity Income (managed by Wellington and containing many of the Wellesley/Wellington stocks) and then the fixed income of your choice.
Yes but the fixed income of your choice would likely be VG's intermediate term corporate, so there you've got the same management again and the price (average) is about the same, plus you have to manually rebalance. However the intermediate corporate does have a slightly shorter duration, or did the last I looked. In the end I don't think it will make much difference, particularly in a deferred account.

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whodidntante
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Re: Wellesley Income performance

Post by whodidntante » Sun Feb 11, 2018 3:36 pm

jim3 wrote:
Sat Feb 10, 2018 2:16 pm
Wellesley Income on a YTD basis is -3% versus -2% SP500. I know duration/ average maturity is longer (6/9) but is the energy overweight causing this massive underperformance (92% percentile)
I would expect Wellesley to significantly underperform the S&P500 over a long-time horizon, short-term is anyone's guess.

jjface
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Re: Wellesley Income performance

Post by jjface » Sun Feb 11, 2018 4:32 pm

You really need to compare Wellesley to alternatives with a similar asset allocation ie mix of fixed income and equities. Comparing to a 100% equity fund is meaningless. An all equity fund has much more risk and therefore higher expected return. YTD is also far too short a period to use for comparison. And then you have the whole past history is no indication of future performance to consider.

Nothing is going to be directly comparable to Wellesley but something like the vanguard conservative growth fund or vanguard target income would be funds you might consider versus Wellesley. Wellseley has outperformed both other than in the last 12 months or so. That would be down to many reasons such as international not performing as well over the past decade, and maybe some special sauce mixed in too :happy

But as for whether it would be a good fund versus separating out fixed income and equities is a different matter. The ability to invest in cds and other things is something to consider versus bonds and might lead to higher gains overall in the future.

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