Wellseley or Wellington in taxable account?

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orrsmills
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Wellseley or Wellington in taxable account?

Post by orrsmills »

Hi folks,

Does anyone invest in VWINX or VWELX in a taxable account? I was told those are better in IRA due to the Capital Gain Distributions at the end of the year and the tax that will be required to pay?

Thanks in advance.
solarcub
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Re: Wellseley or Wellington in taxable account?

Post by solarcub »

orrsmills wrote: Mon Dec 20, 2021 3:41 pm Hi folks,

Does anyone invest in VWINX or VWELX in a taxable account? I was told those are better in IRA due to the Capital Gain Distributions at the end of the year and the tax that will be required to pay?

Thanks in advance.
I have Wellington in taxable, and eventually it grew enough for the distributions to be annoying. Based on the advice I got here, I now send all the distributions to Total Stock Market instead of re-investing in Wellington.
tibbitts
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Re: Wellseley or Wellington in taxable account?

Post by tibbitts »

orrsmills wrote: Mon Dec 20, 2021 3:41 pm Hi folks,

Does anyone invest in VWINX or VWELX in a taxable account? I was told those are better in IRA due to the Capital Gain Distributions at the end of the year and the tax that will be required to pay?

Thanks in advance.
I could never justify having either fund in taxable, at least not during accumulation. You can at least hope that active might match or better passive in a deferred or Roth account, but taxes are another huge handicap if you hold then in taxable.
fundseeker
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Re: Wellseley or Wellington in taxable account?

Post by fundseeker »

orrsmills wrote: Mon Dec 20, 2021 3:41 pm Hi folks,

Does anyone invest in VWINX or VWELX in a taxable account? I was told those are better in IRA due to the Capital Gain Distributions at the end of the year and the tax that will be required to pay?

Thanks in advance.
Looks like you may be new here. Welcome! You might want to look on Vanguard's site at the distributions each year, especially year end, and see how they would have increased your taxable income. Then, compare it to another option with smaller distributions. Just a thought.
Misenplace
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Re: Wellseley or Wellington in taxable account?

Post by Misenplace »

Welcome to the forum!
It really depends upon your own situation. For example, for someone in a low tax bracket, they may have no tax due on capital gains. I see lots of retired folks who have these in their taxable account, and it's just not a concern since their income is low and there is no or negligible tax.

If you post your situation using the Subject: Asking Portfolio Questions template, you will get much better advice that is tailored to your situation.
rrt
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Re: Wellseley or Wellington in taxable account?

Post by rrt »

Have Wellington because I opened it in 1991 and I didn't know any better at the time. Once I had a better understanding I started using VFIAX Index 500 instead. But took me longer to really understand that I should have been redirecting the gains somewhere else even after I quit adding new money.

So have a very nice little nest egg there, but with app 50% as unrealized gains.

Just looked for my curiosity; bought first shares August of 1991, last shares I physically purchased was Feb of 1995. But I left gains on reinvest till 2016. Ouch.
tibbitts
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Re: Wellseley or Wellington in taxable account?

Post by tibbitts »

rrt wrote: Mon Dec 20, 2021 7:53 pm Have Wellington because I opened it in 1991 and I didn't know any better at the time. Once I had a better understanding I started using VFIAX Index 500 instead. But took me longer to really understand that I should have been redirecting the gains somewhere else even after I quit adding new money.

So have a very nice little nest egg there, but with app 50% as unrealized gains.

Just looked for my curiosity; bought first shares August of 1991, last shares I physically purchased was Feb of 1995. But I left gains on reinvest till 2016. Ouch.
I'm not seeing the unrealized gains point: you're going to have unrealized gains in your account if invested in a very tax-efficient equity index fund in 1991, too. The problem with active funds is that they may realize gains at irregular and less than opportune times.
Ed 2
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Re: Wellseley or Wellington in taxable account?

Post by Ed 2 »

orrsmills wrote: Mon Dec 20, 2021 3:41 pm Hi folks,

Does anyone invest in VWINX or VWELX in a taxable account? I was told those are better in IRA due to the Capital Gain Distributions at the end of the year and the tax that will be required to pay?

Thanks in advance.
Wellington is the excellent fund with one of the best track records among mutual active funds , but it’s better hold in tax deferred accounts because it distribute big capital gains , long and short every December.
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
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retiredjg
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Re: Wellseley or Wellington in taxable account?

Post by retiredjg »

Welcome to the forum. :happy

If you do not already have Wellington or Wellesley in taxable, I suggest that you do not put them there. These are not tax-efficient funds and will cause you unnecessary taxes. Nobody wants that, especially when there are other good choices.

If you already these funds in taxable, tell us more so someone can help you fix that in the best way.

If you are already retired and in a very low tax bracket and really love W and W and they are already in your taxable account....it is probably a tolerable flaw. :happy
nix4me
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Re: Wellseley or Wellington in taxable account?

Post by nix4me »

They don't belong in taxable accounts.
And i would recommend using ETFs in taxable - like VTI or VOO.
UpperNwGuy
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Re: Wellseley or Wellington in taxable account?

Post by UpperNwGuy »

These are not good funds for a taxable account.
mortfree
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Re: Wellseley or Wellington in taxable account?

Post by mortfree »

I have about 500 shares of VWELX (Wellington) in my taxable.

I don’t auto reinvest the dividends or gains. If needed I can put the year end distribution towards the taxes if I owe or just invest in my other taxable holding VTI.

This is probably not the right way and I imagine the old saying tax tail wag the dog would not apply either (hope I got that quote close to being right).

If I dumped it all into VTI and the market tanks I would lose more than I would by investing in Wellington. Or so I hope.
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Metsfan91
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Re: Wellseley or Wellington in taxable account?

Post by Metsfan91 »

orrsmills wrote: Mon Dec 20, 2021 3:41 pm Hi folks,

Does anyone invest in VWINX or VWELX in a taxable account? I was told those are better in IRA due to the Capital Gain Distributions at the end of the year and the tax that will be required to pay?

Thanks in advance.
I have VWELX - Wellington fund in a taxable account. Most of the capital gain distributions are long term. I love it. It works great for me. I re-invest distributions, and it increases my cost basis.
"Know what you own, and know why you own it." — Peter Lynch
GG1273
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Re: Wellseley or Wellington in taxable account?

Post by GG1273 »

Have a small taxable acct with Wellington and Wellesley. We opened it years ago with $6K in each as there was some talk of closing the funds and we wanted to be sure we had the option to continue to use them.

Also have positions in both funds in our Roths (2x) and in a legacy 403b plan
iamblessed
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Re: Wellseley or Wellington in taxable account?

Post by iamblessed »

You can buy the LifeStrategy Conservative Growth and Balanced Index Admiral Shares with about half the taxes.
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Charles Joseph
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Re: Wellseley or Wellington in taxable account?

Post by Charles Joseph »

tibbitts wrote: Mon Dec 20, 2021 8:00 pm
rrt wrote: Mon Dec 20, 2021 7:53 pm Have Wellington because I opened it in 1991 and I didn't know any better at the time. Once I had a better understanding I started using VFIAX Index 500 instead. But took me longer to really understand that I should have been redirecting the gains somewhere else even after I quit adding new money.

So have a very nice little nest egg there, but with app 50% as unrealized gains.

Just looked for my curiosity; bought first shares August of 1991, last shares I physically purchased was Feb of 1995. But I left gains on reinvest till 2016. Ouch.
I'm not seeing the unrealized gains point: you're going to have unrealized gains in your account if invested in a very tax-efficient equity index fund in 1991, too. The problem with active funds is that they may realize gains at irregular and less than opportune times.
Yes, and the growth of unrealized gains will create larger realized capital gains distributions (as a percentage of NAV).
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Jerry55
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Re: Wellseley or Wellington in taxable account?

Post by Jerry55 »

I have Wellesley in a ROTH IRA (thank you VCP) and Wellington in a Taxable Account. Wellington just over 6 figures, and it spins out quarterly dividends, as well as end of year Capitol Gains. Fortunately, the short term gains are minor compared to the Long term gains (probably 80% LT vs 20% ST). I've had each for over a decade, and decided about 2 years ago, to just take the profits from Wellington since I've been retired for 10 years now.

Using TurboTax Deluxe, I'm in the 15% tax bracket, and I use it for spending money, as well as giving cash gifts to my 3 children.

I can't take it with me...so.... :sharebeer
Last edited by Jerry55 on Wed Nov 23, 2022 1:04 am, edited 1 time in total.
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helloeveryone
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Re: Wellseley or Wellington in taxable account?

Post by helloeveryone »

Ed 2 wrote: Mon Dec 20, 2021 8:00 pm
orrsmills wrote: Mon Dec 20, 2021 3:41 pm Hi folks,

Does anyone invest in VWINX or VWELX in a taxable account? I was told those are better in IRA due to the Capital Gain Distributions at the end of the year and the tax that will be required to pay?

Thanks in advance.
Wellington is the excellent fund with one of the best track records among mutual active funds , but it’s better hold in tax deferred accounts because it distribute big capital gains , long and short every December.

Curious - why do they put out so much in capital gains? Is it b/c they are actively traded? (Versus SP500 or total stock index fund - minimal turnover so much less in capital gains?)

Thank you
smooth_rough
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Re: Wellseley or Wellington in taxable account?

Post by smooth_rough »

I got started with wellington in taxable back when I was younger and was in lower tax bracket. It eventually grew too big and became tax liability. I traded out of that and took a big tax hit in the process, and now use more tax efficient funds in my taxable account such as vanguard tax managed capital appreciation.
Last edited by smooth_rough on Wed Nov 23, 2022 10:48 am, edited 1 time in total.
sycamore
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Re: Wellseley or Wellington in taxable account?

Post by sycamore »

helloeveryone wrote: Tue Nov 22, 2022 10:15 pm
Ed 2 wrote: Mon Dec 20, 2021 8:00 pm
orrsmills wrote: Mon Dec 20, 2021 3:41 pm Hi folks,

Does anyone invest in VWINX or VWELX in a taxable account? I was told those are better in IRA due to the Capital Gain Distributions at the end of the year and the tax that will be required to pay?

Thanks in advance.
Wellington is the excellent fund with one of the best track records among mutual active funds , but it’s better hold in tax deferred accounts because it distribute big capital gains , long and short every December.

Curious - why do they put out so much in capital gains? Is it b/c they are actively traded? (Versus SP500 or total stock index fund - minimal turnover so much less in capital gains?)

Thank you
I wonder too.

Could be turnover of ~40%, or that as a balanced fund they have to occasionally sell in order to rebalance stock / bond allocation, or they had more redemption requests than purchase requests from investors and so had to sell some assets to raise cash. Or combination of the above. Maybe there's some data in the fund's financial statements that offers a clue but I haven't looked much at that.
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retiredjg
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Re: Wellseley or Wellington in taxable account?

Post by retiredjg »

In general, actively managed funds produce more gains. Index funds produce very little in capital gains that must be distributed each year.

For W & W, there are also dividends from the bond funds - which are all tax at ordinary income rates (which are higher than long term cap gains rates).

In general, these are not the best funds to hold in taxable, but there are some people who prefer it anyway for a number of reasons. And if in a very low tax bracket maybe it does not matter much.
Ed 2
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Re: Wellseley or Wellington in taxable account?

Post by Ed 2 »

helloeveryone wrote: Tue Nov 22, 2022 10:15 pm
Ed 2 wrote: Mon Dec 20, 2021 8:00 pm
orrsmills wrote: Mon Dec 20, 2021 3:41 pm Hi folks,

Does anyone invest in VWINX or VWELX in a taxable account? I was told those are better in IRA due to the Capital Gain Distributions at the end of the year and the tax that will be required to pay?

Thanks in advance.
Wellington is the excellent fund with one of the best track records among mutual active funds , but it’s better hold in tax deferred accounts because it distribute big capital gains , long and short every December.

Curious - why do they put out so much in capital gains? Is it b/c they are actively traded? (Versus SP500 or total stock index fund - minimal turnover so much less in capital gains?)

Thank you
It is actively managed fund, they sell and buy stocks more frequently than index funds and by doing this capital gains generated. That’s why you don’t hold this funds in taxable portfolio
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
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welderwannabe
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Re: Wellseley or Wellington in taxable account?

Post by welderwannabe »

iamblessed wrote: Tue Dec 21, 2021 1:20 pm You can buy the LifeStrategy Conservative Growth and Balanced Index Admiral Shares with about half the taxes.
Better yet VTSAX Vanguard Total Stock Market Index Fund Admiral Shares and VSIGX Vanguard Intermediate-Term Treasury Index Fund Admiral. The treasury fund is state tax free.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.
Ricola
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Re: Wellseley or Wellington in taxable account?

Post by Ricola »

welderwannabe wrote: Thu Nov 24, 2022 9:22 am
iamblessed wrote: Tue Dec 21, 2021 1:20 pm You can buy the LifeStrategy Conservative Growth and Balanced Index Admiral Shares with about half the taxes.
Better yet VTSAX Vanguard Total Stock Market Index Fund Admiral Shares and VSIGX Vanguard Intermediate-Term Treasury Index Fund Admiral. The treasury fund is state tax free.
VTSAX might be Federal Tax-free but not State depending on your State.
Last edited by Ricola on Thu Nov 24, 2022 11:06 am, edited 1 time in total.
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welderwannabe
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Re: Wellseley or Wellington in taxable account?

Post by welderwannabe »

Ricola wrote: Thu Nov 24, 2022 10:21 am VTSAX should be Federal Tax-free but not State depending on your State.
Why would VTSAX be tax free? Its dividends are taxed federally, granted much at the qualified/cap gains rate.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.
Ricola
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Re: Wellseley or Wellington in taxable account?

Post by Ricola »

welderwannabe wrote: Thu Nov 24, 2022 10:45 am
Ricola wrote: Thu Nov 24, 2022 10:21 am VTSAX should be Federal Tax-free but not State depending on your State.
Why would VTSAX be tax free? Its dividends are taxed federally, granted much at the qualified/cap gains rate.
Misunderstand I guess, I was responding to your prior message that said: "The treasury fund is state tax free."
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