Vanguard Wellesley
Vanguard Wellesley
Do balanced funds like Wellesley have any place in the 3-fund portfolio philosophy? If someone has a high risk threshold and long term horizon, could they use it in place of a 100% bond fund since it is about 60% bonds?
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Re: Vanguard Wellesley
Why not own 40% less of your 100% bond fund? Also, the Wellesley "stock holdings are focused on companies that have historically paid a larger-than-average dividend or that have expectations of increasing dividends." Do you want or need that?
Re: Vanguard Wellesley
A fund like Wellesley could certainly be used to hold some of the stocks and some of the bonds.
It is certainly not a 1-1 replacement for a bond fund because it is not a 100% bond fund, and, of course, arithmetic tells you that 60 is not the same number as 100. Naturally one could configure the allocations so that the 60% in Wellesley adds up to the 100% that was there before.
One could even go so far as to say Wellesley all by itself represents the concept of three fund portfolio being one that is 40% US stocks, 60% US bonds, and 0% international stocks. (It is not necessarily illogical to say that the proportion of any of the three funds could range from 0 to 100 though some would find that either strange or contorted.)
Others would argue that the assets held by Wellesely are not diversified in the way the three fund philosophy would expect.
I guess my personal bottom line would be to ask why would someone do that?
It is certainly not a 1-1 replacement for a bond fund because it is not a 100% bond fund, and, of course, arithmetic tells you that 60 is not the same number as 100. Naturally one could configure the allocations so that the 60% in Wellesley adds up to the 100% that was there before.
One could even go so far as to say Wellesley all by itself represents the concept of three fund portfolio being one that is 40% US stocks, 60% US bonds, and 0% international stocks. (It is not necessarily illogical to say that the proportion of any of the three funds could range from 0 to 100 though some would find that either strange or contorted.)
Others would argue that the assets held by Wellesely are not diversified in the way the three fund philosophy would expect.
I guess my personal bottom line would be to ask why would someone do that?
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Re: Vanguard Wellesley
It's not 100% bonds but that does not keep you from owning some of it. It's a bit of a 3 fund with us, international and bonds but is less diversified than holding the total stock, total international stock and total bond individually or all together inside a target date or life strategy fund. Some people hold it as their primary and only balanced fund. There are certainly worse choices. I own some but have more invested in total market funds for broader diversification.
Re: Vanguard Wellesley
I"m invested in 2 funds: 50/50 Wellesley and Wellington. That works out to be roughly 60% stocks and 40% bonds. This way I'm letting Vanguard manage my money for FAR less than a Personal Advisor would cost. Both funds have been around forever, and when I backtest my portfolio against the Bogleheads 3 fund portfolio, they deliver very close to the same returns. I'm retired and when I need a distribution, I withdraw from the larger of the 2. That's my rebalancing plan.
The only constant is CHANGE!!
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Re: Vanguard Wellesley
I'm invested in Vanguard's low-cost, broad-market index funds, so I'm also letting Vanguard manage my money — but for a lot less risk.
Re: Vanguard Wellesley
25% of my Roth is in Wellesley
Re: Vanguard Wellesley
Plan to rollover my prior 401k to Vanguard Wellesley + Wellington.
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Re: Vanguard Wellesley
You can invest your money however you see fit. It's not really a substitute for a bond fund nor an equity fund, but it's cheap and doesn't have high turnover.
If you like the idea of active management of your bond portfolio it's not the worst idea to use Wellesley as a large chunk of your bonds, even if it might not be optimal. Is it good enough for 95% of people? Certainly.
Right now my IRA holdings are 80% FFNOX (Fidelity four in one) and 20% Wellesley which all works out about where I want it, and I like a tiny bit of active exposure on the bond side.
If you like the idea of active management of your bond portfolio it's not the worst idea to use Wellesley as a large chunk of your bonds, even if it might not be optimal. Is it good enough for 95% of people? Certainly.
Right now my IRA holdings are 80% FFNOX (Fidelity four in one) and 20% Wellesley which all works out about where I want it, and I like a tiny bit of active exposure on the bond side.
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Re: Vanguard Wellesley
We used Wellesley for our second level emergency fund so you could certainly use it for your bond portion.
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Re: Vanguard Wellesley
Hi Mishka - did you keep Wellesley in your taxable or tax deferred/Roth account?MishkaWorries wrote: ↑Fri Apr 16, 2021 7:51 pmWe used Wellesley for our second level emergency fund so you could certainly use it for your bond portion.
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Re: Vanguard Wellesley
Taxable. We always stay in the 12% tax bracket so dividends and cap gains are not a concern for us.life in slices wrote: ↑Fri Apr 16, 2021 8:25 pmHi Mishka - did you keep Wellesley in your taxable or tax deferred/Roth account?MishkaWorries wrote: ↑Fri Apr 16, 2021 7:51 pmWe used Wellesley for our second level emergency fund so you could certainly use it for your bond portion.
We plan. G-d laughs.
Re: Vanguard Wellesley
This week I moved 10% of my PF to Wellesley from the S&P 500 in order to lower my equity exposure a little in anticipation of retirement in a couple of months. In this environment I thought I would give their managed bond portfolio a try instead of moving it to VBTLX and their equity portion leans to more value which I thought would give me a little more diversity than my standard S&P 500 which is the bulk of my equities. This is a pretty minor move but I may move more to Wellesley in the future as things play out.
The fool, with all his other faults, has this also - he is always getting ready to live. - Seneca Epistles < c. 65AD
Re: Vanguard Wellesley
portfolio
The fool, with all his other faults, has this also - he is always getting ready to live. - Seneca Epistles < c. 65AD
Re: Vanguard Wellesley
Thanks everybody, great comments and feedback. I'd like more bond exposure so Wellesley is attractive on that front. On the other hand, income and long term growth are important. As Robot Monster pointed out, the stocks in Wellesley are higher dividend stocks like J&J, Chase, P&G, B of A. For me, Wellesley is a better option than a 100% bond fund like Vanguard Total Bond Index.
Re: Vanguard Wellesley
Wellesley historically has been an income fund, that is, it invests in established companies that pay decent dividends. So, not a traditional bond fund and not a replacement for one. Take a look at what Wellesley did in March, 2020 and you'll see it's nowhere near as safe as a broad bond index fund. You want better returns, you'll have to take the risk.
I own it, and have owned it, in a tax sheltered account, for many years. I would not hold it in taxable, at least not right now. I do like the cash it throws off, which just buys me more Wellesley.
You could do worse.
I own it, and have owned it, in a tax sheltered account, for many years. I would not hold it in taxable, at least not right now. I do like the cash it throws off, which just buys me more Wellesley.
You could do worse.
Re: Vanguard Wellesley
Is there a mandate it just stay around 40/60?
In the early years of the 70s when inflation was heating up it made a swift swing to be more heavily in equities - not sure how it’s bounced around since.
If no mandate then don’t count on the bond allocation - and also note they can play around with the risk in that bond allocation more than a bond index fund.
In the early years of the 70s when inflation was heating up it made a swift swing to be more heavily in equities - not sure how it’s bounced around since.
If no mandate then don’t count on the bond allocation - and also note they can play around with the risk in that bond allocation more than a bond index fund.