Vanguard Wellesley

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Sukhumvit
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Vanguard Wellesley

Post by Sukhumvit »

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?
Johm221122
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Re: Vanguard Wellesley

Post by Johm221122 »

Sukhumvit wrote: Fri Apr 16, 2021 1:35 pm could they use it in place of a 100% bond fund since it is about 60% bonds?
Not if they want 100% bonds, yes if they want 60% bonds and they want the risk of less bonds and to hold investment grade bonds
Robot Monster
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Re: Vanguard Wellesley

Post by Robot Monster »

Why not own 40% less of your 100% bond fund? :wink: 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?
dbr
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Re: Vanguard Wellesley

Post by dbr »

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?
Mike Scott
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Re: Vanguard Wellesley

Post by Mike Scott »

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.
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grobertj
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Re: Vanguard Wellesley

Post by grobertj »

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.
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UpperNwGuy
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Re: Vanguard Wellesley

Post by UpperNwGuy »

grobertj wrote: Fri Apr 16, 2021 7:01 pm 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
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.
Bama12
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Re: Vanguard Wellesley

Post by Bama12 »

25% of my Roth is in Wellesley
mtmingus
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Re: Vanguard Wellesley

Post by mtmingus »

Plan to rollover my prior 401k to Vanguard Wellesley + Wellington.
dukeblue219
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Re: Vanguard Wellesley

Post by dukeblue219 »

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.
MishkaWorries
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Re: Vanguard Wellesley

Post by MishkaWorries »

Sukhumvit wrote: Fri Apr 16, 2021 1:35 pm 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?
We used Wellesley for our second level emergency fund so you could certainly use it for your bond portion.
We plan. G-d laughs.
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life in slices
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Re: Vanguard Wellesley

Post by life in slices »

MishkaWorries wrote: Fri Apr 16, 2021 7:51 pm
Sukhumvit wrote: Fri Apr 16, 2021 1:35 pm 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?
We used Wellesley for our second level emergency fund so you could certainly use it for your bond portion.
Hi Mishka - did you keep Wellesley in your taxable or tax deferred/Roth account?
MishkaWorries
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Re: Vanguard Wellesley

Post by MishkaWorries »

life in slices wrote: Fri Apr 16, 2021 8:25 pm
MishkaWorries wrote: Fri Apr 16, 2021 7:51 pm
Sukhumvit wrote: Fri Apr 16, 2021 1:35 pm 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?
We used Wellesley for our second level emergency fund so you could certainly use it for your bond portion.
Hi Mishka - did you keep Wellesley in your taxable or tax deferred/Roth account?
Taxable. We always stay in the 12% tax bracket so dividends and cap gains are not a concern for us.
We plan. G-d laughs.
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Candor
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Re: Vanguard Wellesley

Post by Candor »

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
tibbitts
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Re: Vanguard Wellesley

Post by tibbitts »

Candor wrote: Sat Apr 17, 2021 12:09 pm This week I moved 10% of my PF...
PF?
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Candor
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Re: Vanguard Wellesley

Post by Candor »

tibbitts wrote: Sat Apr 17, 2021 12:30 pm
Candor wrote: Sat Apr 17, 2021 12:09 pm This week I moved 10% of my PF...
PF?
portfolio
The fool, with all his other faults, has this also - he is always getting ready to live. - Seneca Epistles < c. 65AD
Topic Author
Sukhumvit
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Re: Vanguard Wellesley

Post by Sukhumvit »

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.
Admiral
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Re: Vanguard Wellesley

Post by Admiral »

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.
TPIR
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Re: Vanguard Wellesley

Post by TPIR »

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.
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