How do you think Vanguard Wellesley Income Fund will do over the next ten years?

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iamblessed
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How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by iamblessed »

Would like to know what others think of the Vanguard Wellesley Income Fund for the future.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by LiveSimple »

It may do well, stay the same or may not do well, difficult to predict... just take what the market will do.
Invest when you have the money, sell when you need the money, for real life expenses...
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by financeperchance »

Do you think that these folks have special insights and a special culture that make them smarter than the collective wisdom of the market as a whole? https://www.wellington.com/en/our-culture/

If not, then I would suggest simply owning this fund: https://investor.vanguard.com/mutual-fu ... view/vscgx
It's the same allocation as Wellesley Income, but it's indexed, it's cheaper, and it has more international.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by AerialWombat »

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Last edited by AerialWombat on Sun Feb 06, 2022 12:38 am, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by InvMoney »

financeperchance wrote: Sun Feb 02, 2020 11:39 am Do you think that these folks have special insights and a special culture that make them smarter than the collective wisdom of the market as a whole? https://www.wellington.com/en/our-culture/

If not, then I would suggest simply owning this fund: https://investor.vanguard.com/mutual-fu ... view/vscgx
It's the same allocation as Wellesley Income, but it's indexed, it's cheaper, and it has more international.
Yes, we all know what the party line is of indexing advocates. Past performance is not a predictor of future performance. Index funds outperform most managed funds on a long term basis.

But the fact of the matter is that Wellesley Income (VWINX) has substantially outperformed LS Conservative Growth Index (VSCGX) on a long term basis.

- For the five year 2015-2019 year period, VWINX outperformed in 4 of those 5 years.
- For the ten year 2010-2019 year period, VWINX outperformed in 8 of those 10 years.
- For the ten year 2005-2019 year period, VWINX outperformed in 10 of those 15 years.
- For the twenty year 2000-2019 year period, VWINX outperformed in 13 of those 20 years.

LS Conservative Growth Index's (VSCGX) inception date is October 1994. $100,000 invested in these two funds in October 1994 would be worth the following amount today:

- $776,840 - Wellesley Income (VWINX)
- $547,484 - LS Conservative Growth Index (VSCGX)

Wellesley Income has followed the same investment strategy since its inception in 1970 (invests in blue chip, large cap, dividend paying stocks and intermediate term investment grade bonds), and that strategy has yielded index beating superior long term returns.
Last edited by InvMoney on Sun Feb 02, 2020 1:08 pm, edited 6 times in total.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by nix4me »

financeperchance wrote: Sun Feb 02, 2020 11:39 am Do you think that these folks have special insights and a special culture that make them smarter than the collective wisdom of the market as a whole? https://www.wellington.com/en/our-culture/

If not, then I would suggest simply owning this fund: https://investor.vanguard.com/mutual-fu ... view/vscgx
It's the same allocation as Wellesley Income, but it's indexed, it's cheaper, and it has more international.
Huge difference in performance. Wellesley is a far better option than VSCGX.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by annu »

Ok, since I am trying to learn as well, did some backtesting( so usual disclaimer that this does bot mean nothing for future).

See below:
Portfolio Returns
Portfolio performance statistics
Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio Sortino Ratio US Mkt Correlation
Portfolio 1 $10,000 $17,990 7.54% 4.31% 16.39% -2.57% -3.48% 1.55 2.86 0.77
Portfolio 2 $10,000 $18,628 8.00% 4.90% 17.99% -2.19% -5.72% 1.46 2.52 0.94
Portfolio 3 $10,000 $18,377 7.82% 4.89% 18.01% -2.42% -5.24% 1.43 2.48 0.92

1: VWINX 100%( 42% STOCKS, 58% BONDS)
2:VTSAX 42% , VBTLX 58%
3: VFIAX 38%, VSXUS 5%, VBTLX 58%( since vwinx only has large cap, no small and mid)


Looking at composition, 3 is close to what vwinx is.

Returns Based Style Analysis
Returns Based Style Analysis
Style Category Portfolio 1 Portfolio 2 Portfolio 3
Large-cap Value 24.18% 14.79% 17.35%
Large-cap Growth 6.79% 20.65% 21.37%
Mid-cap Value 0.00% 2.05% 0.00%
Mid-cap Growth 0.00% 1.84% 0.00%
Small-cap Value 0.00% 0.00% 0.00%
Small-cap Growth 0.00% 2.65% 0.00%
Global ex-US Developed Markets 3.47% 0.63% 3.71%
Emerging Markets 0.00% 0.28% 1.46%
REITs 0.92% 0.10% 0.00%
Corporate Bonds 22.33% 13.68% 12.35%
Long-Term Treasuries 6.01% 1.84% 1.87%
Intermediate-Term Treasuries 13.83% 14.42% 15.26%
Short-Term Treasuries 22.49% 27.06% 26.64%
R Squared 93.79% 99.62% 99.76%

I think you can tweak international to developed and be even closer.
But even at current composition, 3 is outperforming VWINX, and you have thr option to tax loss harvest, and all this with lower expense ratio.

Like I said, I am still learning, but do not see a huge benifit of vwinx, going to a closed fund route, when index is performing better, cheaper and more flexible.
Infact you can replace vfiax and use something more value, or use vwiux a muni fund instead of vbtlx or even different duration bond fund to match vwinx.
I think less corp. bonds are better, as personally will take risk on stocks, bonds will like to keep in safer options.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by financeperchance »

Once you get past the active vs. indexed debate, it's important to understand that you don't make money from past success. Investing is all about the future. So I would make sure I'm comfortable with the evolution in Wellington Management's culture. This video from 7 years ago shows the way they used to pick stocks, which was more purely based on the fundamentals of the business and the valuation:
https://www.youtube.com/watch?v=v_n684YBVNA

This is what they do now, which encompasses more of the "soft" factors:
https://www.youtube.com/watch?v=NO0eWnG7Vic

Not saying one approach is better than the other, but it's important to understand it and be comfortable with it.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by InvMoney »

annu wrote: Sun Feb 02, 2020 1:05 pm Ok, since I am trying to learn as well, did some backtesting( so usual disclaimer that this does bot mean nothing for future).

See below:
Portfolio Returns
Portfolio performance statistics
Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio Sortino Ratio US Mkt Correlation
Portfolio 1 $10,000 $17,990 7.54% 4.31% 16.39% -2.57% -3.48% 1.55 2.86 0.77
Portfolio 2 $10,000 $18,628 8.00% 4.90% 17.99% -2.19% -5.72% 1.46 2.52 0.94
Portfolio 3 $10,000 $18,377 7.82% 4.89% 18.01% -2.42% -5.24% 1.43 2.48 0.92

1: VWINX 100%( 42% STOCKS, 58% BONDS)
2:VTSAX 42% , VBTLX 58%
3: VFIAX 38%, VSXUS 5%, VBTLX 58%( since vwinx only has large cap, no small and mid)
On a l0ng term basis, VWINX's asset allocation has averaged approximately 36% stocks / 64% bonds.
Last edited by InvMoney on Sun Feb 02, 2020 1:24 pm, edited 1 time in total.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by retired@50 »

The subject of this thread sounds a little like a trick question. Predictions are typically worthless. I'd direct the OP to this wiki page.

https://www.bogleheads.org/wiki/Boglehe ... philosophy

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
InvMoney
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by InvMoney »

InvMoney wrote: Sun Feb 02, 2020 1:13 pm
annu wrote: Sun Feb 02, 2020 1:05 pm Ok, since I am trying to learn as well, did some backtesting( so usual disclaimer that this does bot mean nothing for future).

See below:
Portfolio Returns
Portfolio performance statistics
Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio Sortino Ratio US Mkt Correlation
Portfolio 1 $10,000 $17,990 7.54% 4.31% 16.39% -2.57% -3.48% 1.55 2.86 0.77
Portfolio 2 $10,000 $18,628 8.00% 4.90% 17.99% -2.19% -5.72% 1.46 2.52 0.94
Portfolio 3 $10,000 $18,377 7.82% 4.89% 18.01% -2.42% -5.24% 1.43 2.48 0.92

1: VWINX 100%( 42% STOCKS, 58% BONDS)
2:VTSAX 42% , VBTLX 58%
3: VFIAX 38%, VSXUS 5%, VBTLX 58%( since vwinx only has large cap, no small and mid)
Since 1994, VWINX's asset allocation has averaged 36% stocks / 64% bonds.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by abuss368 »

iamblessed wrote: Sun Feb 02, 2020 11:34 am Would like to know what others think of the Vanguard Wellesley Income Fund for the future.
No can predict that. All our crystal balls are cloudy. If anyone claims they know it may be foolish (and costly) to follow.

Stock market returns. Interest rates. Complexity.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by financeperchance »

InvMoney wrote: Sun Feb 02, 2020 12:34 pm
financeperchance wrote: Sun Feb 02, 2020 11:39 am Do you think that these folks have special insights and a special culture that make them smarter than the collective wisdom of the market as a whole? https://www.wellington.com/en/our-culture/

If not, then I would suggest simply owning this fund: https://investor.vanguard.com/mutual-fu ... view/vscgx
It's the same allocation as Wellesley Income, but it's indexed, it's cheaper, and it has more international.
Yes, we all know what the party line is of indexing advocates. Past performance is not a predictor of future performance. Index funds outperform most managed funds on a long term basis.

But the fact of the matter is that Wellesley Income (VWINX) has substantially outperformed LS Conservative Growth Index (VSCGX) on a long term basis.

- For the five year 2015-2019 year period, VWINX outperformed in 4 of those 5 years.
- For the ten year 2010-2019 year period, VWINX outperformed in 8 of those 10 years.
- For the ten year 2005-2019 year period, VWINX outperformed in 10 of those 15 years.
- For the twenty year 2000-2019 year period, VWINX outperformed in 13 of those 20 years.

LS Conservative Growth Index's (VSCGX) inception date is October 1994. $100,000 invested in these two funds in October 1994 would be worth the following amount today:

- $776,840 - Wellesley Income (VWINX)
- $547,484 - LS Conservative Growth Index (VSCGX)

Wellesley Income has followed the same investment strategy since its inception in 1970 (invests in blue chip, large cap, dividend paying stocks and intermediate term investment grade bonds), and that strategy has yielded index beating superior long term returns.
Please adjust for two things:
1) The longer-term bonds held by Wellesley Income (avg maturity 10 years vs. 8 years for the index), during a time when longer-term bonds had a great bull market.
2) The higher allocation to US, during a time when US stocks had a great outperformance compared with international.

I suspect you'll see that gap shrink a bit, especially on a risk-adjusted basis.
Last edited by financeperchance on Sun Feb 02, 2020 1:23 pm, edited 2 times in total.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by Kenkat »

financeperchance wrote: Sun Feb 02, 2020 1:22 pm
InvMoney wrote: Sun Feb 02, 2020 12:34 pm
financeperchance wrote: Sun Feb 02, 2020 11:39 am Do you think that these folks have special insights and a special culture that make them smarter than the collective wisdom of the market as a whole? https://www.wellington.com/en/our-culture/

If not, then I would suggest simply owning this fund: https://investor.vanguard.com/mutual-fu ... view/vscgx
It's the same allocation as Wellesley Income, but it's indexed, it's cheaper, and it has more international.
Yes, we all know what the party line is of indexing advocates. Past performance is not a predictor of future performance. Index funds outperform most managed funds on a long term basis.

But the fact of the matter is that Wellesley Income (VWINX) has substantially outperformed LS Conservative Growth Index (VSCGX) on a long term basis.

- For the five year 2015-2019 year period, VWINX outperformed in 4 of those 5 years.
- For the ten year 2010-2019 year period, VWINX outperformed in 8 of those 10 years.
- For the ten year 2005-2019 year period, VWINX outperformed in 10 of those 15 years.
- For the twenty year 2000-2019 year period, VWINX outperformed in 13 of those 20 years.

LS Conservative Growth Index's (VSCGX) inception date is October 1994. $100,000 invested in these two funds in October 1994 would be worth the following amount today:

- $776,840 - Wellesley Income (VWINX)
- $547,484 - LS Conservative Growth Index (VSCGX)

Wellesley Income has followed the same investment strategy since its inception in 1970 (invests in blue chip, large cap, dividend paying stocks and intermediate term investment grade bonds), and that strategy has yielded index beating superior long term returns.
Please adjust for two things:
1) The longer-term bonds held by Wellesley Income (avg maturity 10 years vs. 8 years for the index), during a time when longer-term bonds had a great bull market.
2) The higher allocation to US, during a time when US stocks had a great outperformance compared with international.

I suspect you'll see that gap shrink a bit, especially on a risk-adjusted basis.
If you adjust for all of the decisions the active manager made over the years, you are kind of defeating the purpose of any comparisons, aren’t you?
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by Phineas J. Whoopee »

I think they will return roughly as much as the combination of their underlying assets do, as churned over a decade, less expenses. Surely many senior asset managers will retire within the next ten years.

Did you expect a different answer?

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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by Grt2bOutdoors »

Similar to how its performed in the past during both up, down and sideways markets.
The use of a Lifestrategy fund is a poor comparison, there was a period of time where Vanguard had a 25% slice of the fund farmed out to Mellon Bank in an Asset Allocation fund. The problem was they had impeccable mistiming of when to be in equities and when to be in bonds, leading to poor performance against their benchmarks. The other issue I have with Lifestrategy funds, if Vanguard tinkers with the suggested allocations, it may or may not be necessarily a good thing, even if they believe it so. So long as Wellesley follows its charter, you should not be concerned about manager turnover. Wellington Management has a deep bench and a good long term track record.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by iamblessed »

Grt2bOutdoors wrote: Sun Feb 02, 2020 4:32 pm Similar to how its performed in the past during both up, down and sideways markets.
The use of a Lifestrategy fund is a poor comparison, there was a period of time where Vanguard had a 25% slice of the fund farmed out to Mellon Bank in an Asset Allocation fund. The problem was they had impeccable mistiming of when to be in equities and when to be in bonds, leading to poor performance against their benchmarks. The other issue I have with Lifestrategy funds, if Vanguard tinkers with the suggested allocations, it may or may not be necessarily a good thing, even if they believe it so. So long as Wellesley follows its charter, you should not be concerned about manager turnover. Wellington Management has a deep bench and a good long term track record.
I think it will track Wellesley better since they took back that 25% slice.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by Grt2bOutdoors »

iamblessed wrote: Sun Feb 02, 2020 8:12 pm
Grt2bOutdoors wrote: Sun Feb 02, 2020 4:32 pm Similar to how its performed in the past during both up, down and sideways markets.
The use of a Lifestrategy fund is a poor comparison, there was a period of time where Vanguard had a 25% slice of the fund farmed out to Mellon Bank in an Asset Allocation fund. The problem was they had impeccable mistiming of when to be in equities and when to be in bonds, leading to poor performance against their benchmarks. The other issue I have with Lifestrategy funds, if Vanguard tinkers with the suggested allocations, it may or may not be necessarily a good thing, even if they believe it so. So long as Wellesley follows its charter, you should not be concerned about manager turnover. Wellington Management has a deep bench and a good long term track record.
I think it will track Wellesley better since they took back that 25% slice.
Took back the slice and then tinkered again with it. You know the saying, something along the lines of chasing the thought of a better plan when you already had a good plan.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by edge »

I would bet it will do fine.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by iamblessed »

I might have to buy the LS Conservative Growth because of the ACA cliff.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by smectym »

VWIAX is a solid defensive pick. It will not soar, neither will it tank. We use it. It’s for the risk averse.

The plausible argument against Wellesley is that it has posted misleadingly good returns over the last several decades because the stock rally has been accompanied by a bond rally and the bond rally has been facilitated by Fed intervention. So the modest returns that might’ve been expected, were stock gains to be undercut by bond declines, as in a normal market free of Fed interference, has been obviated by massive fed support for the bond market: thus both stocks and bonds
have risen long-term, (thank you very nice, dear Fed). But will that continue? If not, Wellesley’s performance may disappoint going forward.

But until we see decisive evidence that the Fed is stepping back, and we don’t see anything of that so far, I would continue to bet on Wellesley.

And I will add as a footnote that there are other forces, independent of Central Bank intervention, that also support and may be expected to continue to support the bond market—Or at least the government bond market
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by Nowizard »

Funds that have significant periods of success have always been one of our considerations for purchase. Though there are the constant comments about past not predicting the future, there are no other predictors with absolute accuracy either, just those with better accuracy. Using significant periods of past returns as a factor in fund choice has worked quite well for us over many years (Though not as well with individual stocks during that time period). Sometimes, it does pay to question the way things are done and not be overly certain about complex topics. Yes, this can be countered by comments that outliers occur, but it is one that occurs in the context of many other factors influencing our investment decisions. Rather than affirming absolutes of others, individual analysis and developing a formula that works is key...……….even if it differs in some ways from common perceptions. The wonderful things presented here are "absolutely" an ideal place to begin, but successful investing formulas have many different components, some of which do not receive much support here.

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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by watchnerd »

iamblessed wrote: Sun Feb 02, 2020 11:34 am Would like to know what others think of the Vanguard Wellesley Income Fund for the future.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by InvMoney »

Regarding the Wellesley Income (VWINX) compared to LS Conservative Growth Index (VSCGX) matter, following is one year / five year/ 10 year average annual return data for the two funds:

14.19% / 6.62% / 8.15% - Wellesley Income
12.18% / 5.70% / 6.78% - LS Conservative Growth Index

While indexing theory suggests that LS Conservative Growth Index is a better choice than Wellesley Income, one year / five year/ 10 year performance data, as well as performance data since LS Conservative Growth Index's 1994 inception date, indicates otherwise.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by financeperchance »

InvMoney wrote: Mon Feb 03, 2020 9:59 am Regarding the Wellesley Income (VWINX) compared to LS Conservative Growth Index (VSCGX) matter, following is one year / five year/ 10 year average annual return data for the two funds:

14.19% / 6.62% / 8.15% - Wellesley Income
12.18% / 5.70% / 6.78% - LS Conservative Growth Index

While indexing theory suggests that LS Conservative Growth Index is a better choice than Wellesley Income, one year / five year/ 10 year performance data, as well as performance data since LS Conservative Growth Index's 1994 inception date, indicates otherwise.
Wellesley Income is primarily US and has longer-term bonds than VSCGX. This was a period in which both the US stock market and longer-term bonds outperformed. The comparison portfolio therefore needs to be 40% total US stock market and a 60% allocation to a bond fund close to Wellesley's average bond maturity, which is 10.1 years.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by idoc2020 »

I am reviving the thread so as to review how Wellesley has done during the pandemic. In early March when the entire market began to slide, Welleley dropped 17% relatively quickly (compared to VTI's 35%). During this time BND also dropped about 9%. However, an argument could be made that some of BND's slide recovered very quickly (within days). Overtime, all of these funds have returned to their pre-pandemic values but predictably the ride has been a lot rougher with VTI. Overall, throughout the years I have found that Wellesley is not immune to great market convulsions but it does provide for a much smoother ride. This makes me panic less about it than some of my riskier holdings. Sometimes this can have consequences ie: during the pandemic I sold off some of my VTI holdings because of sheet panic. However, for some reason I kept all of my Wellesley. Psychologically I felt better about holding Wellesley whereas I felt more exposed with VTI. Since Wellesley was a large part of my portfolio I'm happy that I didn't sell it.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by grobertj »

I back tested Wellesley against the Boglehead 4 fund portfolio, and Wellesley delivered virtually the same returns from 2002 to 2019. But, Wellesley was MUCH less volatile. It's Std Dev is less than half of the four funds.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by Bama12 »

I have no idea how it will do over the next 10 years.

50% of my Roth is in Wellesley.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by galeno »

If we were US retired investors we would hold the GRI (galeno retirement index):

25% Wellesley + 25% Wellington + 25% VTRF 2020 + 25% VTRF 2025

Which I created to benchmark our non US retirement portfolio:

50% World Stocks + 30% TBM + 15% TIPS + 5% CASH

Our after tax port is beating the before tax "GRI" 6.7% vs 3.2% YTD. Since 3/31 it's 16.1% vs 16.0%.
KISS & STC.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by AerialWombat »

.....
Last edited by AerialWombat on Sat Apr 03, 2021 10:45 pm, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by bluewater23t »

Any concerns on Wellesley's performance going forward given such a large percentage of bonds in its portfolio? I know, yes, yes, no one knows what bonds will do, but just saying....and I do own some in my 401k......
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by GoneOnTilt »

grobertj wrote: Sun Sep 13, 2020 12:53 pm I back tested Wellesley against the Boglehead 4 fund portfolio, and Wellesley delivered virtually the same returns from 2002 to 2019. But, Wellesley was MUCH less volatile. It's Std Dev is less than half of the four funds.
I backtested Wellesley (35/65 AA) against VASIX (Vanguard LifeStrategy Income Fund - 20/80 AA), and it yielded significantly more return with only slightly more volatility.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by 260chrisb »

iamblessed wrote: Sun Feb 02, 2020 11:34 am Would like to know what others think of the Vanguard Wellesley Income Fund for the future.
I like it and hold it in my Roth. Here's my thought; 3 year; 9.44%, 5 year; 7.40%, 10 year; 7.89%, since 1970; 9.71%......my guess is it's going to do okay over the next 10 years!
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by Johnathon Livingston »

From 2016 to present you’d have been better off with index funds:

VWINX - 8.28% CAGR
VTSAX 40% / VBTLX 60% - 9.21% CAGR

If you’re a 3 fund type of person:

VTSAX 30% / VTIAX 10% / VBTLX 60% - 8.50% CAGR

The standard deviations were comparable among the funds, but the index fund portfolios drew down less.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by GoneOnTilt »

Johnathon Livingston wrote: Wed Aug 11, 2021 7:00 pm From 2016 to present you’d have been better off with index funds:

VWINX - 8.28% CAGR
VTSAX 40% / VBTLX 60% - 9.21% CAGR

If you’re a 3 fund type of person:

VTSAX 30% / VTIAX 10% / VBTLX 60% - 8.50% CAGR

The standard deviations were comparable among the funds, but the index fund portfolios drew down less.
Interesting choice of time period. Why'd you pick 2016 to present?

1993 to present (as far back as I could go with total stock market investor shares):

VWINX - 8.27% CAGR
VTSMX 40% / VBMFX 60% - 7.69% CAGR
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by Johnathon Livingston »

GoneOnTilt wrote: Wed Aug 11, 2021 7:13 pm
Johnathon Livingston wrote: Wed Aug 11, 2021 7:00 pm From 2016 to present you’d have been better off with index funds:

VWINX - 8.28% CAGR
VTSAX 40% / VBTLX 60% - 9.21% CAGR

If you’re a 3 fund type of person:

VTSAX 30% / VTIAX 10% / VBTLX 60% - 8.50% CAGR

The standard deviations were comparable among the funds, but the index fund portfolios drew down less.
Interesting choice of time period. Why'd you pick 2016 to present?

1993 to present (as far back as I could go with total stock market investor shares):

VWINX - 8.27% CAGR
VTSMX 40% / VBMFX 60% - 7.69% CAGR
I just picked recent performance- last five years or so. I’m sure there is variation from time to time though. Sometimes active outperforms. Sometimes it underperforms. With the index approach you’re mathematically certain to be average and certain to not underperform.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by GoneOnTilt »

Johnathon Livingston wrote: Wed Aug 11, 2021 7:00 pm From 2016 to present you’d have been better off with index funds:

VWINX - 8.28% CAGR
VTSAX 40% / VBTLX 60% - 9.21% CAGR

If you’re a 3 fund type of person:

VTSAX 30% / VTIAX 10% / VBTLX 60% - 8.50% CAGR

The standard deviations were comparable among the funds, but the index fund portfolios drew down less.
How about this. I can get back further this way:

Since 1987, Wellesley beat an S&P 500/Total Bond Market mix, 11.92% CAGR to 11.50% CAGR, with less volatility.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by GoneOnTilt »

Johnathon Livingston wrote: Wed Aug 11, 2021 7:17 pm
GoneOnTilt wrote: Wed Aug 11, 2021 7:13 pm
Johnathon Livingston wrote: Wed Aug 11, 2021 7:00 pm From 2016 to present you’d have been better off with index funds:

VWINX - 8.28% CAGR
VTSAX 40% / VBTLX 60% - 9.21% CAGR

If you’re a 3 fund type of person:

VTSAX 30% / VTIAX 10% / VBTLX 60% - 8.50% CAGR

The standard deviations were comparable among the funds, but the index fund portfolios drew down less.
Interesting choice of time period. Why'd you pick 2016 to present?

1993 to present (as far back as I could go with total stock market investor shares):

VWINX - 8.27% CAGR
VTSMX 40% / VBMFX 60% - 7.69% CAGR
I just picked recent performance- last five years or so. I’m sure there is variation from time to time though. Sometimes active outperforms. Sometimes it underperforms. With the index approach you’re mathematically certain to be average and certain to not underperform.
The problem is that I'm biased. Wellesley holds Kellogg, and I'm addicted to Corn Flakes.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by nisiprius »

In 473 overlapping 120-month periods from 9/1970 to 12/2019

Wellesley did not lose money ever, 0 times in 473.
Wellesley outperformed intermediate-term government bonds 463/473 = 98% of the time.
Wellesley beat inflation 445/473 = 94% of the time.
But large-company stocks, S&P 500 and predecessor indexes, beat Wellesley 327/473 = 69.1% of the time.

Based on the past, I think that for planning purposes it is reasonable to think that
a) Wellesley will make money
b) Wellesley will beat inflation
c) Wellesley will very likely beat intermediate-term bonds, such as Total Bonds
d) Wellesley will probably underperform 100% stocks.

I don't think you can pin it down much better than that.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by Explorer »

nisiprius wrote: Wed Aug 11, 2021 8:00 pm In 473 overlapping 120-month periods from 9/1970 to 12/2019

Wellesley did not lose money ever, 0 times in 473.
Wellesley outperformed intermediate-term government bonds 463/473 = 98% of the time.
Wellesley beat inflation 445/473 = 94% of the time.
But large-company stocks, S&P 500 and predecessor indexes, beat Wellesley 327/473 = 69.1% of the time.

Based on the past, I think that for planning purposes it is reasonable to think that
a) Wellesley will make money
b) Wellesley will beat inflation
c) Wellesley will very likely beat intermediate-term bonds, such as Total Bonds
d) Wellesley will probably underperform 100% stocks.

I don't think you can pin it down much better than that.
Great post, as usual.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by GoneOnTilt »

nisiprius wrote: Wed Aug 11, 2021 8:00 pm In 473 overlapping 120-month periods from 9/1970 to 12/2019

Wellesley did not lose money ever, 0 times in 473.
Wellesley outperformed intermediate-term government bonds 463/473 = 98% of the time.
Wellesley beat inflation 445/473 = 94% of the time.
But large-company stocks, S&P 500 and predecessor indexes, beat Wellesley 327/473 = 69.1% of the time.

Based on the past, I think that for planning purposes it is reasonable to think that
a) Wellesley will make money
b) Wellesley will beat inflation
c) Wellesley will very likely beat intermediate-term bonds, such as Total Bonds
d) Wellesley will probably underperform 100% stocks.

I don't think you can pin it down much better than that.
This is great and really helpful. Thank you.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by Dottie57 »

financeperchance wrote: Sun Feb 02, 2020 11:39 am Do you think that these folks have special insights and a special culture that make them smarter than the collective wisdom of the market as a whole? https://www.wellington.com/en/our-culture/

If not, then I would suggest simply owning this fund: https://investor.vanguard.com/mutual-fu ... view/vscgx
It's the same allocation as Wellesley Income, but it's indexed, it's cheaper, and it has more international.
I agree with this. I my self would own two funds. Conservative growth and moderate growth at 50% each.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by secondopinion »

iamblessed wrote: Sun Feb 02, 2020 11:34 am Would like to know what others think of the Vanguard Wellesley Income Fund for the future.
My two bits: it will do reasonably. It should have positive returns.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by burritoLover »

nisiprius wrote: Wed Aug 11, 2021 8:00 pm In 473 overlapping 120-month periods from 9/1970 to 12/2019

Wellesley did not lose money ever, 0 times in 473.
Wellesley outperformed intermediate-term government bonds 463/473 = 98% of the time.
Wellesley beat inflation 445/473 = 94% of the time.
But large-company stocks, S&P 500 and predecessor indexes, beat Wellesley 327/473 = 69.1% of the time.

Based on the past, I think that for planning purposes it is reasonable to think that
a) Wellesley will make money
b) Wellesley will beat inflation
c) Wellesley will very likely beat intermediate-term bonds, such as Total Bonds
d) Wellesley will probably underperform 100% stocks.

I don't think you can pin it down much better than that.
lol - it is the new riskless asset that outperforms treasuries, beats inflation, and always makes money. You are seriously going to suggest that investors use that for planning purposes? :oops:
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by tibbitts »

iamblessed wrote: Sun Feb 02, 2020 11:34 am Would like to know what others think of the Vanguard Wellesley Income Fund for the future.
I sold all my Wellesley and Wellington at roughly the end of last year, so I guess that says what I think of its future relative to other investments. I sold all of my bond-inclusive holdings except for high yield, floating rate, emerging market, and I/EE bonds. I replaced most of the bonds with TIAA Traditional, and the equity portion of Wellesley and Wellington with equity funds - with maybe an emphasis on funds having some combination of value/quality/dividend-paying, plus a little higher percentage international than in W&W.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by sycamore »

burritoLover wrote: Thu Aug 12, 2021 10:20 am
nisiprius wrote: Wed Aug 11, 2021 8:00 pm In 473 overlapping 120-month periods from 9/1970 to 12/2019

Wellesley did not lose money ever, 0 times in 473.
Wellesley outperformed intermediate-term government bonds 463/473 = 98% of the time.
Wellesley beat inflation 445/473 = 94% of the time.
But large-company stocks, S&P 500 and predecessor indexes, beat Wellesley 327/473 = 69.1% of the time.

Based on the past, I think that for planning purposes it is reasonable to think that
a) Wellesley will make money
b) Wellesley will beat inflation
c) Wellesley will very likely beat intermediate-term bonds, such as Total Bonds
d) Wellesley will probably underperform 100% stocks.

I don't think you can pin it down much better than that.
lol - it is the new riskless asset that outperforms treasuries, beats inflation, and always makes money. You are seriously going to suggest that investors use that for planning purposes? :oops:
I didn't read nisiprius' post as saying Wellesley is a riskless asset as you did. Note the use of "very likely" and "probably" - no guarantees. Those planning points seem entirely reasonable to me; not surprising that a mix of stocks & bonds (say, from 20-40% stocks) could likely over the course of 5 years do all those things.

Also note that there's an assumption of at least a 5 year investing period (per the backtest). It could certainly lose money in the meantime within a 5 year period.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by burritoLover »

sycamore wrote: Thu Aug 12, 2021 10:45 am
burritoLover wrote: Thu Aug 12, 2021 10:20 am
nisiprius wrote: Wed Aug 11, 2021 8:00 pm In 473 overlapping 120-month periods from 9/1970 to 12/2019

Wellesley did not lose money ever, 0 times in 473.
Wellesley outperformed intermediate-term government bonds 463/473 = 98% of the time.
Wellesley beat inflation 445/473 = 94% of the time.
But large-company stocks, S&P 500 and predecessor indexes, beat Wellesley 327/473 = 69.1% of the time.

Based on the past, I think that for planning purposes it is reasonable to think that
a) Wellesley will make money
b) Wellesley will beat inflation
c) Wellesley will very likely beat intermediate-term bonds, such as Total Bonds
d) Wellesley will probably underperform 100% stocks.

I don't think you can pin it down much better than that.
lol - it is the new riskless asset that outperforms treasuries, beats inflation, and always makes money. You are seriously going to suggest that investors use that for planning purposes? :oops:
I didn't read nisiprius' post as saying Wellesley is a riskless asset as you did. Note the use of "very likely" and "probably" - no guarantees. Those planning points seem entirely reasonable to me; not surprising that a mix of stocks & bonds (say, from 20-40% stocks) could likely over the course of 5 years do all those things.

Also note that there's an assumption of at least a 5 year investing period (per the backtest). It could certainly lose money in the meantime within a 5 year period.
Well, I see "Wellesley will make money" and "Wellesley will beat inflation". Why bother with TIPs with a negative real yield - just dump it all in Wellesley.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by Mike Scott »

I have thought and continue to think that Wellesley/Wellington are both good enough to be two of my fundamental funds in tax advantaged spaces but there are no guarantees and they are not without risk.
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by GoneOnTilt »

Dottie57 wrote: Thu Aug 12, 2021 10:06 am
financeperchance wrote: Sun Feb 02, 2020 11:39 am Do you think that these folks have special insights and a special culture that make them smarter than the collective wisdom of the market as a whole? https://www.wellington.com/en/our-culture/

If not, then I would suggest simply owning this fund: https://investor.vanguard.com/mutual-fu ... view/vscgx
It's the same allocation as Wellesley Income, but it's indexed, it's cheaper, and it has more international.
I agree with this. I my self would own two funds. Conservative growth and moderate growth at 50% each.
That would put you at 50/50 I believe. Wellesley (portfolio 2) outperformed Conservative growth and moderate growth at 50% each (portfolio 1) since 1995, with almost half the volatility. Usual disclaimer about past performance.

Portfolio 1 $10,000 $71,704 7.69% 8.22% 26.14% -23.01% -33.00%
Portfolio 2 $10,000 $88,528 8.55% 6.19% 28.91% -9.84% -18.82%
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Re: How do you think Vanguard Wellesley Income Fund will do over the next ten years?

Post by McQ »

nisiprius wrote: Wed Aug 11, 2021 8:00 pm In 473 overlapping 120-month periods from 9/1970 to 12/2019

Wellesley did not lose money ever, 0 times in 473.
Wellesley outperformed intermediate-term government bonds 463/473 = 98% of the time.
Wellesley beat inflation 445/473 = 94% of the time.
But large-company stocks, S&P 500 and predecessor indexes, beat Wellesley 327/473 = 69.1% of the time.

Based on the past, I think that for planning purposes it is reasonable to think that
a) Wellesley will make money
b) Wellesley will beat inflation
c) Wellesley will very likely beat intermediate-term bonds, such as Total Bonds
d) Wellesley will probably underperform 100% stocks.

I don't think you can pin it down much better than that.
I also would like to compliment Nisiprius on the analysis. And more: I want to unpack why his approach provides an excellent role model for the many historical analyses offered up in BH threads.

Note first that N uses the complete fund record, and second, that ten-year rolls are computed off that record. Benefit: the analysis cannot be accused of cherry-picking.

Next, note the metric: count of wins across hundreds of rolls. Past is still not prologue, but here there are 473 ‘pasts’, allowing odds to be computed. The rolls analysis generates a probability that future Wellesley returns will be as favorable as found before.

I find this approach much more powerful than a simple cross-check of CAGR for Wellesley versus some benchmark or comparison fund.

Next, one other comparison might be undertaken, if anyone is interested (I assume N used the Simba spreadsheet open to all). Wellesley is a balanced fund with some flexibility around the target 35%/65% target allocation. A corridor might be marked out by calculating returns for a 30/70 and a 40/60 blend of a large cap stock index fund and an intermediate bond index fund, and then repeating the count of rolls analysis to see how many times Wellesley wins against each of these balanced alternatives.

The results against the intermediate bond index alone are not particularly informative: if there is a stable equity premium, most balanced funds would be expected to beat most 100% bond indexes most of the time.

But the results of the comparison to a cost-free S&P stock index also do not provide a fair test of Wellesley performance. People forget that single digit basis point expenses are a recent phenomenon. If I recall, early expense ratios on the Vanguard S&P 500 index fund were north of 50 bp. That’s the comparison that needs to be made: Wellesley, with its actual expenses, against index *funds*, with the expenses those funds actually had, down through the years.

And there’s the rub: Wellesley is older than any of the index funds, certainly, older than any intermediate bond index fund that includes corporate bonds, as Wellesley does. And if we dial the comparison forward to the point where there *are* stock and bond index funds, we lose valuable information, i.e., performance across the great bear market of the early 1970s.

I suppose we could extrapolate the actual Vanguard stock index fund expense ratio back six years to 1970, and model the bond fund expenses proportionately on the stock index fund expenses from 1986 back to 1973, using the Barclay’s aggregate bond index as the asset before 1986; but the last three years would probably force us back to the 5-year Treasury again. And now things may be getting too hypothetical to convince anyone not already convinced.

Thoughts? Other ways to improve on Nisiprius’ excellent beginning? I’ll explain in a later post why I think it is important for BH to grapple with the performance of Wellesley and its sibling fund Wellington (itself the subject of another ongoing thread here at BH).
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