Wellesley Gives TSM/TBM a Smackdown

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

Even in the midst of this bear market, Wellesley Income Fund continues to grind out an impressive outperformance compared to a similar TSM/TBM portfolio, going back to 1993.

Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio
Portfolio 1 $100,000 $889,667 7.69% 6.31% 28.91% -10.03% -18.82% 0.86
Portfolio 2 $100,000 $704,182 6.84% 6.21% 24.87% -14.63% -18.18% 0.74


The same goes for S&P 500/TBM, going back to 1987.

Of course the thread subject is tongue in cheek, but any thoughts on the reasons for this consistent outperformance of Wellesley?
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

Re: Wellesley Gives TSM/TBM a Smackdown

Post by willthrill81 »

Yes, Wellesley's value tilt has helped this year. Through June, it was down -10%, whereas a 60/40 AA of TSM/TBM was down -14.3%.
The Sensible Steward
jebmke
Posts: 25475
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Wellesley Gives TSM/TBM a Smackdown

Post by jebmke »

Yep; value index is down ~9% vs Total Stock -20
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

willthrill81 wrote: Tue Jul 05, 2022 6:35 pm Yes, Wellesley's value tilt has helped this year. Through June, it was down -10%, whereas a 60/40 AA of TSM/TBM was down -14.3%.
Yes and the outperformance over a 35-year period compared to a two- or three-fund portfolio is very impressive.
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
mikejuss
Posts: 2833
Joined: Tue Jun 23, 2020 1:36 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by mikejuss »

Yes--but Wellesley probably isn't appropriate for investors who are in the accumulation phase and can take more risk.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
jebmke
Posts: 25475
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Wellesley Gives TSM/TBM a Smackdown

Post by jebmke »

Charles Joseph wrote: Tue Jul 05, 2022 7:52 pm
willthrill81 wrote: Tue Jul 05, 2022 6:35 pm Yes, Wellesley's value tilt has helped this year. Through June, it was down -10%, whereas a 60/40 AA of TSM/TBM was down -14.3%.
Yes and the outperformance over a 35-year period compared to a two- or three-fund portfolio is very impressive.
It is a well managed fund; bond duration a bit long for my blood and the yield is too high for me at 3% -- I like to keep it down under 2% overall.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
jebmke
Posts: 25475
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Wellesley Gives TSM/TBM a Smackdown

Post by jebmke »

mikejuss wrote: Tue Jul 05, 2022 7:58 pm Yes--but Wellesley probably isn't appropriate for investors who are in the accumulation phase and can take more risk.
and has placement issues for taxable/advantaged for people who need to keep equity all in taxable. It is not a great fund for taxable accounts.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

willthrill81 wrote: Tue Jul 05, 2022 6:35 pm Yes, Wellesley's value tilt has helped this year. Through June, it was down -10%, whereas a 60/40 AA of TSM/TBM was down -14.3%.
It may also simply be the corporate bonds that has helped longterm performance, which of course entail more risk.
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
jebmke
Posts: 25475
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Wellesley Gives TSM/TBM a Smackdown

Post by jebmke »

Charles Joseph wrote: Wed Jul 06, 2022 1:44 pm
willthrill81 wrote: Tue Jul 05, 2022 6:35 pm Yes, Wellesley's value tilt has helped this year. Through June, it was down -10%, whereas a 60/40 AA of TSM/TBM was down -14.3%.
It may also simply be the corporate bonds that has helped longterm performance, which of course entail more risk.
I seem to recall that the duration of the bonds in Wellesley was significantly higher than TBM; has been a while since I looked at the portfolio of either.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

jebmke wrote: Wed Jul 06, 2022 1:56 pm
Charles Joseph wrote: Wed Jul 06, 2022 1:44 pm
willthrill81 wrote: Tue Jul 05, 2022 6:35 pm Yes, Wellesley's value tilt has helped this year. Through June, it was down -10%, whereas a 60/40 AA of TSM/TBM was down -14.3%.
It may also simply be the corporate bonds that has helped longterm performance, which of course entail more risk.
I seem to recall that the duration of the bonds in Wellesley was significantly higher than TBM; has been a while since I looked at the portfolio of either.
Yes, it used to be over eight years. In an interview I heard last year, the fund managers said they would shorten duration if interest rates were to rise. I just checked and since then, the duration has dropped to 7.4 years. So you're right, still higher than TBM.
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
Jerry476
Posts: 52
Joined: Sun Jul 31, 2016 3:29 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Jerry476 »

Yes, Wellesley is a fine fund. You know, there aren’t as many Bogleheads on this site as one might think. Oh well, each to his own, I guess. Perhaps, we should become Bogleheadsandothers.
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

Jerry476 wrote: Wed Jul 06, 2022 2:31 pm Yes, Wellesley is a fine fund. You know, there aren’t as many Bogleheads on this site as one might think. Oh well, each to his own, I guess. Perhaps, we should become Bogleheadsandothers.
I see that. It appears as though it's a big tent here. :sharebeer
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
garlandwhizzer
Posts: 3565
Joined: Fri Aug 06, 2010 3:42 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by garlandwhizzer »

Wellesley Income Fund has a long track record of excellent risk adjusted returns for conservative income oriented investors. It is expected to weather equity bear markets better than TSM and perhaps better than TSM/TBM. It is managed by Wellington Management which also manages Vanguard's Wellington Fund. Both have produced decades of excellent risk adjusted returns.

True investing skill is IMO very rare among individuals even more rare among financial firms, but Wellington Management has succeeded in outperforming in a risk adjusted manner comparable benchmarks for so long that it is unlikely to be just luck. They succeed not by using models that computers spit out like traditional balanced index funds and factor based funds but instead with in depth analysis of each specific holding done by knowledgeable and experienced professionals. That is precisely what investing skill is and it doesn't come from a computer mathematical analysis of reported numbers like PE, PB, PCF. Those reported numbers are subject to accounting practice manipulation in various degrees to make the numbers look better and raise stock prices. Secondly, those numbers are always backward looking rather than anticipating their future. Thirdly, those numbers are carefully scrutinized by all fund managers, private equity, and hedge funds. All have that same reported information. How likely is it that demonstrable bargains based on these numbers in risk adjusted terms will not quickly be arbitraged away? Higher returns, less risk is precisely what they're all looking for. If it's in the numbers, it doesn't last long.

For conservative income oriented investors who are looking at balanced funds, Wellington Income or Wellesley (which holds a higher percentage of equity relative to bonds) are IMO excellent choices. They are not sexy but they are as solid and reliable as it gets for that type of investor.

Garland Whizzer
User avatar
burritoLover
Posts: 4097
Joined: Sun Jul 05, 2020 12:13 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by burritoLover »

TSM/TBM is not a comparable benchmark. Wellesley takes on more risk on the equity and bond sides. BND has nearly the same percentage in treasuries as Wellesley has in corporates.
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

burritoLover wrote: Wed Jul 06, 2022 3:19 pm TSM/TBM is not a comparable benchmark. Wellesley takes on more risk on the equity and bond sides. BND has nearly the same percentage in treasuries as Wellesley has in corporates.
TSM/TBM is riskier.
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

garlandwhizzer wrote: Wed Jul 06, 2022 3:06 pm Wellesley Income Fund has a long track record of excellent risk adjusted returns for conservative income oriented investors. It is expected to weather equity bear markets better than TSM and perhaps better than TSM/TBM. It is managed by Wellington Management which also manages Vanguard's Wellington Fund. Both have produced decades of excellent risk adjusted returns.

True investing skill is IMO very rare among individuals even more rare among financial firms, but Wellington Management has succeeded in outperforming in a risk adjusted manner comparable benchmarks for so long that it is unlikely to be just luck. They succeed not by using models that computers spit out like traditional balanced index funds and factor based funds but instead with in depth analysis of each specific holding done by knowledgeable and experienced professionals. That is precisely what investing skill is and it doesn't come from a computer mathematical analysis of reported numbers like PE, PB, PCF. Those reported numbers are subject to accounting practice manipulation in various degrees to make the numbers look better and raise stock prices. Secondly, those numbers are always backward looking rather than anticipating their future. Thirdly, those numbers are carefully scrutinized by all fund managers, private equity, and hedge funds. All have that same reported information. How likely is it that demonstrable bargains based on these numbers in risk adjusted terms will not quickly be arbitraged away? Higher returns, less risk is precisely what they're all looking for. If it's in the numbers, it doesn't last long.

For conservative income oriented investors who are looking at balanced funds, Wellington Income or Wellesley (which holds a higher percentage of equity relative to bonds) are IMO excellent choices. They are not sexy but they are as solid and reliable as it gets for that type of investor.

Garland Whizzer
Great summary and analysis of the W's and Wellington Management. Very helpful. Thanks Garland Whizzer.
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
LXEX55
Posts: 93
Joined: Fri Feb 12, 2016 8:12 am

Re: Wellesley Gives TSM/TBM a Smackdown

Post by LXEX55 »

My entire IRA is now Wellesley and Wellington, a tad more in Wellesely. I sleep easy at night. Will never get a huge bump but won't get killed either. You pays your money and takes your choice.
Da5id
Posts: 5066
Joined: Fri Feb 26, 2016 7:20 am

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Da5id »

Charles Joseph wrote: Wed Jul 06, 2022 3:31 pm
burritoLover wrote: Wed Jul 06, 2022 3:19 pm TSM/TBM is not a comparable benchmark. Wellesley takes on more risk on the equity and bond sides. BND has nearly the same percentage in treasuries as Wellesley has in corporates.
TSM/TBM is riskier.
By what definition of risk (I'd ask both of you the same question). Per https://www.portfoliovisualizer.com/bac ... on3_2=61.5 Wellesley has a *very* slightly higher standard deviation over its lifetime, and a *very* slightly bigger max drawdown. But really basically a tie in terms of those risk measures. And Wellesley has had higher historic returns. Clearly Wellesley has done well in the past.

The part I don't know about, as with any actively managed fund that has had a long successful run, is whether it will continue to be more successful than a comparable index fund (or here composite funds) in the future.
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

Da5id wrote: Wed Jul 06, 2022 4:57 pm
Charles Joseph wrote: Wed Jul 06, 2022 3:31 pm
burritoLover wrote: Wed Jul 06, 2022 3:19 pm TSM/TBM is not a comparable benchmark. Wellesley takes on more risk on the equity and bond sides. BND has nearly the same percentage in treasuries as Wellesley has in corporates.
TSM/TBM is riskier.
By what definition of risk (I'd ask both of you the same question). Per https://www.portfoliovisualizer.com/bac ... on3_2=61.5 Wellesley has a *very* slightly higher standard deviation over its lifetime, and a *very* slightly bigger max drawdown. But really basically a tie in terms of those risk measures. And Wellesley has had higher historic returns. Clearly Wellesley has done well in the past.

The part I don't know about, as with any actively managed fund that has had a long successful run, is whether it will continue to be more successful than a comparable index fund (or here composite funds) in the future.
Wellesley has had a slighter higher risk adjusted return. Usual disclaimers about past performance.

I give burritoLover the last word. Going out for some Tex Mex.
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
Da5id
Posts: 5066
Joined: Fri Feb 26, 2016 7:20 am

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Da5id »

Charles Joseph wrote: Wed Jul 06, 2022 5:08 pm
Da5id wrote: Wed Jul 06, 2022 4:57 pm
Charles Joseph wrote: Wed Jul 06, 2022 3:31 pm
burritoLover wrote: Wed Jul 06, 2022 3:19 pm TSM/TBM is not a comparable benchmark. Wellesley takes on more risk on the equity and bond sides. BND has nearly the same percentage in treasuries as Wellesley has in corporates.
TSM/TBM is riskier.
By what definition of risk (I'd ask both of you the same question). Per https://www.portfoliovisualizer.com/bac ... on3_2=61.5 Wellesley has a *very* slightly higher standard deviation over its lifetime, and a *very* slightly bigger max drawdown. But really basically a tie in terms of those risk measures. And Wellesley has had higher historic returns. Clearly Wellesley has done well in the past.

The part I don't know about, as with any actively managed fund that has had a long successful run, is whether it will continue to be more successful than a comparable index fund (or here composite funds) in the future.
Wellesley has had a slighter higher risk adjusted return. Usual disclaimers about past performance.

I give burritoLover the last word. Going out for some Tex Mex.
Higher risk adjusted return doesn't mean "not riskier". Just by some thoughts "better". You said "TSM/TBM is riskier", I guess you didn't mean that?
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

Da5id wrote: Wed Jul 06, 2022 5:10 pm
Charles Joseph wrote: Wed Jul 06, 2022 5:08 pm
Da5id wrote: Wed Jul 06, 2022 4:57 pm
Charles Joseph wrote: Wed Jul 06, 2022 3:31 pm
burritoLover wrote: Wed Jul 06, 2022 3:19 pm TSM/TBM is not a comparable benchmark. Wellesley takes on more risk on the equity and bond sides. BND has nearly the same percentage in treasuries as Wellesley has in corporates.
TSM/TBM is riskier.
By what definition of risk (I'd ask both of you the same question). Per https://www.portfoliovisualizer.com/bac ... on3_2=61.5 Wellesley has a *very* slightly higher standard deviation over its lifetime, and a *very* slightly bigger max drawdown. But really basically a tie in terms of those risk measures. And Wellesley has had higher historic returns. Clearly Wellesley has done well in the past.

The part I don't know about, as with any actively managed fund that has had a long successful run, is whether it will continue to be more successful than a comparable index fund (or here composite funds) in the future.
Wellesley has had a slighter higher risk adjusted return. Usual disclaimers about past performance.

I give burritoLover the last word. Going out for some Tex Mex.
Higher risk adjusted return doesn't mean "not riskier". Just by some thoughts "better". You said "TSM/TBM is riskier", I guess you didn't mean that?
TSM/TBM took on more risk to earn its returns than did Wellesley. Therefore it is perfectly reasonable to say it was riskier.

Edit: it's not perfectly reasonable to say it was riskier. It's correct to say so.
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
Da5id
Posts: 5066
Joined: Fri Feb 26, 2016 7:20 am

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Da5id »

Charles Joseph wrote: Wed Jul 06, 2022 5:17 pm
Da5id wrote: Wed Jul 06, 2022 5:10 pm
Charles Joseph wrote: Wed Jul 06, 2022 5:08 pm
Da5id wrote: Wed Jul 06, 2022 4:57 pm
Charles Joseph wrote: Wed Jul 06, 2022 3:31 pm

TSM/TBM is riskier.
By what definition of risk (I'd ask both of you the same question). Per https://www.portfoliovisualizer.com/bac ... on3_2=61.5 Wellesley has a *very* slightly higher standard deviation over its lifetime, and a *very* slightly bigger max drawdown. But really basically a tie in terms of those risk measures. And Wellesley has had higher historic returns. Clearly Wellesley has done well in the past.

The part I don't know about, as with any actively managed fund that has had a long successful run, is whether it will continue to be more successful than a comparable index fund (or here composite funds) in the future.
Wellesley has had a slighter higher risk adjusted return. Usual disclaimers about past performance.

I give burritoLover the last word. Going out for some Tex Mex.
Higher risk adjusted return doesn't mean "not riskier". Just by some thoughts "better". You said "TSM/TBM is riskier", I guess you didn't mean that?
TSM/TBM took on more risk to earn its returns than did Wellesley. Therefore it is perfectly reasonable to say it was riskier.
Short term treasuries are riskier than stocks by this measure. Not how people often mean risk when comparing allocations.
User avatar
whodidntante
Posts: 13114
Joined: Thu Jan 21, 2016 10:11 pm
Location: outside the echo chamber

Re: Wellesley Gives TSM/TBM a Smackdown

Post by whodidntante »

The value factor has had positive returns lately, while the market factor has not. You do not capture the value factor if you invest in TSM funds.
User avatar
burritoLover
Posts: 4097
Joined: Sun Jul 05, 2020 12:13 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by burritoLover »

It is a common active management tactic to take on much more credit and/or duration risk than the benchmark- you have to equalize for these factors before you make claims that outperformance is due to alpha. It seems there’s some mythical qualities that are spouted by many about Wellesley - as if outperformance is some permanent feature of the fund that is not subject to manager risk in the future.
Logan Roy
Posts: 1838
Joined: Sun May 29, 2022 10:15 am

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Logan Roy »

Charles Joseph wrote: Tue Jul 05, 2022 6:22 pm Even in the midst of this bear market, Wellesley Income Fund continues to grind out an impressive outperformance compared to a similar TSM/TBM portfolio, going back to 1993.

Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio
Portfolio 1 $100,000 $889,667 7.69% 6.31% 28.91% -10.03% -18.82% 0.86
Portfolio 2 $100,000 $704,182 6.84% 6.21% 24.87% -14.63% -18.18% 0.74


The same goes for S&P 500/TBM, going back to 1987.

Of course the thread subject is tongue in cheek, but any thoughts on the reasons for this consistent outperformance of Wellesley?
Close?

Image
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

Re: Wellesley Gives TSM/TBM a Smackdown

Post by willthrill81 »

Logan Roy wrote: Wed Jul 06, 2022 6:01 pm
Charles Joseph wrote: Tue Jul 05, 2022 6:22 pm Even in the midst of this bear market, Wellesley Income Fund continues to grind out an impressive outperformance compared to a similar TSM/TBM portfolio, going back to 1993.

Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio
Portfolio 1 $100,000 $889,667 7.69% 6.31% 28.91% -10.03% -18.82% 0.86
Portfolio 2 $100,000 $704,182 6.84% 6.21% 24.87% -14.63% -18.18% 0.74


The same goes for S&P 500/TBM, going back to 1987.

Of course the thread subject is tongue in cheek, but any thoughts on the reasons for this consistent outperformance of Wellesley?
Close?

Image
Nope. Wellesley only has 35% stock exposure, not 50%. Change that to 35/40/25, and you'll see that Wellesley was ahead by about .45% annualized.
The Sensible Steward
Logan Roy
Posts: 1838
Joined: Sun May 29, 2022 10:15 am

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Logan Roy »

willthrill81 wrote: Wed Jul 06, 2022 6:04 pm Nope. Wellesley only has 35% stock exposure, not 50%. Change that to 35/40/25, and you'll see that Wellesley was ahead by about .45% annualized.
I'm reading that the remit is 30-50% equity, so I'd assumed they'd changed over time, and that bonds have included perpetuals and convertibles that may behave a bit more like equities. But looking at their portfolio today, I like the focus on quality value. Unlike TSM and TBM, there's really nothing speculative in it – I think that's been a good approach.
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

Re: Wellesley Gives TSM/TBM a Smackdown

Post by willthrill81 »

Logan Roy wrote: Wed Jul 06, 2022 6:21 pm
willthrill81 wrote: Wed Jul 06, 2022 6:04 pm Nope. Wellesley only has 35% stock exposure, not 50%. Change that to 35/40/25, and you'll see that Wellesley was ahead by about .45% annualized.
I'm reading that the remit is 30-50% equity, so I'd assumed they'd changed over time, and that bonds have included perpetuals and convertibles that may behave a bit more like equities. But looking at their portfolio today, I like the focus on quality value. Unlike TSM and TBM, there's really nothing speculative in it – I think that's been a good approach.
Morningstar shows Wellesley at 38% equities right now. I think that they've stayed really close to 35% for a long time.
The Sensible Steward
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

burritoLover wrote: Wed Jul 06, 2022 5:49 pm It seems there’s some mythical qualities that are spouted by many about Wellesley...
I haven't seen any "mythical qualities that are spouted by many about Wellesley" on here.

Could you cite them and share them in the thread?

Thanks.
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
AlwaysLearningMore
Posts: 1934
Joined: Sun Jul 26, 2020 2:29 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by AlwaysLearningMore »

burritoLover wrote: Wed Jul 06, 2022 5:49 pm ... It seems there’s some mythical qualities that are spouted by many about Wellesley....

Definition of mythical https://www.merriam-webster.com/dictionary/mythical

1 : based on or described in a myth especially as contrasted with history
2 usually mythical : existing only in the imagination : fictitious, imaginary


Can you please explain how reporting a fund's performance contrasts with history? Or its returns are fictitious or imaginary?
Retirement is best when you have a lot to live on, and a lot to live for. * None of what I post is investment advice.* | FIRE'd July 2023
User avatar
burritoLover
Posts: 4097
Joined: Sun Jul 05, 2020 12:13 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by burritoLover »

AlwaysLearningMore wrote: Wed Jul 06, 2022 7:12 pm
burritoLover wrote: Wed Jul 06, 2022 5:49 pm ... It seems there’s some mythical qualities that are spouted by many about Wellesley....

Definition of mythical https://www.merriam-webster.com/dictionary/mythical

1 : based on or described in a myth especially as contrasted with history
2 usually mythical : existing only in the imagination : fictitious, imaginary


Can you please explain how reporting a fund's performance contrasts with history? Or its returns are fictitious or imaginary?
“Myth
a widely held but false belief or idea.”

It gets the active management pass here as if it is some special alpha generating fund for all time. Maybe this thread isn’t as overt in these claims as others but it has hints of the same overtones.
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

burritoLover wrote: Wed Jul 06, 2022 7:23 pm Maybe this thread isn’t as overt in these claims as others but it has hints of the same overtones.
Which threads? Which comments?

Where are the "mythical qualities that are spouted by many about Wellesley" on here?
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
Shrevetown
Posts: 25
Joined: Sat Sep 04, 2021 9:05 am

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Shrevetown »

Wellesley and its 65/35 sibling Wellington are superb actively managed funds and have been for decades. The only reason I’m in Vanguard’s balanced index fund (VBIAX) instead of Wellington is b/c of management risk and to a much lesser extent, a slightly lower expense ratio. But the fact remains that Wellesley and Wellington continue to best similarly allocated index fund competitors. Pretty darn impressive.
User avatar
burritoLover
Posts: 4097
Joined: Sun Jul 05, 2020 12:13 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by burritoLover »

Charles Joseph wrote: Wed Jul 06, 2022 7:31 pm
burritoLover wrote: Wed Jul 06, 2022 7:23 pm Maybe this thread isn’t as overt in these claims as others but it has hints of the same overtones.
Which threads? Which comments?

Where are the "mythical qualities that are spouted by many about Wellesley" on here?
viewtopic.php?t=209617
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

burritoLover wrote: Wed Jul 06, 2022 7:47 pm
Charles Joseph wrote: Wed Jul 06, 2022 7:31 pm
burritoLover wrote: Wed Jul 06, 2022 7:23 pm Maybe this thread isn’t as overt in these claims as others but it has hints of the same overtones.
Which threads? Which comments?

Where are the "mythical qualities that are spouted by many about Wellesley" on here?
viewtopic.php?t=209617
I see no mythical attributes applied to Wellesley on that thread. Please support your claim about "mythical qualities that are spouted by many about Wellesley."

Please share the comments you are referencing.

Thanks.
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

Re: Wellesley Gives TSM/TBM a Smackdown

Post by willthrill81 »

Charles Joseph wrote: Wed Jul 06, 2022 7:50 pm
burritoLover wrote: Wed Jul 06, 2022 7:47 pm
Charles Joseph wrote: Wed Jul 06, 2022 7:31 pm
burritoLover wrote: Wed Jul 06, 2022 7:23 pm Maybe this thread isn’t as overt in these claims as others but it has hints of the same overtones.
Which threads? Which comments?

Where are the "mythical qualities that are spouted by many about Wellesley" on here?
viewtopic.php?t=209617
I see no mythical attributes applied to Wellesley on that thread. Please support your claim about "mythical qualities that are spouted by many about Wellesley."

Please share the comments you are referencing.

Thanks.
It seems that there may be confusion about the terms 'incredible' and 'mythical'.
The Sensible Steward
User avatar
burritoLover
Posts: 4097
Joined: Sun Jul 05, 2020 12:13 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by burritoLover »

Charles Joseph wrote: Wed Jul 06, 2022 7:50 pm
burritoLover wrote: Wed Jul 06, 2022 7:47 pm
Charles Joseph wrote: Wed Jul 06, 2022 7:31 pm
burritoLover wrote: Wed Jul 06, 2022 7:23 pm Maybe this thread isn’t as overt in these claims as others but it has hints of the same overtones.
Which threads? Which comments?

Where are the "mythical qualities that are spouted by many about Wellesley" on here?
viewtopic.php?t=209617
I see no mythical attributes applied to Wellesley on that thread. Please support your claim about "mythical qualities that are spouted by many about Wellesley."

Please share the comments you are referencing.

Thanks.
In the current thread, I’d say calling a fund of 60-ish value stocks and a bond allocation with a boatload of corporates as less risky than total stock/bond is pretty mythical as far as funds go. Or maybe that’s just “incredible”.
Mr. Buzzkill
Posts: 305
Joined: Mon Mar 28, 2022 8:23 am

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Mr. Buzzkill »

Someone correct me if I’m misinformed. But I’m under the impression that the managers at Wellesley have the freedom to pick individual stocks and bonds at any point in time eg. With respect to new or expected changes in interest rates. If I had studied what they did in school and learned on the job what they learned, I bet I could do about as well.

Indexed portfolio holdings have no such freedom to move in and out of individual securities. That active managers might appear to exhibit slight skill over long period of time could explain much of the performance difference. But there is no guarantee it will continue for Wellesley like it has.

But I prefer a fixed allocation of index funds that I control and select, that backrests long term performance just close enough to Wellesley for my purposes with slightly slower drawdown risk and is close in standard deviation of returns. Yet I also avoid manager risk and style drift risk.

Some arbitrary periods, Wellesley does better. Sometimes not.
Last edited by Mr. Buzzkill on Wed Jul 06, 2022 8:43 pm, edited 1 time in total.
A strategy that works only in bull markets isn’t much of a strategy. Anyway, four dollars a pound.
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

Re: Wellesley Gives TSM/TBM a Smackdown

Post by willthrill81 »

burritoLover wrote: Wed Jul 06, 2022 8:15 pm
Charles Joseph wrote: Wed Jul 06, 2022 7:50 pm
burritoLover wrote: Wed Jul 06, 2022 7:47 pm
Charles Joseph wrote: Wed Jul 06, 2022 7:31 pm
burritoLover wrote: Wed Jul 06, 2022 7:23 pm Maybe this thread isn’t as overt in these claims as others but it has hints of the same overtones.
Which threads? Which comments?

Where are the "mythical qualities that are spouted by many about Wellesley" on here?
viewtopic.php?t=209617
I see no mythical attributes applied to Wellesley on that thread. Please support your claim about "mythical qualities that are spouted by many about Wellesley."

Please share the comments you are referencing.

Thanks.
In the current thread, I’d say calling a fund of 60-ish value stocks and a bond allocation with a boatload of corporates as less risky than total stock/bond is pretty mythical as far as funds go. Or maybe that’s just “incredible”.
It's certainly seems to have been no more risky as a strategy over the last 50+ years.

Contrary to what many believe (not necessarily saying you), it's not necessary to own TSM in order to largely remove idiosyncratic risk.
The Sensible Steward
hoops777
Posts: 4603
Joined: Sun Apr 10, 2011 12:23 pm
Location: Behind the 3 point line

Re: Wellesley Gives TSM/TBM a Smackdown

Post by hoops777 »

Just a thought but just maybe the good people at Wellington are very good at what they do.
They have a system that has worked well for many years and they are sticking to it.
Is it really that hard to believe?
K.I.S.S........so easy to say so difficult to do.
User avatar
burritoLover
Posts: 4097
Joined: Sun Jul 05, 2020 12:13 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by burritoLover »

willthrill81 wrote: Wed Jul 06, 2022 8:25 pm
burritoLover wrote: Wed Jul 06, 2022 8:15 pm
Charles Joseph wrote: Wed Jul 06, 2022 7:50 pm
burritoLover wrote: Wed Jul 06, 2022 7:47 pm
Charles Joseph wrote: Wed Jul 06, 2022 7:31 pm

Which threads? Which comments?

Where are the "mythical qualities that are spouted by many about Wellesley" on here?
viewtopic.php?t=209617
I see no mythical attributes applied to Wellesley on that thread. Please support your claim about "mythical qualities that are spouted by many about Wellesley."

Please share the comments you are referencing.

Thanks.
In the current thread, I’d say calling a fund of 60-ish value stocks and a bond allocation with a boatload of corporates as less risky than total stock/bond is pretty mythical as far as funds go. Or maybe that’s just “incredible”.
It's certainly seems to have been no more risky as a strategy over the last 50+ years.

Contrary to what many believe (not necessarily saying you), it's not necessary to own TSM in order to largely remove idiosyncratic risk.
Generally the consensus is about 100 stocks covering the broad market to mitigate idiosyncratic risk. But we have 60-ish stocks concentrated in dividend payers. It isn’t ARKK but I think we can say the equity side it is riskier than TSM and 60% or whatever corporates on bond side is riskier than roughly the same
% in treasuries in BND.
User avatar
Topic Author
Charles Joseph
Posts: 2394
Joined: Tue Apr 05, 2022 10:49 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Charles Joseph »

burritoLover wrote: Wed Jul 06, 2022 8:15 pm
Charles Joseph wrote: Wed Jul 06, 2022 7:50 pm
burritoLover wrote: Wed Jul 06, 2022 7:47 pm
Charles Joseph wrote: Wed Jul 06, 2022 7:31 pm
burritoLover wrote: Wed Jul 06, 2022 7:23 pm Maybe this thread isn’t as overt in these claims as others but it has hints of the same overtones.
Which threads? Which comments?

Where are the "mythical qualities that are spouted by many about Wellesley" on here?
viewtopic.php?t=209617
I see no mythical attributes applied to Wellesley on that thread. Please support your claim about "mythical qualities that are spouted by many about Wellesley."

Please share the comments you are referencing.

Thanks.
In the current thread, I’d say calling a fund of 60-ish value stocks and a bond allocation with a boatload of corporates as less risky than total stock/bond is pretty mythical as far as funds go. Or maybe that’s just “incredible”.
Okay, so we'll just accept that you can't support your claim about "mythical qualities that are spouted by many about Wellesley" and be done with it.

Thanks.
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

Re: Wellesley Gives TSM/TBM a Smackdown

Post by willthrill81 »

burritoLover wrote: Wed Jul 06, 2022 8:37 pm
willthrill81 wrote: Wed Jul 06, 2022 8:25 pm
burritoLover wrote: Wed Jul 06, 2022 8:15 pm
Charles Joseph wrote: Wed Jul 06, 2022 7:50 pm
burritoLover wrote: Wed Jul 06, 2022 7:47 pm
viewtopic.php?t=209617
I see no mythical attributes applied to Wellesley on that thread. Please support your claim about "mythical qualities that are spouted by many about Wellesley."

Please share the comments you are referencing.

Thanks.
In the current thread, I’d say calling a fund of 60-ish value stocks and a bond allocation with a boatload of corporates as less risky than total stock/bond is pretty mythical as far as funds go. Or maybe that’s just “incredible”.
It's certainly seems to have been no more risky as a strategy over the last 50+ years.

Contrary to what many believe (not necessarily saying you), it's not necessary to own TSM in order to largely remove idiosyncratic risk.
Generally the consensus is about 100 stocks covering the broad market to mitigate idiosyncratic risk. But we have 60-ish stocks concentrated in dividend payers. It isn’t ARKK but I think we can say the equity side it is riskier than TSM and 60% or whatever corporates on bond side is riskier than roughly the same
% in treasuries in BND.
Then why hasn't that risk manifested itself in 50+ years?
The Sensible Steward
hoops777
Posts: 4603
Joined: Sun Apr 10, 2011 12:23 pm
Location: Behind the 3 point line

Re: Wellesley Gives TSM/TBM a Smackdown

Post by hoops777 »

burritoLover wrote: Wed Jul 06, 2022 8:37 pm
willthrill81 wrote: Wed Jul 06, 2022 8:25 pm
burritoLover wrote: Wed Jul 06, 2022 8:15 pm
Charles Joseph wrote: Wed Jul 06, 2022 7:50 pm
burritoLover wrote: Wed Jul 06, 2022 7:47 pm
viewtopic.php?t=209617
I see no mythical attributes applied to Wellesley on that thread. Please support your claim about "mythical qualities that are spouted by many about Wellesley."

Please share the comments you are referencing.

Thanks.
In the current thread, I’d say calling a fund of 60-ish value stocks and a bond allocation with a boatload of corporates as less risky than total stock/bond is pretty mythical as far as funds go. Or maybe that’s just “incredible”.
It's certainly seems to have been no more risky as a strategy over the last 50+ years.

Contrary to what many believe (not necessarily saying you), it's not necessary to own TSM in order to largely remove idiosyncratic risk.
Generally the consensus is about 100 stocks covering the broad market to mitigate idiosyncratic risk. But we have 60-ish stocks concentrated in dividend payers. It isn’t ARKK but I think we can say the equity side it is riskier than TSM and 60% or whatever corporates on bond side is riskier than roughly the same
% in treasuries in BND.
Sometimes you have to accept that maybe Wellington knows something you don’t and there is more than one way to be successful with all due respect.
K.I.S.S........so easy to say so difficult to do.
Da5id
Posts: 5066
Joined: Fri Feb 26, 2016 7:20 am

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Da5id »

burritoLover wrote: Wed Jul 06, 2022 8:37 pm
willthrill81 wrote: Wed Jul 06, 2022 8:25 pm
burritoLover wrote: Wed Jul 06, 2022 8:15 pm
Charles Joseph wrote: Wed Jul 06, 2022 7:50 pm
burritoLover wrote: Wed Jul 06, 2022 7:47 pm
viewtopic.php?t=209617
I see no mythical attributes applied to Wellesley on that thread. Please support your claim about "mythical qualities that are spouted by many about Wellesley."

Please share the comments you are referencing.

Thanks.
In the current thread, I’d say calling a fund of 60-ish value stocks and a bond allocation with a boatload of corporates as less risky than total stock/bond is pretty mythical as far as funds go. Or maybe that’s just “incredible”.
It's certainly seems to have been no more risky as a strategy over the last 50+ years.

Contrary to what many believe (not necessarily saying you), it's not necessary to own TSM in order to largely remove idiosyncratic risk.
Generally the consensus is about 100 stocks covering the broad market to mitigate idiosyncratic risk. But we have 60-ish stocks concentrated in dividend payers. It isn’t ARKK but I think we can say the equity side it is riskier than TSM and 60% or whatever corporates on bond side is riskier than roughly the same
% in treasuries in BND.
In its long history (which includes many difficult times) Wellesley hasn't been particularly risky in terms of standard deviation and max drawdown compared to a comparable TSM+BND holding (I posted a link above). Your definition of risk seems rather ad hoc and based on your opinion. Maybe you are right about its future risk, but I don't think you can say it with such confidence.
User avatar
jeffyscott
Posts: 13486
Joined: Tue Feb 27, 2007 8:12 am

Re: Wellesley Gives TSM/TBM a Smackdown

Post by jeffyscott »

Logan Roy wrote: Wed Jul 06, 2022 6:21 pm
willthrill81 wrote: Wed Jul 06, 2022 6:04 pm Nope. Wellesley only has 35% stock exposure, not 50%. Change that to 35/40/25, and you'll see that Wellesley was ahead by about .45% annualized.
I'm reading that the remit is 30-50% equity, so I'd assumed they'd changed over time, and that bonds have included perpetuals and convertibles that may behave a bit more like equities. But looking at their portfolio today, I like the focus on quality value. Unlike TSM and TBM, there's really nothing speculative in it – I think that's been a good approach.
According to the prospectus:

Principal Investment Strategies
The Fund invests approximately 60% to 65% of its assets in investment-grade fixed income securities...
The remaining 35% to 40% of Fund assets are invested in common stocks...


So I'd treat it as 37.5% equity. But the fund has always used 65% bonds and 35% stocks as it's benchmark, according to Vanguard's performance comparison footnotes.
User avatar
dual
Posts: 1383
Joined: Mon Feb 26, 2007 6:02 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by dual »

Burrito:
Generally the consensus is about 100 stocks covering the broad market to mitigate idiosyncratic risk. But we have 60-ish stocks concentrated in dividend payers.
Because broad market Indexes are capitalization weighted, their performance is determined by far fewer than 100 stocks. For example, in 2021, the 5 faang stocks represented 23% of the Standard & Poor’s 500 capitalization.
Da5id
Posts: 5066
Joined: Fri Feb 26, 2016 7:20 am

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Da5id »

dual wrote: Wed Jul 06, 2022 10:57 pm Burrito:
Generally the consensus is about 100 stocks covering the broad market to mitigate idiosyncratic risk. But we have 60-ish stocks concentrated in dividend payers.
Because broad market Indexes are capitalization weighted, their performance is determined by far fewer than 100 stocks. For example, in 2021, the 5 faang stocks represented 23% of the Standard & Poor’s 500 capitalization.
But the discussion was on risk. What are you now arguing about performance?
User avatar
dual
Posts: 1383
Joined: Mon Feb 26, 2007 6:02 pm

Re: Wellesley Gives TSM/TBM a Smackdown

Post by dual »

Da5id wrote: Wed Jul 06, 2022 11:22 pm
dual wrote: Wed Jul 06, 2022 10:57 pm Burrito:
Generally the consensus is about 100 stocks covering the broad market to mitigate idiosyncratic risk. But we have 60-ish stocks concentrated in dividend payers.
Because broad market Indexes are capitalization weighted, their performance is determined by far fewer than 100 stocks. For example, in 2021, the 5 faang stocks represented 23% of the Standard & Poor’s 500 capitalization.
But the discussion was on risk. What are you now arguing about performance?
How do you define risk? If you define it by standard deviation for example, that is the standard deviation of performance by my definition of performance.
Da5id
Posts: 5066
Joined: Fri Feb 26, 2016 7:20 am

Re: Wellesley Gives TSM/TBM a Smackdown

Post by Da5id »

dual wrote: Wed Jul 06, 2022 11:25 pm
Da5id wrote: Wed Jul 06, 2022 11:22 pm
dual wrote: Wed Jul 06, 2022 10:57 pm Burrito:
Generally the consensus is about 100 stocks covering the broad market to mitigate idiosyncratic risk. But we have 60-ish stocks concentrated in dividend payers.
Because broad market Indexes are capitalization weighted, their performance is determined by far fewer than 100 stocks. For example, in 2021, the 5 faang stocks represented 23% of the Standard & Poor’s 500 capitalization.
But the discussion was on risk. What are you now arguing about performance?
How do you define risk? If you define it by standard deviation for example, that is the standard deviation of performance by my definition of performance.
I posted a link PV link up thread that showed that Wellesley has comparable risk to a similar holding of VTI and BND. Where risk is standard deviation as well as max drawdown. I took to you to be instead discussing performance (% return, or CAGR).
Post Reply