What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

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Charles Joseph
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Charles Joseph »

celia wrote: Sat May 21, 2022 1:13 am
Samuel Glover wrote: Tue May 17, 2022 2:52 pm Could I reasonably go higher? I'll be rolling over funds to my Traditional IRA and would love to keep it all in one place, but that would jack up the percentage even more.
OP, what does this mean? It doesn’t make sense to me. It’s like saying “I would rollover but my Asset Allocation would change.”

You have the same asset allocation or percentage of managed funds in your portfolio regardless if they sit in 1 or 2 or 3 or “n” accounts or at multiple custodians.

Maybe you meant something else?
Yes you're right that wasn't clear. What I meant was that if I roll over my 403b and put it into Wellesley, it would increase my percentage of Wellesley as a portion of my total portfolio.

Thanks for helping me clarify!
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Bama12 »

Are the bonds in Wellesley and Wellington the same?
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by gmaynardkrebs »

RubyTuesday wrote: Tue May 17, 2022 7:12 pm
Taylor Larimore wrote: Tue May 17, 2022 6:29 pm Bogleheads:

If I knew of an active fund with the low-cost and diversification of an index fund--I would be happy to consider it -- but I don't.

Best wishes
Taylor
Jack Bogle's Words of Wisdom(2005): "Of the 355 equity funds in 1970, fully 233 of those funds have gone out of business. Only 24 outpaced the market by more than 1% a year. These are terrible odds."
Taylor,

Many of Vanguard’s relatively low cost fixed income funds are actively managed, for example Vanguard Inflation-Protected Securities Fund Admiral Shares (VAIPX). It has an expense ratio if 0.10%.
SCHP for me.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by vineviz »

Bama12 wrote: Sat May 21, 2022 12:18 pm Are the bonds in Wellesley and Wellington the same?
More or less.

The bond portion of both funds resembles, in performance and overall characteristics at least, the iShares Aaa - A Rated Corporate Bond ETF (QLTA).

Wellington's equities resemble a 60% allocation to Vanguard Total Stock Market ETF (VTI).

Wellesley's equities resemble a 40% allocation to Vanguard High Dividend Yield ETF (VYM).
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by cinghiale »

vineviz wrote: Sat May 21, 2022 3:41 pm
Bama12 wrote: Sat May 21, 2022 12:18 pm Are the bonds in Wellesley and Wellington the same?
More or less.

The bond portion of both funds resembles, in performance and overall characteristics at least, the iShares Aaa - A Rated Corporate Bond ETF (QLTA).

Wellington's equities resemble a 60% allocation to Vanguard Total Stock Market ETF (VTI).

Wellesley's equities resemble a 40% allocation to Vanguard High Dividend Yield ETF (VYM).
Curious about this. I had thought that Wellesley’s equity component reflected a more value orientation, and could be tracked via the Vanguard Value fund (VTV). Any specifics on how/why the High Dividend Yield provides a better surrogate?
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by cinghiale »

secondopinion wrote: Sat May 21, 2022 2:15 am
cinghiale wrote: Sat May 21, 2022 1:54 am Interesting to not how many replies (thus far) reference Wellesley Income or Wellington.

Wellesley is the cornerstone of my retirement holdings… around 20% of total financial assets (not including real estate values) and 33% of retirement assets. Agree with other posters that Wellesley works much better in a tax protected space.

As I’ve mentioned many time in past threads, Wellesley keeps me honest. It’s not an ideal fund, or the ideal fund, but it allows me to ignore the “dividend strategy noise” and bypass the temptation to buy dividend stocks or ETFs. And, it’s a splendid “sleep at night” fund. It’s down 8.58% so far this year, which is a bit of an “ouch!”, but not nearly as “ouchy” as total stock’s -18.87% or total bond’s -9.27% YTD performance.

Morgan Housel’s excellent The Psychology of Money discusses the difference between being reasonable versus rational when making (and sticking to) investment decisions and plans. He states, “Do not aim to be coldly rational when making investment decisions. Aim to just be pretty reasonable. Reasonable is more realistic and you have a better chance of sticking with it over the long run, which is what matters most when managing money.”

As a number have posters have mentioned in this thread, a managed choice such as Wellesley or Wellington isn’t an awful choice. I would add that it might be a fine choice it it helps one avoid panic, fear, overreaction, and impulse-driven responses to market shocks.
Umm, “reasonable” is better than “rational”? By some definitions, “rational” requires optimization. So if “reasonable” is optimal, then it is “rational”. I am not understanding the point of the author’s quote; the two word essentially the same thing to me in the context I see here.
Good question, though I thought Housel’s context helped interpret his terms. A “reasonable” asset allocation is optimal when it mitigates bad decisions due to fear or panic. Calling something “optimal” needs to factor in human psychology, not just what allocation works best in theory. Housel (in chapter 11) states, “Investing has a social component that’s often ignored when viewed through a strictly financial lens.”

I think this shows up here on the forum from time to time. A 100% stock allocation may be the most rational and optimal allocation for a young person with decades of saving and investing ahead. But if a 2008-2009 plunge occurs, it may not be reasonable, which is to say, maintainable. Too much psychic pain will almost always derail what was, in theory, a sound investment plan.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by HanSolo »

cinghiale wrote: Sun May 22, 2022 2:32 am
vineviz wrote: Sat May 21, 2022 3:41 pm
Bama12 wrote: Sat May 21, 2022 12:18 pm Are the bonds in Wellesley and Wellington the same?
More or less.

The bond portion of both funds resembles, in performance and overall characteristics at least, the iShares Aaa - A Rated Corporate Bond ETF (QLTA).

Wellington's equities resemble a 60% allocation to Vanguard Total Stock Market ETF (VTI).

Wellesley's equities resemble a 40% allocation to Vanguard High Dividend Yield ETF (VYM).
Curious about this. I had thought that Wellesley’s equity component reflected a more value orientation, and could be tracked via the Vanguard Value fund (VTV). Any specifics on how/why the High Dividend Yield provides a better surrogate?
Wellesley has an income orientation (hence the name, Wellesley Income Fund). For example, Berkshire Hathaway may be a great value stock, but you won't find it in Wellesley because BRK pays no dividends.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by bearcub »

Wellington is one of the few active fund families I like. I have 10% of holdings in Wellesley Global. Spouse has 15% in Mairs + Power Balanced Fund. Rest are in Index Bond Funds + cash.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by secondopinion »

cinghiale wrote: Sun May 22, 2022 3:04 am
secondopinion wrote: Sat May 21, 2022 2:15 am
cinghiale wrote: Sat May 21, 2022 1:54 am Interesting to not how many replies (thus far) reference Wellesley Income or Wellington.

Wellesley is the cornerstone of my retirement holdings… around 20% of total financial assets (not including real estate values) and 33% of retirement assets. Agree with other posters that Wellesley works much better in a tax protected space.

As I’ve mentioned many time in past threads, Wellesley keeps me honest. It’s not an ideal fund, or the ideal fund, but it allows me to ignore the “dividend strategy noise” and bypass the temptation to buy dividend stocks or ETFs. And, it’s a splendid “sleep at night” fund. It’s down 8.58% so far this year, which is a bit of an “ouch!”, but not nearly as “ouchy” as total stock’s -18.87% or total bond’s -9.27% YTD performance.

Morgan Housel’s excellent The Psychology of Money discusses the difference between being reasonable versus rational when making (and sticking to) investment decisions and plans. He states, “Do not aim to be coldly rational when making investment decisions. Aim to just be pretty reasonable. Reasonable is more realistic and you have a better chance of sticking with it over the long run, which is what matters most when managing money.”

As a number have posters have mentioned in this thread, a managed choice such as Wellesley or Wellington isn’t an awful choice. I would add that it might be a fine choice it it helps one avoid panic, fear, overreaction, and impulse-driven responses to market shocks.
Umm, “reasonable” is better than “rational”? By some definitions, “rational” requires optimization. So if “reasonable” is optimal, then it is “rational”. I am not understanding the point of the author’s quote; the two word essentially the same thing to me in the context I see here.
Good question, though I thought Housel’s context helped interpret his terms. A “reasonable” asset allocation is optimal when it mitigates bad decisions due to fear or panic. Calling something “optimal” needs to factor in human psychology, not just what allocation works best in theory. Housel (in chapter 11) states, “Investing has a social component that’s often ignored when viewed through a strictly financial lens.”

I think this shows up here on the forum from time to time. A 100% stock allocation may be the most rational and optimal allocation for a young person with decades of saving and investing ahead. But if a 2008-2009 plunge occurs, it may not be reasonable, which is to say, maintainable. Too much psychic pain will almost always derail what was, in theory, a sound investment plan.
It is based on incomplete information of the investor's goals. "Optimal" in Housel's theory is ignorant of both the investor's needs and the incomplete information thereof; the optimal choice for an investor is the one that best meets needs, not the best risk-adjusted portfolio or the highest returning portfolio given a set volatility. In short, Housel is wrong on what is optimal; although what is optimal may not be within the frontier given risk tolerance, it is not impossible for others. This is purely financial; economics does discuss risk aversion.

Also, a 100% stock allocation is not always the optimal choice for goals; end of story. The expected returns might be superior to a stock/bond portfolio, but that does not mean it is optimal. It can be psychological, but it is sometimes purely financial.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by sycamore »

cinghiale wrote: Sun May 22, 2022 2:32 am ...
Curious about this. I had thought that Wellesley’s equity component reflected a more value orientation, and could be tracked via the Vanguard Value fund (VTV). Any specifics on how/why the High Dividend Yield provides a better surrogate?
Both High Dividend Yield and the Value Index have a value orientation. Quite possibly either one is good enough as a surrogate. And that which one is better will switch over time.

One way to compare funds is with Morningstar's fund screener. It only compares on certain characteristics, and not at the level of individual holding overlap. But at least it's something.

1. Browse to https://www.morningstar.com/funds/screener-compare
2. Enter VWINX,VWELX,VHYAX,VVIAX,VFIAX,VTSAX
3. Do the compare, change to the Portfolio view

Image

Wellington's Style Box, Avg Market Cap, and P/E are more like a typical large cap blend such as S&P 500.

Wellesley's Style Box is like High Dividend Yield & Value Index but its P/E is a bit "growthier" than either. Its 3-year Earnings Growth is more like High Dividend Yield.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by JackoC »

RubyTuesday wrote: Tue May 17, 2022 7:12 pm
Taylor Larimore wrote: Tue May 17, 2022 6:29 pm Bogleheads:
If I knew of an active fund with the low-cost and diversification of an index fund--I would be happy to consider it -- but I don't.
Best wishes
Taylor
Jack Bogle's Words of Wisdom(2005): "Of the 355 equity funds in 1970, fully 233 of those funds have gone out of business. Only 24 outpaced the market by more than 1% a year. These are terrible odds."
Many of Vanguard’s relatively low cost fixed income funds are actively managed, for example Vanguard Inflation-Protected Securities Fund Admiral Shares (VAIPX). It has an expense ratio if 0.10%.
Yeah I count in a quick filter search 38 Vanguard fixed income (not including stock/bond blend) MF's of which only 15 include 'index' in the title, there being regulatory requirements to include that term. In many of the other cases the practical deviation from 'basically an index' is limited or minimal but 'favor index funds over active' does not hold anywhere near as well as a rule with fixed income funds as it does with equity funds. For example if muni's suit your tax situation and risk appetite (for 'safe' that's maybe not be entirely safe if it hits the fan but the Fed *doesn't* step in to prevent the muni market seizing up), there's no reason to limit yourself to the 1 out of 13 Vang muni funds which is technically index IMO, nor limit your holdings in any of the others *because* they aren't technically index funds.

Active stock fund is a different animal by and large. But in that case I'd say there's little point to having a small allocation to active equity, and it's worse than pointless to have multiple active equity funds in whole market or same sector*: the differences the managers adopt relative to index will tend to cancel out but you're still paying each of them. With active stock I'd say go pretty large *if* you trust the manager to deliver net value after fees, and otherwise don't bother. I don't bother.

*whether you'd do any sector or style (value etc) at all is another question, likewise active in a foreign market that's less efficient. Though AFAIK results don't particularly back the idea that active works better in stock markets where efficiency is lower, and some people don't accept EM or even any non-US stocks as valid investments: no need to rerun that argument for the 9,436th time. :happy
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Nowizard »

We overweight value with an active fund and hold Wellington. The two represent approximately 20% of our invested assets. The reason in our case involves best efforts to determine funds that will meet our investment goals, preceded by the decisions that we require stocks and bonds in our portfolio, that we will overweight value for long periods of time, and that active management is another form of diversification that is not frequently discussed.

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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

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cinghiale wrote: Sun May 22, 2022 3:04 am A 100% stock allocation may be the most rational and optimal allocation for a young person with decades of saving and investing ahead.
No. It's not. That's simply the reigning narrative.
But if a 2008-2009 plunge occurs, it may not be reasonable, which is to say, maintainable. Too much psychic pain will almost always derail what was, in theory, a sound investment plan.
Yeah. Which is why that narrative doesn't serve accumulators in aggregate. Simply put, it's a lie. People don't like being lied to, and they tend to freak out once they figure it out.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Swansea »

I have 10% in an active fund. Prior to the recent drop, it had returned 19% over the past 10 years. Now it has dropped way more than the market as a whole, so glad I limited it.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by JackoC »

Beensabu wrote: Sun May 22, 2022 5:13 pm
cinghiale wrote: Sun May 22, 2022 3:04 am A 100% stock allocation may be the most rational and optimal allocation for a young person with decades of saving and investing ahead.
1. No. It's not. That's simply the reigning narrative.
But if a 2008-2009 plunge occurs, it may not be reasonable, which is to say, maintainable. Too much psychic pain will almost always derail what was, in theory, a sound investment plan.
2. Yeah. Which is why that narrative doesn't serve accumulators in aggregate. Simply put, it's a lie. People don't like being lied to, and they tend to freak out once they figure it out.
1. I'd agree with 'may be optimal' but also agree from some people's POV it's not (never was for me even as 'accumulator' and no regrets). And some less knowledgeable people are probably influenced by online communities where lots of people say it's great to take boatloads of stock risk, to take more than they end up being able to stomach. But also there's a significant measurement issue with '% stocks'. Some people on this forum saying they are '100% stock' would be much less as I'd count it. They may be leaving out a house which is a significant % (for the disproportionate Silicon Valley contingent here it might a big % for the younger ones), the so called 'emergency fund' (ie allocation to cash) might be significant for those starting out, older people sometimes exclude Social Security and pensions perhaps enough to carry them along alone if their financial investments crashed, not '100% stock' in any meaningful sense.

2. Again I wouldn't go that far, but I do agree there's a tendency of rearview mirror (of one country, counter examples 'couldn't happen here' or 'we'd see it coming') driver stock optimists to assume their own conclusion that 'stocks always go up in the long run' then frame the question as strictly whether you can 'stand the pain' when stocks temporarily go down. But in reality there's no guarantee temporary won't last for decades. If there was such a guarantee my allocation would be different than it is. Purely psychological effects also factor in, but it's not just that.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by asif408 »

As long as it is low turnover, low cost, and diversified enough, probably no limit. But for practical purposes unless it's a target date fund it probably won't be diversified enough to hold more than 50%. There are plenty of active funds that meet the first two criteria, though.

In your case, if I was in your shoes VWIAX would cover US large stocks and bonds pretty well and is low cost, so I'd consider it for the US large stock and bond portion of my portfolio. It's not diversified enough for me, though, as I prefer more international stocks, and more exposure to value and small stocks.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by LadyGeek »

This thread is now in the Personal Investments forum (portfolio help).

(Thanks to the member who reported the post and explained what's wrong.)
Samuel Glover wrote: Tue May 17, 2022 2:52 pm This question is, of course, for those who would even consider an active fund.

Currently, Vanguard Wellesley Income Fund (VWIAX) makes up 40% of my total assets. Vanguard states that investors can consider it as a "core holding in their portfolio."

Those of you who hold or would hold active funds, would you consider 40% too much? Just right? Could I reasonably go higher? I'll be rolling over funds to my Traditional IRA and would love to keep it all in one place, but that would jack up the percentage even more.

Any thoughts are appreciated in advance.
Bear in mind that what's right for one person may not be right for others. Asking what others do in a particular situation may work for them, but not for you.

Have you made a decision?
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Charles Joseph »

LadyGeek wrote: Mon May 23, 2022 9:49 am This thread is now in the Personal Investments forum (portfolio help).

(Thanks to the member who reported the post and explained what's wrong.)
Samuel Glover wrote: Tue May 17, 2022 2:52 pm This question is, of course, for those who would even consider an active fund.

Currently, Vanguard Wellesley Income Fund (VWIAX) makes up 40% of my total assets. Vanguard states that investors can consider it as a "core holding in their portfolio."

Those of you who hold or would hold active funds, would you consider 40% too much? Just right? Could I reasonably go higher? I'll be rolling over funds to my Traditional IRA and would love to keep it all in one place, but that would jack up the percentage even more.

Any thoughts are appreciated in advance.
Bear in mind that what's right for one person may not be right for others. Asking what others do in a particular situation may work for them, but not for you.

Have you made a decision?
Excellent point. Thank you. And yes, I think I have. I think 40% of my portfolio, even in a great fund like Wellesley (which Vanguard states can be "a core holding" in one's portfolio) is more than enough in one active fund. This has helped me see that's about the limit of my comfort zone in this regard. When I move the money it will be going into index funds.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Charles Joseph »

sycamore wrote: Sun May 22, 2022 11:19 am
cinghiale wrote: Sun May 22, 2022 2:32 am ...
Curious about this. I had thought that Wellesley’s equity component reflected a more value orientation, and could be tracked via the Vanguard Value fund (VTV). Any specifics on how/why the High Dividend Yield provides a better surrogate?
Both High Dividend Yield and the Value Index have a value orientation. Quite possibly either one is good enough as a surrogate. And that which one is better will switch over time.
The equity benchmark for Wellesley is the FTSE High Dividend Yield Index. That is also the benchmark for VYM (Vanguard High Dividend Yield).

So strictly speaking, VYM would be the correct surrogate. There are others that would do the trick. SCHD and VTV come to mind.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by cegibbs »

Approximately 38% of our investable assets is in BRK.B which we initially purchased in 1978. The remaining portion in equities (37%) is in FXAIX (S&P500 index). Certainly understand BRK.B is not a fund per se, but it is as diversified as some funds and we view it that way.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

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LadyGeek wrote: Mon May 23, 2022 9:49 am Have you made a decision?
Actually, given that Vanguard states that Wellesley can be used as "a core fund" in one's portfolio, I'd be curious to hear from other's what that means to them? Does "core" mean 100%? That would change my mind for certain.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by vineviz »

Samuel Glover wrote: Tue May 24, 2022 6:05 am
LadyGeek wrote: Mon May 23, 2022 9:49 am Have you made a decision?
Actually, given that Vanguard states that Wellesley can be used as "a core fund" in one's portfolio, I'd be curious to hear from other's what that means to them? Does "core" mean 100%? That would change my mind for certain.
That's not usually what is meant by "core", but it could be.

Usually a "core" fund is on that the writer thinks can serve as the primary fund in a portfolio (or within an asset class) with other "satellite" funds adding specific exposures.

https://static.vgcontent.info/crp/intl/ ... esting.pdf
The core-satellite approach uses index funds as the ‘core’ or foundation of a portfolio and lowly correlated active funds or direct shares as ‘satellites’ to deliver risk and return benefits to client portfolios. The low cost, tax efficient and broad diversification characteristics of index funds provide a foundation for client portfolios that will deliver market returns. Once the core allocation is in place, active satellites can be chosen that tilt a portfolio towards a particular sector or style with the objective of achieving outperformance.
But in the context of this quote (which is from Vanguard Australia, where I'm not sure Wellesley is available), Wellesley is effectively an index fund anyway. It's active in name only, for all intents and purposes.
Last edited by vineviz on Tue May 24, 2022 6:16 am, edited 1 time in total.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by LadyGeek »

^^^ I had similar thought but will provide a different source. "Core" is a way to express the central or key part of something. It's not 100%.

See the wiki: Lazy portfolios (Core four portfolios)
As proposed by Rick Ferri on the Bogleheads® forum, the Core Four are four funds which form the "cornerstone" of a portfolio.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Charles Joseph »

Taylor Larimore wrote: Wed May 18, 2022 5:42 pm Samuel Glover:

Bonds should be primarily for safety in a portfolio. Any bond fund that is low cost, diversified, and holding investment grade securities should do the job. Investors should increase their stock allocation for higher return (and more risk of loss).

I am not enthusiastic about "Blue-Chip dividend stocks for safety in a bear market. Below are Vanguard fund returns in the 2008 bear market for stocks:

-39.5% Diversified Equity
-26.6% Dividend Appreciation
+4.9% Total Bond Market

-37.0% S&P 500 Index Fund
Taylor,

That is likely due to the outsized share of financial holdings in dividend and value funds and the pounding financial stocks took during the Great Financial Crisis. But that brings up the issue of sector diversification so your point is well taken.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Charles Joseph »

LadyGeek wrote: Tue May 24, 2022 6:13 am ^^^ I had similar thought but will provide a different source. "Core" is a way to express the central or key part of something. It's not 100%.

See the wiki: Lazy portfolios (Core four portfolios)
As proposed by Rick Ferri on the Bogleheads® forum, the Core Four are four funds which form the "cornerstone" of a portfolio.
Thank you LadyGeek and vineviz. I'll look at the wiki and quote from Vanguard Australia is helpful.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Charles Joseph »

Taylor Larimore wrote: Tue May 17, 2022 6:29 pm Bogleheads:

If I knew of an active fund with the low-cost and diversification of an index fund--I would be happy to consider it -- but I don't.

Best wishes
Taylor
Jack Bogle's Words of Wisdom(2005): "Of the 355 equity funds in 1970, fully 233 of those funds have gone out of business. Only 24 outpaced the market by more than 1% a year. These are terrible odds."
Taylor - an update if I may.

I've gone from Wellesley being 40% of my total portfolio when I started this thread to it now being 26% of my total portfolio (now at least all in tax advantaged accounts). While I've really hesitated to let go, and I've sworn I'd hang on to Wellesley "forever," I'm considering just switching the last bit out for 40% VTSAX (total stock) and 60% VBTLX (total bond).

I've been dragged kicking and screaming but I retire in 2-3 year and it's not too late I don't think. Heading toward 100% indexing at last. This old dog can learn new tricks.

Thanks for all you've done for investors. What a legacy.

EDIT: Wellesley has a brand new Equity "Managing Director, Portfolio Manager." He has only advised the fund since 2021. Who knows what he will do?
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Nowizard »

The "Good enough" comment is a significant one in this context. The key is perhaps not a specific percentage but whether the goals of the investor are being met if the portfolio is zero or one hundred percent active funds.

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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by cegibbs »

Although not an active fund, approximately 30% of our total investable assets are in Berkshire Hathaway.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by ruralavalon »

Charles Joseph wrote: Tue May 17, 2022 2:52 pm This question is, of course, for those who would even consider an active fund.

Currently, Vanguard Wellesley Income Fund (VWIAX) makes up 40% of my total assets. Vanguard states that investors can consider it as a "core holding in their portfolio."

Those of you who hold or would hold active funds, would you consider 40% too much? Just right? Could I reasonably go higher? I'll be rolling over funds to my Traditional IRA and would love to keep it all in one place, but that would jack up the percentage even more.

Any thoughts are appreciated in advance.
Currently 00%.

In the past for a short time I used an actively managed fund Vanguard Short-Term Investment-Grade Fund Admiral Shares (VFSUX) ER 0.10% for my 50% bond allocation.

I wanted a short-term bond fund for a time. I had just assumed that VFSUX was an index fund because of the low expense ratio.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Charles Joseph »

ruralavalon wrote: Wed Jan 04, 2023 12:18 pm
Charles Joseph wrote: Tue May 17, 2022 2:52 pm This question is, of course, for those who would even consider an active fund.

Currently, Vanguard Wellesley Income Fund (VWIAX) makes up 40% of my total assets. Vanguard states that investors can consider it as a "core holding in their portfolio."

Those of you who hold or would hold active funds, would you consider 40% too much? Just right? Could I reasonably go higher? I'll be rolling over funds to my Traditional IRA and would love to keep it all in one place, but that would jack up the percentage even more.

Any thoughts are appreciated in advance.
Currently 00%.

In the past for a short time I used an actively managed fund Vanguard Short-Term Investment-Grade Fund Admiral Shares (VFSUX) ER 0.10% for my 50% bond allocation.

I wanted a short-term bond fund for a time. I had just assumed that VFSUX was an index fund because of the low expense ratio.
Thanks for posting. I shared in a new thread that I'm selling Wellesley today, and other than MWTSX which I can't avoid now (and am more than okay with) I will be 100% indexed.

Thanks again!
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Varsh »

I think Wellesley is a good fund, a bit moderate for me at my juncture, but a good one as part of a "In retirement" holding.... why are you selling it? Changing your AA or goals?
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by squirrel1963 »

I have about 4% in BRK.B, not quite a fund but close enough. Everything else is either individual bonds or index funds.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Billyboy »

00% Never Held an Active Mutual Fund; however, held many individual Stocks.
Last edited by Billyboy on Wed Jan 04, 2023 2:19 pm, edited 1 time in total.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by sperry8 »

Charles Joseph wrote: Tue May 17, 2022 2:52 pm This question is, of course, for those who would even consider an active fund.

Currently, Vanguard Wellesley Income Fund (VWIAX) makes up 40% of my total assets. Vanguard states that investors can consider it as a "core holding in their portfolio."

Those of you who hold or would hold active funds, would you consider 40% too much? Just right? Could I reasonably go higher? I'll be rolling over funds to my Traditional IRA and would love to keep it all in one place, but that would jack up the percentage even more.

Any thoughts are appreciated in advance.
All (collectively) of my active funds are 40% of my portfolio... so I'd say yes. Of course, I feel somewhat more diversified having numerous active funds make up this 40%.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Taylor Larimore »

Bogleheads:

Read this study by Rick Ferri & Alex Benke and you will probably never hold an active fund again:

The Case For Index Fund Portfolios

Best wishes
Taylor
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Makefile »

Taylor Larimore wrote: Wed Jan 04, 2023 2:12 pm Bogleheads:

Read this study by Rick Ferri & Alex Benke and you will probably never hold an active fund again:

The Case For Index Fund Portfolios

Best wishes
Taylor
Jack Bogle's Words of Wisdom (2005): "Of the 355 equity funds in 1970, fully 233 of those funds have gone out of business. Only 24 outpaced the market by more than 1% a year. These are terrible odds."


Technically, all money market funds are actively managed :D
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Mike Scott »

Max 50% in Vanguards's Wellington and Wellesley funds.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by LeoB »

Makefile wrote: Wed Jan 04, 2023 2:15 pm
Taylor Larimore wrote: Wed Jan 04, 2023 2:12 pm Bogleheads:

Read this study by Rick Ferri & Alex Benke and you will probably never hold an active fund again:

The Case For Index Fund Portfolios

Best wishes
Taylor
Jack Bogle's Words of Wisdom (2005): "Of the 355 equity funds in 1970, fully 233 of those funds have gone out of business. Only 24 outpaced the market by more than 1% a year. These are terrible odds."
Technically, all money market funds are actively managed :D
Thanks for sharing this paper! I enjoyed that the authors examined not only actively managed funds overall but also those with the lowest 50% of expenses.

It would be interesting to see how actively managed funds in the cheapest quintile compare to index funds. I believe Wellesley and Wellington both fall into this category.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by placeholder »

I have somewhere around 20% in my 401k stable value fund which is of course actively managed but nothing else.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by thedaybeforetoday »

45% in active fund.
Not sure how knowing my percentage of active management will help OP...
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by ruralavalon »

thedaybeforetoday wrote: Thu Jan 05, 2023 4:52 am 45% in active fund.
Not sure how knowing my percentage of active management will help OP...
The OP has now gone 100% index funds, except in the employer plan where there is no bond index fund.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by niagara_guy »

In my taxable account I will only hold the most tax efficient funds, like VFIAX and VTSAX, which are both index funds. For VFIAX, most of its dividends are qualified, so lower tax bracket and I think virtually no capital gains.

I have 3 well known stocks that are about 10% of my portfolio, just to have some fun, probably have about matched the s&p 500. The other 90% is all index funds.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Outer Marker »

8% Berkshire Hathaway. Warren Buffett is a pretty good "fund" manager for a near zero ER.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Kenkat »

Charles Joseph wrote: Wed Jan 04, 2023 10:47 am
Taylor Larimore wrote: Tue May 17, 2022 6:29 pm Bogleheads:

If I knew of an active fund with the low-cost and diversification of an index fund--I would be happy to consider it -- but I don't.

Best wishes
Taylor
Jack Bogle's Words of Wisdom(2005): "Of the 355 equity funds in 1970, fully 233 of those funds have gone out of business. Only 24 outpaced the market by more than 1% a year. These are terrible odds."
Taylor - an update if I may.

I've gone from Wellesley being 40% of my total portfolio when I started this thread to it now being 26% of my total portfolio (now at least all in tax advantaged accounts). While I've really hesitated to let go, and I've sworn I'd hang on to Wellesley "forever," I'm considering just switching the last bit out for 40% VTSAX (total stock) and 60% VBTLX (total bond).

I've been dragged kicking and screaming but I retire in 2-3 year and it's not too late I don't think. Heading toward 100% indexing at last. This old dog can learn new tricks.

Thanks for all you've done for investors. What a legacy.

EDIT: Wellesley has a brand new Equity "Managing Director, Portfolio Manager." He has only advised the fund since 2021. Who knows what he will do?
While I think 40% Total Stock, 60% Total Bond is a perfectly fine choice, I would personally temper my expectations that I’d really achieved any meaningful difference by making the change. I mean, it’s fine, but you have to understand that Wellesley Income was already low cost. It was already diversified. Are the index funds a little lower cost? Yes. Are they a little more diversified? Yes. But I would say it is an insignificant difference. You can see long term performance is very close between the two options:

https://www.portfoliovisualizer.com/bac ... tion3_2=60

I know you’ve already made the decision to switch and it’s fine. Absolutely no worries with that choice. But whether you are 100% indexed or hold some percentage of index funds and some percentage of Wellesley Income is not going to make much of a difference in terms of your long term portfolio performance.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Charles Joseph »

Kenkat wrote: Thu Jan 05, 2023 10:17 am
Charles Joseph wrote: Wed Jan 04, 2023 10:47 am
Taylor Larimore wrote: Tue May 17, 2022 6:29 pm Bogleheads:

If I knew of an active fund with the low-cost and diversification of an index fund--I would be happy to consider it -- but I don't.

Best wishes
Taylor
Jack Bogle's Words of Wisdom(2005): "Of the 355 equity funds in 1970, fully 233 of those funds have gone out of business. Only 24 outpaced the market by more than 1% a year. These are terrible odds."
Taylor - an update if I may.

I've gone from Wellesley being 40% of my total portfolio when I started this thread to it now being 26% of my total portfolio (now at least all in tax advantaged accounts). While I've really hesitated to let go, and I've sworn I'd hang on to Wellesley "forever," I'm considering just switching the last bit out for 40% VTSAX (total stock) and 60% VBTLX (total bond).

I've been dragged kicking and screaming but I retire in 2-3 year and it's not too late I don't think. Heading toward 100% indexing at last. This old dog can learn new tricks.

Thanks for all you've done for investors. What a legacy.

EDIT: Wellesley has a brand new Equity "Managing Director, Portfolio Manager." He has only advised the fund since 2021. Who knows what he will do?
While I think 40% Total Stock, 60% Total Bond is a perfectly fine choice, I would personally temper my expectations that I’d really achieved any meaningful difference by making the change. I mean, it’s fine, but you have to understand that Wellesley Income was already low cost. It was already diversified. Are the index funds a little lower cost? Yes. Are they a little more diversified? Yes. But I would say it is an insignificant difference. You can see long term performance is very close between the two options:

https://www.portfoliovisualizer.com/bac ... tion3_2=60

I know you’ve already made the decision to switch and it’s fine. Absolutely no worries with that choice. But whether you are 100% indexed or hold some percentage of index funds and some percentage of Wellesley Income is not going to make much of a difference in terms of your long term portfolio performance.
Couple of points. The bigger issue for me is coming to terms with whether I'm going to trust my money in general to active managers, or simply accept the market return via indexing. After years of research and hemming and hawing, I'm finally at a place where I'll just sleep better at night knowing I'll get the market return. This is not about Wellesley or any other individual fund.

For instance, I don't have to worry about the new Equity Manager at Wellesley and what he'll do. Matthew Hand took over the equity side 7/1/22. He's been with Wellington Management since 2004 but with the fund only since 2021. If you look at the company choices and weights in the portfolio, he's moved quite a few things around already.

I just don't want to deal with things like manager risk, fund objective risk, bond quality drift (it's been happening in Wellesley), etc. I'll just take what the market gives me. Easy peasy. Guy like me isn't gonna put a portfolio of active/passive together that's gonna beat the market. So why try?
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Kenkat »

Charles Joseph wrote: Thu Jan 05, 2023 10:52 am I just don't want to deal with things like manager risk, fund objective risk, bond quality drift (it's been happening in Wellesley), etc. I'll just take what the market gives me. Easy peasy. Guy like me isn't gonna put a portfolio of active/passive together that's gonna beat the market. So why try?
These are all perfectly good reasons. You’ve made a fine choice, no concerns at all.

My main point, and perhaps this does not apply to the specific situation, but it’s not really a requirement to say Wellesley Income is active, so therefore it is a bad choice. It’s not. Wellesley Income is a good choice. 40/60 TSM/TBM is a good choice. Vanguard, in general, is a good choice. I think that point gets lost in some of the discussions around active and index. It’s really a discussion about high cost vs. low cost. That is what matters.
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Re: What's the Largest Percentage of Your Portfolio You'd Have in An Active Fund??

Post by Charles Joseph »

Kenkat wrote: Thu Jan 05, 2023 11:29 am I think that point gets lost in some of the discussions around active and index. It's really a discussion about high cost vs. low cost. That is what matters.
Agreed. If I recall correctly Jack Bogle said this also, and said it often.
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
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