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theorist
Follower ○○○

Balanced funds question

 

I am currently very heavily invested in Vanguard Target Retirement 2035 in my 401k and 457b accounts, and was thinking of moving some amount of that into a couple of balanced funds.  I already hold some Fidelity Puritan (FPURX) in my IRA and will add to it (I am guessing the new manager will find his feet, we will see).  I’d like to divert some of what is going into Target Retirement into one or two funds that are less “growth” and not so FAANGishly oriented as Puritan.  I’m happy with 60/40 or 70/30 type equity/bond ratio.  

I was thinking of

Vanguard Global Wellington (VGWLX)

Mairs and Power balanced fund (MAPOX)

(I do not have access to plain vanilla Wellington in the account I plan to use.)

Do these seem like reasonable choices?  Are there other excellent possibilities that fulfill the allocation, more value oriented, non FAANG criteria?  Any guidance or suggestions are much appreciated.

 

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41 Replies
PatMorgan
Explorer ○

Re: Balanced funds question

Another standard suggestion is Dodge & Cox Balanced Fund (DODBX). It is one of (Director of Manager Research for Morningstar) Kinnel's Favorite Balanced Funds.

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yogibearbull
Valued Contributor

Re: Balanced funds question

DODBX is among M* favorites but it is quite aggressive among the moderate-allocation funds. 

Mairs & Power focuses on companies in the US Midwest - mostly healthcare companies around MN. Why would you want to be limited to that?

YBB
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theorist
Follower ○○○

Re: Balanced funds question

Thanks for suggestions!  

@ yogibearbull:

The things that attracted me to Mairs and Power are 

— not so tech heavy (I have lots of exposure already);

— did very well in the last big drawdown (but that is ancient history, I admit);

— Morningstar gives the impression that the manager transition (which will happen with many candidate funds I look at) is being well handled here.

I have to admit it also doesn’t hurt that I grew up in the Midwest, and so don’t mind that quirk...

 

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yogibearbull
Valued Contributor

Re: Balanced funds question

I am in the Midwest, but to just invest in the US Midwestern companies is extreme home-bias.

YBB
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theorist
Follower ○○○

Re: Balanced funds question

 

Agreed.  I hadn’t realized they were very extreme about that, I’ll look more into their holdings.

about DODBX, I like the value tilt.  My worries there were the performance in down markets (not great, again though it is in the past), and the general worries about Dodge & Cox that I’ve read about on other forums (mostly bogleheads).

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PatMorgan
Explorer ○

Re: Balanced funds question


@theorist wrote:

— Morningstar gives the impression that the manager transition (which will happen with many candidate funds I look at) is being well handled here.


Vanguard Wellington (the older non-Global fund), Mairs and Power Balanced, and Dodge & Cox Balanced have each been managed by the same investment management firm for decades.  The firms have had a mostly consistent investment approach over those decades even though the individuals making investment decisions have changed over time.

Wellington Management, which manages the Vanguard Wellington fund, diverged from it usual approach in the late 1960s when it merged with a more aggressive investment management firm.  Wellington Management returned to their usual approach with the Wellington fund after about a decade of using a more aggressive than usual approach.

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cegibbs
Participant ○

Re: Balanced funds question

My first choice would be the traditional original Wellington (VWELX) followed by American Balanced (BALFX).

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theorist
Follower ○○○

Re: Balanced funds question

@cegibbs:

 

thanks!  I was just looking at BALFX earlier today.  I was also wondering about two other American funds: AMECX (maybe under the share class with no load), and TAIFX (for a taxable account).  Do you know these and have reactions?

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cegibbs
Participant ○

Re: Balanced funds question

I definitely prefer BALFX rather than Income Fund of America. It is much more consistent fund which makes it easy to hold for the long term. Capital Group is one of only four firms that I would use for active management. Regarding TAIFX, I use an S&P500 index along with money markets in my taxable account. Indexing is definitely better in taxable accounts in my opinion.

Sent from my iPhone
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NoFriends1
Explorer ○○○

Re: Balanced funds question

TAIFX is a very good 30 to 50% American Portfolio Series Fund.

Of course, Vanguard has the Wellslley Fund, which has a value tilt but it is 35/65% fixed income equity split.

Another balanced fund I owned for years which has a value tilt, though it is a 85/15 split, is Fidelity's Strategic Dividend and Income Fund[ FSDIX ]. Examine that one as well. 

Lastly VBINX is a 60/40 split, is to growthy/tech oriented for you?

Good Luck w/whatever choice you make.

 

Signed,

NoFriends1

 

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theorist
Follower ○○○

Re: Balanced funds question

Thanks!  I had never thought about FSDIX.  I’ll do a little research, I’m not very familiar with convertibles and preferred stocks.  

I have to admit I do have some Wellesley in an HSA and a retirement account (I am sheepish about it because at 49 I feel like it is a bit too conservative for me to be stockpiling just yet).  I like it very much, it is unfortunate that I can’t get its slightly less conservative cousin Wellington except in a taxable account.

I have also considered VBINX and FBALX and they both seem excellent.  But indeed they don’t have the value tilt.  (I’m temporarily kicking myself for picking Puritan instead of Fidelity balanced fund given performance this year, but I’m going to stick with my choice — I imagine there will be another occasion when growth outperforms, and I can’t really complain about Puritan this year except relative to FBALX...).

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chang
Contributor ○○○

Re: Balanced funds question

TAIFX is a unique LV + HY muni balanced fund. I own some, sitting on CGs, but I am not adding to it, because for some time I have preferred separate equity and bond funds.

TAIFX is a good fund. Pity I can’t find a way into the R-2 or R-3 classes.

VG Tax Managed Balanced is an excellent balanced fund, though I’d prefer to use separate VG equity and muni funds to create something with more HY muni exposure (using VWALX), which is essentially what I do.

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theorist
Follower ○○○

Re: Balanced funds question

@chang:

thanks for your response!

My only account with Vanguard is taxable.  So far I mostly use California intermediate term and long term tax exempt municipal bond funds there, and some index funds for equities.  But I’ve pondered adding VBINX there in the past (it is supposed to be tax efficient...), or even Wellington (which isn’t great in taxable I’m told, but I can’t get it elsewhere).  TAIFX will go on that list...it seems more value oriented than VTMFX.

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yogibearbull
Valued Contributor

Re: Balanced funds question

@theorist , be aware that old FPURX was value, but it hasn't been value for years. It has a recent manager change.

FBALX, BALFX are blend.

Value-tilted TAIFX and growth-tilted VTMFX are tax managed.

Go with a solid moderate-allocation fund and find tilts elsewhere.

YBB
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theorist
Follower ○○○

Re: Balanced funds question

 

Thanks.  I did know FPURX is growthy now, and in fact X-ray reveals that it is very very growth oriented.  I will give the new manager three years to prove himself, the fund has been doing ok for me so far.  But holding it in my IRA is one reason I want something more value focused in my 457.

Right now after all the advice and some research, BALFX and maybe also Vanguard Global Wellington look like the options I’ll probably go with.  (All the discussion of lower P/E ratios abroad, and the good track record of management, give me some faith that the latter will also be a solid choice.)

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PatMorgan
Explorer ○

Re: Balanced funds question


@theorist wrote:

thanks!  I was just looking at BALFX earlier today.  I was also wondering about two other American funds: AMECX (maybe under the share class with no load), and TAIFX (for a taxable account).  Do you know these and have reactions?


My reactions would be about how much inflation-adjusted income the funds would have paid out each year and what the account balance would have been over the years. Here is a chart of that for three funds mentioned with the longest history, using for the American funds the share class with the longest history, without adjusting for sales loads.
inc-2018-abalx-amecx-mapox.svg
Up to about the year 2005, an account in AMECX would have generated the most income. More recently, an account in MAPOX would have generated the most income.

The account balance of all the funds would have been about the same until about the year 1995. More recently, an account in MAPOX would have had a higher balance, while an account in AMECX would have had the lowest balance. However, with AMECX the combination of lower balance and lower distribution amount corresponds to a higher percentage distribution than MAPOX has had recently.

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theorist
Follower ○○○

Re: Balanced funds question

 

Helpful!  MAPOX looks pretty good here.  Though who knows what the future holds.

I had concluded from looking at M* that MAPOX and BALFX have pretty similar past performance (who knows going forward), though one is run by a much larger firm, has significantly more assets under management, and has a bit more international as well as domestically diversified stock.  I was just comparing total return — I assumed that included reinvested dividends, is that wrong?  I won’t be planning to use the payout to support any spending for quite a while yet.

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cegibbs
Participant ○

Re: Balanced funds question

Have you looked at the Risk metrics for both funds?  In my opinion, BALFX is much better and is run by a far superior firm.

theorist
Follower ○○○

Re: Balanced funds question


hmm.  Just looked.  I had tried to gauge this by looking at performance in the drawdowns visible in last quarter 2018, and in 2008.  They are almost degenerate in one and Mapox looks better in the other.  I had wrongly concluded it was close to a wash or edge to the smaller fund.

How does M* compute the risk?  Is it based on standard deviation of returns over a period, with a correction by higher moments to separate negative vs positive (downside vs upside)?  Or something fancier?

Anyway I don’t doubt you’re right, certainly American must have more depth and expertise in their talent pool compared to a smaller local firm...and I’ll take M*s word on risk, though it’d be nice to know how they compute it!

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