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Mixing Wellington With Wellesley

A VERY, VERY old topic I know, but the old M* Posts have  now disappeared and I was wondering if views have changed.

I once scoffed at mixing Vwinx and Vwelx together because it just seemed to be adding duplication and a lack of diversification by concentrating a lot in LC. Simply more of the same.

That is still true but as retirement advances there may be some attractiveness in the stability of using Vwelx to increase the equity allocation of a large holding of Vwinx and gain a bit more income.

Current thoughts on the subject?

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Re: Mixing Wellington With Wellesley

I'm probably misremembering, but I've been following this forum pretty closely for a few years now, and I do recall this being a topic a couple of times.  Someone (maybe YBB, but I'm not sure) did an analysis of a 50/50 mix of the two funds, and there actually wasn't as much of an overlap as I thought there would be.  

I think that there was also a similar evaluation of a 50/50 mix of each fund with Vanguard STAR, and that also didn't give a huge overlap.

Again, I'm relying on memory here, so no one bite my head off if I'm off base.

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Re: Mixing Wellington With Wellesley


@Newer_Retiree wrote:

A VERY, VERY old topic I know, but the old M* Posts have  now disappeared and I was wondering if views have changed.

I once scoffed at mixing Vwinx and Vwelx together because it just seemed to be adding duplication and a lack of diversification by concentrating a lot in LC. Simply more of the same.

FD: the stock portfolios are different and probably the bond portions are closer.  VWELX is more growth and VWINX is more value.

That is still true but as retirement advances there may be some attractiveness in the stability of using Vwelx to increase the equity allocation of a large holding of Vwinx and gain a bit more income.

FD: if you increase VWELX(about 64-65% stocks) you will have lower income.  VWINX has higher income.  

Current thoughts on the subject?


These 2 funds have been discussed hundreds of times.

Below are top stocks for VWELX

vwelx.PNG

 

Top stocks for VWINX

vwinx.PNG

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Re: Mixing Wellington With Wellesley


@Newer_Retiree wrote:

A VERY, VERY old topic I know, but the old M* Posts have  now disappeared and I was wondering if views have changed.

I once scoffed at mixing Vwinx and Vwelx together because it just seemed to be adding duplication and a lack of diversification by concentrating a lot in LC. Simply more of the same.

That is still true but as retirement advances there may be some attractiveness in the stability of using Vwelx to increase the equity allocation of a large holding of Vwinx and gain a bit more income.

Current thoughts on the subject?

Don't worry. I posted a similar thread a few days ago. There might be a very constipated poster that feels the need to police 'worthy' topics, but it'll be fine. To your subject, I'm considering a somewhat similar move. Except, I'm thinking of moving between them as a tactical move to increase/decrease equity exposure. Perhaps  for a better buy and hold with two balanced funds, you might consider mixing WWINX with FPURX for more LCG exposure.


 

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Re: Mixing Wellington With Wellesley

I hold VWELX and was disappointed that with the market up at 2019 y/e they declared a very reduced cap gain over the last couple of years.  For some that's fine, but I hold it in my IRA and use the income (divs and cap gains) to supplement my income since I have no pension.  It is a core holding for me and I doubt that will change.  

Morningstar imported the old forum threads for the Vanguard funds - look at the total number of posts on that forum and you'll see what I mean.  Go to the Vanguard forum, change the search from all community to Vanguard only and it will pull up a number of threads that are old.  I just read one there from 2013.  Just realize we're in a different investing world now........... Good luck and hope this helps.

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Re: Mixing Wellington With Wellesley

@Newer_Retiree 

I will just mention again that the benchmark for the stock side of Wellesley Income VWINX/VWIAX is the FTSE High Dividend Yield Index* (Benchmark).

Also the benchmark for VHYAX/VYM Vanguards high dividend yield index is the same FTSE High Dividend Yield Index.

If you wanted to add stock exposure that might be close to Wellesley, you could add a bit of VHYAX/VYM.

VYM current SEC yld is now at 3.75%.

The benchmark for Wellington is the SP500, but of course it does not hug that index.

Question for anyone who has M* premium. Do they still have the overlap feature in portfolio manager? If so, one could use that to see prior overlaps.

Fishingrod

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Re: Mixing Wellington With Wellesley

Thanks again @Fishingrod for all your insights.

PV shows that for the past five years (a small window admittedly) a 40/60 combination of Vwelx plus Vwinx throws off more income than a 40/60 VYM plus Vwinx combo; has lower volativity; and a better Sharpe ratio, Beta, and Alpha.

Why than go with VYM over Wellington, except to get a larger stock holding and no bonds?

Also, M*, for what it's worth, has Vwelx as a LC Blend and VYM as more of a LC Value. Since Vwinx is LC Value, why not add a Blend? Not that that matters all that much here.

Further thoughts?

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Re: Mixing Wellington With Wellesley

@Newer_Retiree,

"Why than go with VYM over Wellington"

Except to get a larger stock holding and no bonds is the answer.

I don't know what you need/want whether it be more growth or more dividends or both? I believe one must compromise with a balance between their needs and their wants. I for one am willing to give up the possibility of way more growth even though I want it, in return for the stability hopefully of the dividends that I need.

I am just giving some options not suggestions. You have to decide based on what you want/need. Do you want more of a blend such as the SP500/ Wellington stocks or do you want more value stocks that VHYAX and Wellesley own?

Fishingrod

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Re: Mixing Wellington With Wellesley

 

According to M* X-Ray, VWELX and VWINX had 21 stocks in common as of 03/31/20. Vanguard's website indicates that VWELX and VWINX held 64 and 65 stocks respectively as of 04/30/20.   

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Re: Mixing Wellington With Wellesley

@rila3400,

Thank you. Does it give a percentage of overlap on the top holdings?

Fishingrod

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Re: Mixing Wellington With Wellesley


@Fishingrod wrote:

@rila3400,

Thank you. Does it give a percentage of overlap on the top holdings?

Fishingrod


@Fishingrod,

I used a 50/50 mix of VWELX and VWINX. The top holdings for this portfolio are listed below.

VWINX X-Ray.JPG

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Re: Mixing Wellington With Wellesley

@rila3400,

Thank you so much!!

So at this time the overlap is minimal as far as percentage is concerned.

Fishingrod

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Re: Mixing Wellington With Wellesley

According to the portfolio holdings from Vanguard as of 2020-03-31, 33 stocks are in both funds. Here is a list in order from highest to lowest percentage of market value of the stock holdings of the funds.

Company NameValue of Stocks in WellingtonValue of Stocks in Wellesley
JPMorgan Chase & Co.3.15%3.40%
Pfizer Inc.2.39%3.86%
Bank of America Corp.2.85%2.86%
Verizon Communications Inc.2.16%3.58%
Cisco Systems Inc.1.87%3.99%
Comcast Corp.2.10%2.84%
Intel Corp.1.98%2.89%
Coca-Cola Co.1.96%2.13%
McDonald's Corp.2.23%1.86%
Home Depot Inc.2.08%1.86%
Lockheed Martin Corp.1.23%2.68%
Progressive Corp.1.52%2.15%
AstraZeneca plc ADR2.15%1.48%
Dominion Energy Inc.1.61%1.87%
Union Pacific Corp.1.33%1.81%
Medtronic plc1.20%1.90%
Novartis AG1.56%1.29%
Texas Instruments Inc.1.79%1.13%
Exelon Corp.1.12%1.39%
Eli Lilly & Co.1.54%0.92%
BlackRock Inc.0.98%1.05%
PepsiCo Inc.0.46%1.68%
Unilever NV0.34%2.04%
Chubb Ltd.0.65%1.03%
PNC Financial Services Group Inc.0.68%0.91%
Vinci SA0.71%0.86%
Merck & Co. Inc.0.25%2.33%
CVS Health Corp.0.43%1.19%
Bristol-Myers Squibb Co.1.02%0.46%
Sysco Corp.1.17%0.30%
Chevron Corp.0.13%1.87%
Diageo plc [ADR in Wellesley]0.99%0.10%
American International Group Inc.0.40%0.18%

 

46% of the market value of stocks in Wellington were in stocks in Wellesley Income. 60% of the market value of stocks in Wellesley Income were in stocks in Wellington.

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Re: Mixing Wellington With Wellesley

@PatMorgan,

Thanks for all your time and work to compile the list!!

"46% of the market value of stocks in Wellington were in stocks in Wellesley Income. 60% of the market value of stocks in Wellesley Income were in stocks in Wellington."

Now there is a head scratcher to envision that. I feel like a venn diagram would help. ;<)

Fishingrod

 

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Re: Mixing Wellington With Wellesley

If we were Americans we would DEFINATELY use the 50/50 VWELX/VWINX combo.

NO DOUBT ABOUT IT!

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Re: Mixing Wellington With Wellesley

The overlap of companies in the two funds doesn't bother me.  If I wanted all the companies I would just buy an index fund.  Or, perhaps buy a growth fund and a value fund. They should have limited overlap. When I was younger I did that.

I buy Wellington and Wellesley Income Funds because I want skilled management teams to select good companies for me and those two teams are pretty much top tier.  I am buying both because where they are different where it matters.  Wellington typically earns more but Wellesley Income is less volatile.  Using 2008 as an example, Wellington lost 22%, Wellesley 10%.  If I had needed to draw out money at the time I would have picked Wellesley and let Wellington recover.

I believe the two funds compliment each other very well.

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Re: Mixing Wellington With Wellesley

@Mustang,

I to think that the overlap is not anything to be overly concerned about. If the overlap were creating oversized individual holdings I would be concerned but both funds don't hold any oversized individual holdings. I kind of feel that if both funds want to hold these same individual stocks they must be some good stocks to own even if it does create the overlap.

Fishingrod

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Re: Mixing Wellington With Wellesley

Yes they do. 

"I believe the two funds compliment each other very well."

 

 

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Re: Mixing Wellington With Wellesley


@Fishingrod wrote:

"46% of the market value of stocks in Wellington were in stocks in Wellesley Income. 60% of the market value of stocks in Wellesley Income were in stocks in Wellington."

Now there is a head scratcher to envision that. I feel like a venn diagram would help. ;<)


Here are additional details that may be helpful.

The sum of the market values of all the stocks in the Wellington fund was 60.16 Billion$. The sum for the stocks in the Wellington fund that were also in the Wellesley Income fund was 27.68 Billion$. 27.68/60.16 = 46%.

The corresponding values for the Wellesley Income fund were $20.55 Billion$ and 12.30 Billion$. 12.30/20.55 = 60%.

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