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Follower ○○

Re: Wellington and Wellesley

I was fortunate enough to have had a workplace retirement plan in which the tax savings resulting from tax deductible contributions plus the added employer contribution amounted to an annual cushion (equal to about 30% of the annual contribution) that effectively neutralized market risk over decades. Now that I am retired the cushion along with dollar cost averaging is gone, removing the safety from investing. I cashed out of VWINX and VWELX and have allocated about 90% of my assets to guaranteed instruments ---- leaving the remaining 10% to grow for my childrens' inheritence. I have adopted the perspective that for each generation of workers there is an investing cycle that ends with retirement when the margin of safety provided by workplace retirement plans disappears and financial assets are best diverted to risk free instruments -- namely treasuries, CDs, and the prime money market (ok, not 100% risk free but good enough) available at V. --while the next generation takes the baton for another lap in the investment marathon.

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Explorer ○

Re: Re: Wellington and Wellesley

I continue to put money into vwinx as I move toward retirement.

Except for my checking and emergency accts i will be 100% vwinx in retirement.

I will pass things on via vwinx.

Kiss.

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Frequent Contributor

Re: Wellington and Wellesley


felix wrote:

I was fortunate enough to have had a workplace retirement plan in which the tax savings resulting from tax deductible contributions plus the added employer contribution amounted to an annual cushion (equal to about 30% of the annual contribution) that effectively neutralized market risk over decades. Now that I am retired the cushion along with dollar cost averaging is gone, removing the safety from investing. I cashed out of VWINX and VWELX and have allocated about 90% of my assets to guaranteed instruments ---- leaving the remaining 10% to grow for my childrens' inheritence. I have adopted the perspective that for each generation of workers there is an investing cycle that ends with retirement when the margin of safety provided by workplace retirement plans disappears and financial assets are best diverted to risk free instruments -- namely treasuries, CDs, and the prime money market (ok, not 100% risk free but good enough) available at V. --while the next generation takes the baton for another lap in the investment marathon.

Hi Felix,

Your desire for safety in retirement would be very unsafe for most retirees.  It is possible that you will live as long in retirement as you did working.  "Safe" investments may not even keep up with inflation.  This is why virtually every investment professional suggests at least keeping some growth potential in your portfolio.  25% equities is the low ball figure often used.

The exception to that rule might be someone with 50 or more times their yearly expenses.

Try dividing your portfolio by 30.  Unless that number is double or more than your yearly expenses, it is likely not safe to be "safe".


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Participant ○○○

Re: Wellington and Wellesley

bilperk:

felix:

I was fortunate enough to have had a workplace retirement plan in which the tax savings resulting from tax deductible contributions plus the added employer contribution amounted to an annual cushion (equal to about 30% of the annual contribution) that effectively neutralized market risk over decades. Now that I am retired the cushion along with dollar cost averaging is gone, removing the safety from investing. I cashed out of VWINX and VWELX and have allocated about 90% of my assets to guaranteed instruments ---- leaving the remaining 10% to grow for my childrens' inheritence. I have adopted the perspective that for each generation of workers there is an investing cycle that ends with retirement when the margin of safety provided by workplace retirement plans disappears and financial assets are best diverted to risk free instruments -- namely treasuries, CDs, and the prime money market (ok, not 100% risk free but good enough) available at V. --while the next generation takes the baton for another lap in the investment marathon.

Hi Felix,

Your desire for safety in retirement would be very unsafe for most retirees.  It is possible that you will live as long in retirement as you did working.  "Safe" investments may not even keep up with inflation.  This is why virtually every investment professional suggests at least keeping some growth potential in your portfolio.  25% equities is the low ball figure often used.

The exception to that rule might be someone with 50 or more times their yearly expenses.

Try dividing your portfolio by 30.  Unless that number is double or more than your yearly expenses, it is likely not safe to be "safe".

Very much agree!

Risk cuts both ways. Too much risk can be bad; too little risk can be equally bad, just in a different way.

Equity volatility viewed from a long-term perspective is just noise in the big scheme of things. Risk-adjusted return makes sense for monies you need in the short-term, but when the timeframe is extended a decade (or more), it usually just means lost opportunity!

The historical differential between equities and fixed-income, compounded over a 25-30 year retirement period can be staggering.

Gatorbyter

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Follower ○○

Re: Wellington and Wellesley

Good points. The answer for me is, "It all depends." 


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Explorer ○

Re: Re: Wellington and Wellesley

It all depends...

On what?

It may be academic at this point, if you sold out of vwinx/vwelx a strategic decision was made which put you in a different universe...you ain't going back.

the above has little to do with vwinx and vwelx, it has to do with your "perspective", generational cycles, etc.

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Follower ○○

Re: Wellington and Wellesley

I admit that I keep going back and forth on Wellesley ... bought in big time at the beginning of retirement ("best" retirement fund and all that, strongly recommened by Ms. Benz and company, etc.); backed off and sold it when it went though it's slow down in 2018; and now back in at lesser amounts.

(Yes, I know, intellectually, I should just stay the course).

I can't believe the market will continue to grow anything like it has been and probably will retract quite a bit, so, as a retiree, I find the relative safety of Wellesley very attractive.

However, its long-term growth is inherenty mediocre by design (because of its heavy bond portion) and its income, while reasonable, is lukewarm for a retiree without any pension.

I understand why people suggest Wellington is the better way to go because of its higher stock allocation and the woes of the current bond market but I am leary in making that a primary part of my portfolio's "core."

I am currently following Yogi's suggestion of Wellesley for safety and safe income ratched up by VYM to give it more punch but I still wonder if I could do better (and, yes, I do own some PIMIX, international, a REIT, and also dabble with some "relatively" safe CEFs like PCI for extra income but -- other than PIMIX -- occasionally worry that is too much like chasing yield).

For what it's worth ...

Probably just retiree income angst being played out here!

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Explorer ○

xx

For many retirees one or the other is a solid choice.

For every reason someone could give why wellesley is worse than Wellington a counter argument exists, and vice versa. You need to look at the return, income, SD, etc. you "need", not concern yourself with rhetorical arguments...which all may be true/possible.

I plan on a 3% draw in 3% inflation (I'm 65), which translates to 6.19% annualized return over periods of several years. I think wellesley has a good shot at doing that (I'll be 100% wellesley in retirement), and if it does I will get my inflation-adjusted draw AND my portfolio will maintain purchasing power. Maybe wellesley can do all that for a 3.5% draw too. Of course I/wellesley will never realize gains in a bull market like Wellington, Wellington could easily provide a better end result than wellesley.

If I meet or come close to my objectives, ie a real draw in retirement and real portfolio growth, I'll feel successful and won't care about better results.

If your draw % is 4 or 4.5% then wellington may be the better choice. Of course you'll be at lower income and higher SD. 

The draw % is the most important input unless inflation is really high so anything you can do to push your draw down is big.

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Explorer ○

Re: xx

Don't be ratcheting, dabbling, tweaking, etc.

To be honest you have a concern about your "current" porfolio meeting your objectives (you need to ratchet, dabble, tweak, etc.), as long as that concern exists you'll be susceptible to ratcheting, dabbling, tweaking, etc. which will cost you dearly.

If you eliminate that concern you won't be ratcheting, dabbling, tweaking, etc.

You eliminate that concern by going through your numbers, until you realize (take to heart) your situation there's always going to be doubt which unsettles you. You want/need a REAL portfolio, not an ongoing experiment.

A good CFP?

Good Luck, Ken.

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Frequent Contributor

Re: Wellington and Wellesley

Ken,

How do you plan on handling draws in retirement; reinvest all distributions and sell shares later, take income distributions quarterly, sell shares at the beginning of the year, send income to a MM and then drain at the beginning of the year or along the way?

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Explorer ○

Re: Wel

Draw at the beginning of each year, put the draw in my checking acct, and reinvest all yearly distributions.

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Follower ○○

Re: Wellington and Wellesley

50% Wellington and 50% Wellesley and call it a day. 

You won't go wrong with that mix.

If you were to go with one you are going to with you

went with the other, do both.

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Contributor ○

Re: Wellington and Wellesley

Even though Wellington has value tilt and lagging Wellesly ytd. YTD performance is too early to judge.

Given I have 15 years to retirement I will continue with Wellington. It is already too conservative for me. And hope that Wellington managers will somehow get on the right side of the market or market will finally agree with their picks.

Though in past that has rarely if ever happened for managers that got on the wrong. Ie they continue on wrong side for years.

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Frequent Contributor

Re: Wellington and Wellesley


@waffle wrote:

Even though Wellington has value tilt and lagging Wellesly ytd. YTD performance is too early to judge.

Given I have 15 years to retirement I will continue with Wellington. It is already too conservative for me. And hope that Wellington managers will somehow get on the right side of the market or market will finally agree with their picks.

Though in past that has rarely if ever happened for managers that got on the wrong. Ie they continue on wrong side for years.


With recent manager change, VG Wellington will have more growth tilt. Some of it has already happened. So, W&W combo in future will provide both growth and dividend/value flavors.

YBB
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Explorer ○○

Re: Wellington and Wellesley

Putting a fresh log on the fire, I offer Mark Hulbert's assessment of VWINX from today's Marketwatch:

This 50 Year Old Vanguard Mutual Fund is Holding Its Own Against Younger Rivals

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Participant ○○○

Re: Wellington and Wellesley

Avvocato - Thanks for posting. Wellesley is the foundation of my portfolio (largest holding). I am hoping that it continues to provide a steady/slow stream of returns.

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