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Frequent Contributor

"But in my mind, classic balanced funds...

"But in my mind, classic balanced funds, bought on a buy and hold (go fishing) basis, combining all the risks associated with this approach, is, IMHO:  THE SINGLE MOST RISKY INVESTMENT STYLE THAT IS MOST LIKELY TO DISAPPOINT INVESTORS THE MOST THROUGHOUT THE NEXT FIFTEEN YEARS"  Posted Oct. 16, 2011.

8 years later:

Wellington:  CAGR  10.94      SD 7.3     Sharpe 1.38

Wellesley     CAGR    8.00      SD 4.6     Sharpe 1.59

VG Bal Ind   CAGR   10.09     SD 7        Sharpe 1.33

Over halfway throughout, and no sign of disappointment.

 

EDIT:  And I just "won" a conversation starter badge!!  Woot woot!!

64 Replies
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Frequent Contributor

Re: "But in my mind, classic balanced funds...

Bill,

 If it were up to me, you would be put on double supervised probation for your inflammatory missive.

Hope all is well, MSU looks really good this year.

Go, Duke.......:))

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Frequent Contributor

Re: "But in my mind, classic balanced funds...

No doubt, Bill, they are good funds. We hold two of the three.

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Frequent Contributor

Re: "But in my mind, classic balanced funds...

Rumors of the death of balanced funds have been greatly exaggerated.  😉

Bob

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Frequent Contributor

Re: "But in my mind, classic balanced funds...


@GLI2019 wrote:

Rumors of the death of balanced funds have been greatly exaggerated.  😉

Bob


Anybody wanna posit/opine whether it's better, financially, to use something like VWINX or VWELX, compared to 'rolling your own', using something like VEIPX and VWEHX, appropriately rebalanced as necessary?  PV link.

ElLobo, de la casa de la toro caca grande
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Frequent Contributor

Re: "But in my mind, classic balanced funds...

What I can "opine," ElLobo, is I share your general regard for Wellington Management.  👍

Bob

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Frequent Contributor

Re: "But in my mind, classic balanced funds...


@ElLobo wrote:

@GLI2019 wrote:

Rumors of the death of balanced funds have been greatly exaggerated.  😉

Bob


Anybody wanna posit/opine whether it's better, financially, to use something like VWINX or VWELX, compared to 'rolling your own', using something like VEIPX and VWEHX, appropriately rebalanced as necessary?  PV link.


Well, in a way, we all roll our own when we hold stock and bond funds.

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Frequent Contributor

Re: "But in my mind, classic balanced funds...


@FatKat wrote:

@ElLobo wrote:

@GLI2019 wrote:

Rumors of the death of balanced funds have been greatly exaggerated.  😉

Bob


Anybody wanna posit/opine whether it's better, financially, to use something like VWINX or VWELX, compared to 'rolling your own', using something like VEIPX and VWEHX, appropriately rebalanced as necessary?  PV link.


Well, in a way, we all roll our own when we hold stock and bond funds.


Yes we do and we don't own VWELX or VWINX!  Or, if we do own either and, in addition, other stock or bond funds, we 'tilt' towards something!  So what's the rational for such tilting?  What does it give you, in terms of risk/returns, that VWINX or VWELX doesn't give you by itself?

Again, just a topic for discussion.  I hold neither, but ifn I did hold a balanced fund, twud be one of these two, probably VWELX, since it's close to 60/40 allocation, rather than 40/60.

At those allocations, VWELX would seem to be 'growth', as in 'stocks for growth', compared to VWINX (bonds for income).  Yet, the PV run shows that VWELX usually produced about the same amount income as VWINX, regardless of whether or not distributions were reinvested.  At least since October 2011, per Bill's OP.

Nothing more profound!

ElLobo, de la casa de la toro caca grande
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Frequent Contributor

Re: "But in my mind, classic balanced funds...

I might say what I would like to do is hold more VWIAX and less equity funds and have reinvested in some decent bond funds, like DODIX and BAGIX because these funds will earn some over time and usually act as ballast to my equity funds. For many years now I avoided bond funds fir the usual reasons, but I do realise a bear market would be painful. I may begin to reinvest in VWIAX next year; I like it more than VWENX for now.

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Frequent Contributor

Re: "But in my mind, classic balanced funds...


@ElLobo wrote:

@GLI2019 wrote:

Rumors of the death of balanced funds have been greatly exaggerated.  😉

Bob


Anybody wanna posit/opine whether it's better, financially, to use something like VWINX or VWELX, compared to 'rolling your own', using something like VEIPX and VWEHX, appropriately rebalanced as necessary?  PV link.


I’m definitely a roll-your-owner. Mainly because I want the flexibility to choose different bond sleeve characteristics than a Wellington or a Wellesley.

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Participant ○

Re: "But in my mind, classic balanced funds...


@ElLobo wrote:

Anybody wanna posit/opine whether it's better, financially, to use something like VWINX or VWELX, compared to 'rolling your own', using something like VEIPX and VWEHX, appropriately rebalanced as necessary?  PV link.


Whether it is better to use a balanced fund or roll you own depends on the funds and the time period. The PV link you provided was from OCT 2011. PV has the data back to at least APR 1988, the first full month of VEIPX, PV link.

Looking at the rolling returns given by PV, the average rolling return of VWELX (about 65% stocks and 35% bonds) has been greater than that of 65% VEIPX plus 35% VWEHX for all roll periods.

Looking at the rolling returns given by PV, the average rolling return of VWINX (about 35% stocks and 65% bonds) has been greater than that of 35% VEIPX plus 65% VWEHX (PV link) for all roll periods.

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Re: "But in my mind, classic balanced funds...


@chang wrote:

@ElLobo wrote:

@GLI2019 wrote:

Rumors of the death of balanced funds have been greatly exaggerated.  😉

Bob


Anybody wanna posit/opine whether it's better, financially, to use something like VWINX or VWELX, compared to 'rolling your own', using something like VEIPX and VWEHX, appropriately rebalanced as necessary?  PV link.


I’m definitely a roll-your-owner. Mainly because I want the flexibility to choose different bond sleeve characteristics than a Wellington or a Wellesley.


Same here, and those funds are value plays. I have invested more in growth since 2012, I do own some VWENX, but have not added to the fund in some time now. I think value might outdo growth if the market slows down? I like VWIAX better.

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Frequent Contributor

Re: "But in my mind, classic balanced funds...

Totally agree that there are many combinations out there that have and will beat these balanced funds.  Clearly this time period favored higher equity exposure.  However, anyone who is "disappointed" in getting 8% with 38% equity exposure or 11% with 65% equity exposure, has unrealistic expectations, IMO.

One of the biggest advantages of balanced funds is that one IS NOT able to increase or decrease bond or equity sleeves or decide to go to growth or high yield bonds.  You are implicitly required to "stay the course".  And in doing so, you get the real return of the fund, instead of the hit and miss effect of rotating in and out.

 

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Explorer ○

Re: "But in my mind, classic balanced funds...

Yes, but of course we have had a period of declining rates, if we enter an opposite period, the picture may change. 

I know this is obvious. Buy I had to comment if I'm every going to "graduate" from lurker.  :-)

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Re: "But in my mind, classic balanced funds...


@PatMorgan wrote:

@ElLobo wrote:

Anybody wanna posit/opine whether it's better, financially, to use something like VWINX or VWELX, compared to 'rolling your own', using something like VEIPX and VWEHX, appropriately rebalanced as necessary?  PV link.


Whether it is better to use a balanced fund or roll you own depends on the funds and the time period. The PV link you provided was from OCT 2011. PV has the data back to at least APR 1988, the first full month of VEIPX, PV link.

Looking at the rolling returns given by PV, the average rolling return of VWELX (about 65% stocks and 35% bonds) has been greater than that of 65% VEIPX plus 35% VWEHX for all roll periods.

Looking at the rolling returns given by PV, the average rolling return of VWINX (about 35% stocks and 65% bonds) has been greater than that of 35% VEIPX plus 65% VWEHX (PV link) for all roll periods.


Bill used Oct 2011 in his OP and I used VEIPX and VWEHX as examples, not recommendations.

ElLobo, de la casa de la toro caca grande
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Re: "But in my mind, classic balanced funds...


@bilperk wrote:

Totally agree that there are many combinations out there that have and will beat these balanced funds.  Clearly this time period favored higher equity exposure.  However, anyone who is "disappointed" in getting 8% with 38% equity exposure or 11% with 65% equity exposure, has unrealistic expectations, IMO.

One of the biggest advantages of balanced funds is that one IS NOT able to increase or decrease bond or equity sleeves or decide to go to growth or high yield bonds.  You are implicitly required to "stay the course".  And in doing so, you get the real return of the fund, instead of the hit and miss effect of rotating in and out.

 


Although one CAN increase/decrease stock/bond sleeves, one doesn't HAVE TO.  One can buy and hold, rebalancing annually.  That's what my PV analysis did!  Likewise, ifn there is a sharp selloff during the year in one, but not the other, one can rebalance at that point in time, rather than waiting until yearend.  Seems as if the only real advantage in a single balanced fund approach is simplicity!

ElLobo, de la casa de la toro caca grande
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Frequent Contributor

Re: "But in my mind, classic balanced funds...

Yes. I have t agree. I do like the bond sleeve in VWENX and that is has the higher amount of bonds. I think the fund is well managed and it is the bond sleeve that is hardest for me to hold comfortably. I believe stocks are easier to understand than bonds. Good management helps!

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Re: "But in my mind, classic balanced funds...


@FatKat wrote:

Yes. I have t agree. I do like the bond sleeve in VWENX and that is has the higher amount of bonds. I think the fund is well managed and it is the bond sleeve that is hardest for me to hold comfortably. I believe stocks are easier to understand than bonds. Good management helps!


Rolling your own also has the advantage that you can use a fund (OEF, CEF, ETF, ETN) for one side of your allocation and individual stocks/bonds for the other.  For example, one might use stock funds but individual bonds, to avoid capital losses (buy at original issue, redeem at maturity), or to counter inflation (use TIPs ladder to assure X number of years of future real, inflation adjusted withdrawals during retirement.)

I originally (over a decade ago) ran my retirement portfolio using VWEHX for the bond allocation and high yield individual stocks for the stock allocation.

ElLobo, de la casa de la toro caca grande
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Re: "But in my mind, classic balanced funds...

I like individual bonds and back ten years ago had invested in several at variation of maturity. My average rate is 5.5 percent, coming due between 2018 and 2032. Having not known how low rates have gone, thinking rates would increase, now I wish I had purchased a larger amount than $10,000 a bond.

I have held PIMIX and hold PIGIX, and some core and coreplus bond funds. 

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Re: "But in my mind, classic balanced funds...


@ElLobo wrote:


Anybody wanna posit/opine whether it's better, financially, to use something like VWINX or VWELX, compared to 'rolling your own', using something like VEIPX and VWEHX, appropriately rebalanced as necessary?  PV link.

Apparently, "rolling your own" and using USMV and PIMIX since November 2011, for example, would certainly have been an excellent choice financially.

Portfolio Visualizer indicates that a USMV/PIMIX combination has a rather better risk/reward profile over that time period compared to "classic balanced funds" like VWINX or VWELX:

                                                    CAGR*            Std Dev             Sharpe                Sortino

USMV/PIMIX (35/65)                 10.0%                 4.3                   2.1                       4.8

VWINX                                        7.5                     4.4                   1.5                       2.9

 

USMV/PIMIX (65/35)                12.1%                 6.1                   1.8                       3.7

VWELX                                      10.1                    7.0                   1.3                       2.3

* Compund Annual Growth Rate

In other words, if "rolling your own", careful fund selection and diligently monitoring performance of same is critical if one doesn't want to be a disappointed investor. Otherwise, stick with balanced funds with proven track records from highly regarded fund companies.

Good luck,

Fred

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