An odd choice for a VP: Wellesley

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An odd choice for a VP: Wellesley

Post by Kevin K. » Tue Sep 15, 2020 10:01 am

OK here's a weird idea for a VP: Vanguard's venerable Wellesley Income Fund, which celebrated its 50th year of stellar returns this past July.

What prompted the thought was talking with a very knowledgeable investor friend who's long had 25% of his nest egg in W with the rest broadly-diversified in equities, Treasuries and gold. Other than Wellesley he holds only index funds, but feels that a decent slice of arguably the best actively-managed fund in history adds to his diversification - while also providing something his wife could just dump everything else into if he kicks the bucket first.

Of course the fund is narrowly concentrated in handpicked IT corporates and dividend stocks and with U.S. valuations being so rich a fund that holds no international seems somewhat suspect (but of course the PP doesn't hold any either). Probably not a choice that would appeal to most who frequent these forums but I've wondered if a modest allocation to W in my IRA might make sense.
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Re: An odd choice for a VP: Wellesley

Post by modeljc » Tue Sep 15, 2020 10:36 am

Kevin K. wrote:
Tue Sep 15, 2020 10:01 am
OK here's a weird idea for a VP: Vanguard's venerable Wellesley Income Fund, which celebrated its 50th year of stellar returns this past July.

What prompted the thought was talking with a very knowledgeable investor friend who's long had 25% of his nest egg in W with the rest broadly-diversified in equities, Treasuries and gold. Other than Wellesley he holds only index funds, but feels that a decent slice of arguably the best actively-managed fund in history adds to his diversification - while also providing something his wife could just dump everything else into if he kicks the bucket first.

Of course the fund is narrowly concentrated in handpicked IT corporates and dividend stocks and with U.S. valuations being so rich a fund that holds no international seems somewhat suspect (but of course the PP doesn't hold any either). Probably not a choice that would appeal to most who frequent these forums but I've wondered if a modest allocation to W in my IRA might make sense.
I owned W in the past but sold my positon in April 2020. I did not like that the US govt. is providing a bid for corporate investment grade debt. The funds hold 60% or so in bonds. W did well with falling bonds yields and the wind at their back since 1980. It is well managed also.
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Re: An odd choice for a VP: Wellesley

Post by Tyler » Tue Sep 15, 2020 10:57 am

Kevin K. wrote:
Tue Sep 15, 2020 10:01 am
Of course the fund is narrowly concentrated in handpicked IT corporates and dividend stocks and with U.S. valuations being so rich a fund that holds no international seems somewhat suspect (but of course the PP doesn't hold any either).
If you like Wellesley and also want international exposure, they have a new Global Wellesley version called VGWIX. The ER is a bit higher, but if it's run like its famous sibling I imagine it's a good fund.

While I prefer to manage my own portfolio of ETFs, I've always liked Wellesley and have recommended it to friends looking for a safe, simple way to invest. And Wellesley with a side of gold looks and acts a lot like the Golden Butterfly (with a bit more credit risk).
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Re: An odd choice for a VP: Wellesley

Post by Kevin K. » Tue Sep 15, 2020 11:51 am

Thanks very much for your thoughts!

I don't blame folks who dislike active management but Wellington Group certainly has a deep bench and it's difficult to argue with the performance over many decades of either of the "W" funds (Wellington or Wellesley).

I could totally see recommending some combination of the international an domestic Wellesleys to a conservative investor who just wants a set-it-and-forget-it portfolio - albeit preferably with lots of room in tax-deferred accounts.

I think you mentioned the Wellesley with a slice of gold idea before Tyler but I was pretty blown away when I just added 20% IAU to Wellesley and ran some backtests. Guess I should head over to the Bogleheads forum and start a thread called "How To Fix Wellesley." (just kidding - I've learned my lesson about mentioning the four-letter word G**d over there). ;)
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Re: An odd choice for a VP: Wellesley

Post by modeljc » Tue Sep 15, 2020 5:02 pm

Kevin K. wrote:
Tue Sep 15, 2020 11:51 am
Thanks very much for your thoughts!

I don't blame folks who dislike active management but Wellington Group certainly has a deep bench and it's difficult to argue with the performance over many decades of either of the "W" funds (Wellington or Wellesley).

I could totally see recommending some combination of the international an domestic Wellesleys to a conservative investor who just wants a set-it-and-forget-it portfolio - albeit preferably with lots of room in tax-deferred accounts.

I think you mentioned the Wellesley with a slice of gold idea before Tyler but I was pretty blown away when I just added 20% IAU to Wellesley and ran some backtests. Guess I should head over to the Bogleheads forum and start a thread called "How To Fix Wellesley." (just kidding - I've learned my lesson about mentioning the four-letter word G**d over there). ;)
Pls. share the backtests.
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Re: An odd choice for a VP: Wellesley

Post by Kevin K. » Tue Sep 15, 2020 5:34 pm

OK here's the best I can come up with. The constraint is that GLD, the first U.S. gold ETF, has only been in existence since 2004. But this gives you a good sense of what Tyler was talking about.

The general principle that he talks about in his excellent article on gold on the Portfolio Charts site of a modest allocation to gold smoothing overall performance clearly applies to even a quite concentrated portfolio like Wellesley:

https://www.portfoliovisualizer.com/bac ... tion6_3=75
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Re: An odd choice for a VP: Wellesley

Post by I Shrugged » Tue Sep 15, 2020 6:04 pm

Wellesley has been rock solid for the ~30 years my wife has used it for her IRA money. I'm very impressed with it. I wouldn't hesitate to recommend it to anyone looking for steady, conservative growth.
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Re: An odd choice for a VP: Wellesley

Post by D1984 » Tue Sep 15, 2020 6:26 pm

Kevin K. wrote:
Tue Sep 15, 2020 5:34 pm
OK here's the best I can come up with. The constraint is that GLD, the first U.S. gold ETF, has only been in existence since 2004. But this gives you a good sense of what Tyler was talking about.

The general principle that he talks about in his excellent article on gold on the Portfolio Charts site of a modest allocation to gold smoothing overall performance clearly applies to even a quite concentrated portfolio like Wellesley:

https://www.portfoliovisualizer.com/bac ... tion6_3=75
https://www.portfoliovisualizer.com/bac ... ation7_1=2

Here it is back to 1987; I had to use VUSTX in place of TLT, a blend of FIGTX/CASHX to replace VFISX, ^GOLD in place of IAU or GLD, VFINX in lieu of a TSM fund since no TSM fund goes back that far, and an actively managed SCV fund (PENNX) since no Vanguard or DFA SCV index funds go back that far....but it does show how adding gold can smooth things out.
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Re: An odd choice for a VP: Wellesley

Post by Kevin K. » Tue Sep 15, 2020 7:00 pm

Thanks very much for doing that D1984.

All three are outstanding portfolios. The 80% Wellesley 20% Gold iteration has the best risk-adjusted returns of any of these options in both backtests. A winner it would appear for anyone wanting to keep things simple while applying a bit of PP wisdom to what is after all the epitome of a mainstream retirement income fund.
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Re: An odd choice for a VP: Wellesley

Post by PP67 » Wed Sep 16, 2020 10:12 am

I just celebrated my 69th birthday have long thought about how I could make our investments easier for my wife after I'm gone and had considered that perhaps moving everything to a Wellesley + Gold allocation would be the simplest for her to manage with Vanguard doing most of the "managing" within the Wellesley fund.

Taylor, I know I have asked about this before and no doubt have no idea of how hard and complicated it might be but since there is a lot of historical data for the Wellesley fund (and the Wellington fund), could it be possible to add these funds to your portfolio charts options and see if how they would look? I suspect a lot of fans would be very interested. I would certainly be Venti Venti grateful!
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Re: An odd choice for a VP: Wellesley

Post by Tyler » Wed Sep 16, 2020 11:59 am

PP67 wrote:
Wed Sep 16, 2020 10:12 am
Taylor, I know I have asked about this before and no doubt have no idea of how hard and complicated it might be but since there is a lot of historical data for the Wellesley fund (and the Wellington fund), could it be possible to add these funds to your portfolio charts options and see if how they would look? I suspect a lot of fans would be very interested. I would certainly be Venti Venti grateful!
Adding mutual funds to the site is outside of my goals for now, but I'm happy to hook you guys up with a few custom charts. 8) All of these use VWIAX data from the Simba spreadsheet. I haven't done some of my normal things like verifying returns and correcting ERs, but Simba is pretty trustworthy and it should be close enough to get the idea.

Image
Image
Image

Like I said, that's pretty similar to the GB. Long story short, the income focus of Wellesley shifts the stocks towards value and the bonds towards higher-yielding options (using greater credit risk rather than longer maturities). The end result is in the same structural ballpark as the GB, so the numbers aren't too surprising.
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Re: An odd choice for a VP: Wellesley

Post by Mark Leavy » Wed Sep 16, 2020 12:21 pm

Tyler wrote:
Wed Sep 16, 2020 11:59 am
Adding mutual funds to the site is outside of my goals for now, but I'm happy to hook you guys up with a few custom charts. 8)
You're a mensch, Taylor
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Re: An odd choice for a VP: Wellesley

Post by PP67 » Wed Sep 16, 2020 3:15 pm

Excellent Taylor!

It is very GB-esque!

Many Many Thanks!
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Re: An odd choice for a VP: Wellesley

Post by Tyler » Wed Sep 16, 2020 3:42 pm

I feel like my timeline crossed somewhere and I jumped into an alternate universe where everything is the same but people call me Taylor. ;)

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Re: An odd choice for a VP: Wellesley

Post by pp4me » Wed Sep 16, 2020 4:04 pm

When I was researching a safer way to invest after the 2008 meltdown I came across a debate about Wellesley vs the Permanent Portfolio on a forum. I don't think it was Bogleheads but I remember that MT and Craig were on the PP side and it got pretty nasty at times.

I went with Wellesley for a while, not because MT and Craig didn't sell the PP very well but because it appealed to my lazy nature, having less moving parts to deal with. Eventually, I bought HB's book, sold all the Wellesley and distributed it 4 ways into the PP components.

Wellesley doesn't make much sense as a VP to me because it's considered a fairly conservative and safe investment which is why it matched up well with the PP. According to Harry, the VP is supposed to consist of money that you can afford to lose and "swinging for the fences" as he think he might have said it. Wellesley doesn't seem to fit that bill to me.
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Re: An odd choice for a VP: Wellesley

Post by Mark Leavy » Wed Sep 16, 2020 4:21 pm

Tyler wrote:
Wed Sep 16, 2020 3:42 pm
I feel like my timeline crossed somewhere and I jumped into an alternate universe where everything is the same but people call me Taylor. ;)
Dang! Sorry about that. You do good work, also, Tyler :)
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Re: An odd choice for a VP: Wellesley

Post by Smith1776 » Wed Sep 16, 2020 4:34 pm

Nobody DARE confuse Tyler with Taylor.

That's like confusing Coca-Cola with Walmart cola.
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Re: An odd choice for a VP: Wellesley

Post by Kevin K. » Wed Sep 16, 2020 5:11 pm

pp4me wrote:
Wed Sep 16, 2020 4:04 pm
When I was researching a safer way to invest after the 2008 meltdown I came across a debate about Wellesley vs the Permanent Portfolio on a forum. I don't think it was Bogleheads but I remember that MT and Craig were on the PP side and it got pretty nasty at times.

I went with Wellesley for a while, not because MT and Craig didn't sell the PP very well but because it appealed to my lazy nature, having less moving parts to deal with. Eventually, I bought HB's book, sold all the Wellesley and distributed it 4 ways into the PP components.

Wellesley doesn't make much sense as a VP to me because it's considered a fairly conservative and safe investment which is why it matched up well with the PP. According to Harry, the VP is supposed to consist of money that you can afford to lose and "swinging for the fences" as he think he might have said it. Wellesley doesn't seem to fit that bill to me.
You're correct of course about the original purpose of the variable portfolio but I'd argue that it's okay to repurpose it and also to tinker with the PP - not only because Browne did himself as his thinking evolved, but also because negative real returns on even 30 year Treasuries weren't even on his radar screen.

In and of itself Wellesley provides diversification vs. the PP because it is actively managed and invests in assets that aren't included in the PP. Add in Tyler's brilliant suggestion of a slice of gold and you have (on paper, admittedly) a level of sequence-of-returns and drawdown insurance that's truly impressive. One could also make some of the Wellesley allocation its global version for international exposure - something that neither the PP nor regular Wellesley provides.

I'm also looking at this through the lens of today's unprecedented Treasury yield situation and today's crystal clear statement by the Fed that they intend for it to continue for years to come. I see no point in owning even intermediate Treasuries in the PP so a "safe" version of that allocation is something like 50% T-bills and the rest gold and TSM. Wellesley's carefully-selected IT bonds and dividend-paying stocks are looking pretty good by comparison. NOT to suggest jettisoning the PP or GB altogether but I could certainly see splitting my assets 50:50 into the Wellesley/Gold and a GB. So rather than viewing the variable portfolio as being for money I can afford to lose, I'm looking at it as a way of increasing my chances of winning through broader diversification of investment styles and assets. YMMV of course.
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Re: An odd choice for a VP: Wellesley

Post by vnatale » Wed Sep 16, 2020 5:23 pm

Kevin K. wrote:
Wed Sep 16, 2020 5:11 pm
pp4me wrote:
Wed Sep 16, 2020 4:04 pm
When I was researching a safer way to invest after the 2008 meltdown I came across a debate about Wellesley vs the Permanent Portfolio on a forum. I don't think it was Bogleheads but I remember that MT and Craig were on the PP side and it got pretty nasty at times.

I went with Wellesley for a while, not because MT and Craig didn't sell the PP very well but because it appealed to my lazy nature, having less moving parts to deal with. Eventually, I bought HB's book, sold all the Wellesley and distributed it 4 ways into the PP components.

Wellesley doesn't make much sense as a VP to me because it's considered a fairly conservative and safe investment which is why it matched up well with the PP. According to Harry, the VP is supposed to consist of money that you can afford to lose and "swinging for the fences" as he think he might have said it. Wellesley doesn't seem to fit that bill to me.
You're correct of course about the original purpose of the variable portfolio but I'd argue that it's okay to repurpose it and also to tinker with the PP - not only because Browne did himself as his thinking evolved, but also because negative real returns on even 30 year Treasuries weren't even on his radar screen.

In and of itself Wellesley provides diversification vs. the PP because it is actively managed and invests in assets that aren't included in the PP. Add in Tyler's brilliant suggestion of a slice of gold and you have (on paper, admittedly) a level of sequence-of-returns and drawdown insurance that's truly impressive. One could also make some of the Wellesley allocation its global version for international exposure - something that neither the PP nor regular Wellesley provides.

I'm also looking at this through the lens of today's unprecedented Treasury yield situation and today's crystal clear statement by the Fed that they intend for it to continue for years to come. I see no point in owning even intermediate Treasuries in the PP so a "safe" version of that allocation is something like 50% T-bills and the rest gold and TSM. Wellesley's carefully-selected IT bonds and dividend-paying stocks are looking pretty good by comparison. NOT to suggest jettisoning the PP or GB altogether but I could certainly see splitting my assets 50:50 into the Wellesley/Gold and a GB. So rather than viewing the variable portfolio as being for money I can afford to lose, I'm looking at it as a way of increasing my chances of winning through broader diversification of investment styles and assets. YMMV of course.
What exactly was that statement?

I'd read in a few articles to expect the status quo for the next five to ten years.

Vinny
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Re: An odd choice for a VP: Wellesley

Post by D1984 » Wed Sep 16, 2020 5:49 pm

Kevin K. wrote:
Wed Sep 16, 2020 5:11 pm
pp4me wrote:
Wed Sep 16, 2020 4:04 pm
When I was researching a safer way to invest after the 2008 meltdown I came across a debate about Wellesley vs the Permanent Portfolio on a forum. I don't think it was Bogleheads but I remember that MT and Craig were on the PP side and it got pretty nasty at times.

I went with Wellesley for a while, not because MT and Craig didn't sell the PP very well but because it appealed to my lazy nature, having less moving parts to deal with. Eventually, I bought HB's book, sold all the Wellesley and distributed it 4 ways into the PP components.

Wellesley doesn't make much sense as a VP to me because it's considered a fairly conservative and safe investment which is why it matched up well with the PP. According to Harry, the VP is supposed to consist of money that you can afford to lose and "swinging for the fences" as he think he might have said it. Wellesley doesn't seem to fit that bill to me.
You're correct of course about the original purpose of the variable portfolio but I'd argue that it's okay to repurpose it and also to tinker with the PP - not only because Browne did himself as his thinking evolved, but also because negative real returns on even 30 year Treasuries weren't even on his radar screen.

In and of itself Wellesley provides diversification vs. the PP because it is actively managed and invests in assets that aren't included in the PP. Add in Tyler's brilliant suggestion of a slice of gold and you have (on paper, admittedly) a level of sequence-of-returns and drawdown insurance that's truly impressive. One could also make some of the Wellesley allocation its global version for international exposure - something that neither the PP nor regular Wellesley provides.

I'm also looking at this through the lens of today's unprecedented Treasury yield situation and today's crystal clear statement by the Fed that they intend for it to continue for years to come. I see no point in owning even intermediate Treasuries in the PP so a "safe" version of that allocation is something like 50% T-bills and the rest gold and TSM. Wellesley's carefully-selected IT bonds and dividend-paying stocks are looking pretty good by comparison. NOT to suggest jettisoning the PP or GB altogether but I could certainly see splitting my assets 50:50 into the Wellesley/Gold and a GB. So rather than viewing the variable portfolio as being for money I can afford to lose, I'm looking at it as a way of increasing my chances of winning through broader diversification of investment styles and assets. YMMV of course.
Just something to add concerning Wellesley as the VP in a 50/50 VP/PP blend (whether the "PP" section of that blend is the classic PP or the GB): A portfolio consisting of 50% Wellesely and 50% classic PP rebalanced annually has a lower standard deviation, higher Sharpe, higher Sortino, a less-bad worst year, and a lower MaxDD then either of the two separately while having a CAGR that is right between either of the two; see:

https://www.portfoliovisualizer.com/bac ... on8_3=12.5

A 50/50 annually rebalanced blend of Wellesley and the GB shows similar characteristics.....lower SD and a higher Sharpe and Sortino; it has a worst year and MaxDD that is between that of the GB and Wellesley (albeit much closer to the one for the GB which has a less bad maxDD than Wellesley) but returns that are pretty close to the higher-returning of the two (Wellesley); see:

https://www.portfoliovisualizer.com/bac ... tion9_3=50

What is good about either of these allocations is that Wellesley tends to balance out the PP (or GB) and vice versa; when stocks are doing well Wellesley beats the PP/GB but the gold (and bond/cash) heavier PP or GB typically shines in years stocks do poorly.

I can think of one other change that would likely improve performance even more (and that also would improve lack of market correlation in years like 1999 or 2015....one of the big "risks" with holding something like the PP or GB--or Wellesley for that matter--is having a portfolio that can have a down year when the market is going gangbusters; FOMO and regret can cause an investor to switch back to a more risky stock-heavy allocation--like 60/40 or even 100% stocks--at exactly the wrong time) but it kind of involves violating the "classic" 25/25/25/25 PP or the classic "20% of each asset" GB so it may not be of relevance here.
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Re: An odd choice for a VP: Wellesley

Post by Kevin K. » Wed Sep 16, 2020 5:51 pm

[/quote]
What exactly was that statement?
I'd read in a few articles to expect the status quo for the next five to ten years.

Vinny
[/quote]

Here's one of many articles on this. New one in today's NY Times as well saying no interest rate increases until at least 2023.

https://www.cnn.com/2020/09/16/economy ... index.html
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Re: An odd choice for a VP: Wellesley

Post by Kevin K. » Thu Sep 17, 2020 2:22 pm

D1984 wrote:
Wed Sep 16, 2020 5:49 pm
Kevin K. wrote:
Wed Sep 16, 2020 5:11 pm
pp4me wrote:
Wed Sep 16, 2020 4:04 pm
When I was researching a safer way to invest after the 2008 meltdown I came across a debate about Wellesley vs the Permanent Portfolio on a forum. I don't think it was Bogleheads but I remember that MT and Craig were on the PP side and it got pretty nasty at times.

I went with Wellesley for a while, not because MT and Craig didn't sell the PP very well but because it appealed to my lazy nature, having less moving parts to deal with. Eventually, I bought HB's book, sold all the Wellesley and distributed it 4 ways into the PP components.

Wellesley doesn't make much sense as a VP to me because it's considered a fairly conservative and safe investment which is why it matched up well with the PP. According to Harry, the VP is supposed to consist of money that you can afford to lose and "swinging for the fences" as he think he might have said it. Wellesley doesn't seem to fit that bill to me.
You're correct of course about the original purpose of the variable portfolio but I'd argue that it's okay to repurpose it and also to tinker with the PP - not only because Browne did himself as his thinking evolved, but also because negative real returns on even 30 year Treasuries weren't even on his radar screen.

In and of itself Wellesley provides diversification vs. the PP because it is actively managed and invests in assets that aren't included in the PP. Add in Tyler's brilliant suggestion of a slice of gold and you have (on paper, admittedly) a level of sequence-of-returns and drawdown insurance that's truly impressive. One could also make some of the Wellesley allocation its global version for international exposure - something that neither the PP nor regular Wellesley provides.

I'm also looking at this through the lens of today's unprecedented Treasury yield situation and today's crystal clear statement by the Fed that they intend for it to continue for years to come. I see no point in owning even intermediate Treasuries in the PP so a "safe" version of that allocation is something like 50% T-bills and the rest gold and TSM. Wellesley's carefully-selected IT bonds and dividend-paying stocks are looking pretty good by comparison. NOT to suggest jettisoning the PP or GB altogether but I could certainly see splitting my assets 50:50 into the Wellesley/Gold and a GB. So rather than viewing the variable portfolio as being for money I can afford to lose, I'm looking at it as a way of increasing my chances of winning through broader diversification of investment styles and assets. YMMV of course.
Just something to add concerning Wellesley as the VP in a 50/50 VP/PP blend (whether the "PP" section of that blend is the classic PP or the GB): A portfolio consisting of 50% Wellesely and 50% classic PP rebalanced annually has a lower standard deviation, higher Sharpe, higher Sortino, a less-bad worst year, and a lower MaxDD then either of the two separately while having a CAGR that is right between either of the two; see:

https://www.portfoliovisualizer.com/bac ... on8_3=12.5

A 50/50 annually rebalanced blend of Wellesley and the GB shows similar characteristics.....lower SD and a higher Sharpe and Sortino; it has a worst year and MaxDD that is between that of the GB and Wellesley (albeit much closer to the one for the GB which has a less bad maxDD than Wellesley) but returns that are pretty close to the higher-returning of the two (Wellesley); see:

https://www.portfoliovisualizer.com/bac ... tion9_3=50

What is good about either of these allocations is that Wellesley tends to balance out the PP (or GB) and vice versa; when stocks are doing well Wellesley beats the PP/GB but the gold (and bond/cash) heavier PP or GB typically shines in years stocks do poorly.

I can think of one other change that would likely improve performance even more (and that also would improve lack of market correlation in years like 1999 or 2015....one of the big "risks" with holding something like the PP or GB--or Wellesley for that matter--is having a portfolio that can have a down year when the market is going gangbusters; FOMO and regret can cause an investor to switch back to a more risky stock-heavy allocation--like 60/40 or even 100% stocks--at exactly the wrong time) but it kind of involves violating the "classic" 25/25/25/25 PP or the classic "20% of each asset" GB so it may not be of relevance here.
Thanks for the backtests and insightful thoughts!

A few more thoughts inspired by yours:

1. Both Wellesley and the PP and GB lack any international assets, though I do buy Tyler's argument that gold kind of obviates the need for international stocks - at least historically. With U.S. valuations sky-high thanks to the FAANG stock mania and both the dollar's status as the world's reserve currency and U.S. leadership in the political and economic realms at least somewhat in doubt I perhaps including international equities might make sense. So for example 20% TSM 20% International (VXUS) instead of the small-cap value in the GB.

2. A bigger issue in my mind is with 30 year Treasuries not worth owning anymore (IMHO) having 40-50% (GB and PP respectively) of funds in T-bills or short Treasuries earning nothing isn't exactly thrilling. What are the chances that the hand-selected IT corporate bonds that make up 60-65% of both Wellesley's are going to underperform 50% cash and/or STT's? Slim to none would be my guess. "Golden Wellesley" might rule the roost going forward.

I'm just mulling all of this over but what appeals at the moment is putting 50% of assets in the Wellesley (domestic) 80%/Gold 20% allocation and the other half in a modified Golden Butterfly with 20% each TSM, Total International and Gold and the rest Short-Term Treasuries. That way you have a substantial piece of perhaps the best actively-managed fund in history with its careful selection of corporate bonds and dividend stocks contrasted with an all-index blend that makes up for the lack of international and lack of highest-quality bonds in Wellesley without taking on LTT's that are at least as volatile as gold with little remaining upside.
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Re: An odd choice for a VP: Wellesley

Post by Kevin K. » Wed Sep 23, 2020 7:47 pm

Speaking of Wellesley, here's an interview with two of the fund's managers about how they manage risk:

https://www.morningstar.com/podcasts/the-long-view/75
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Re: An odd choice for a VP: Wellesley

Post by drumminj » Tue Sep 29, 2020 9:33 am

Appreciate all the insights offered in this thread. I don't have anything of substance to contribute to the discussion here other than to share that over the course of the past few years I've invested in Wellesley in addition to the PP, mainly for a bit more diversification (strategy and institution).

I'm about 20% VWIAX and 80% PP with my assets at this point.
Kevin K.
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Re: An odd choice for a VP: Wellesley

Post by Kevin K. » Tue Sep 29, 2020 11:34 am

drumminj wrote:
Tue Sep 29, 2020 9:33 am
Appreciate all the insights offered in this thread. I don't have anything of substance to contribute to the discussion here other than to share that over the course of the past few years I've invested in Wellesley in addition to the PP, mainly for a bit more diversification (strategy and institution).

I'm about 20% VWIAX and 80% PP with my assets at this point.
Thanks for posting. I don't see how you can go too wrong with an allocation like that, and as I mentioned over on the Ray Dalio bond thread I've gone down a somewhat parallel path myself, with around 40% of my total portfolio in Wellesley and the rest in a PP-inspired mixture of equities, gold and (mostly) Treasuries.

Here's a link to an excellent recent Morningstar podcast interview with two of the principal managers of Wellington Group's equities:

https://www.morningstar.com/podcasts/the-long-view/75

You can download the transcript at the link too. I especially enjoyed the discussion of how they mitigate against downside risks.

So yeah, in owning Wellesley you've got an allocation to skilled active management of a couple of sectors (handpicked corporate bonds and dividend-paying stocks) that are far removed from the PP's assets. I see it as analogous to the inclusion of Small Cap Value in the Golden Butterfly except that Wellesley has been an über-successful value play for 50 years.
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