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Is VWELX still the 'good' Vanguard fund?

alkemyst

alkemyst

No Lifer
I have $11000 sitting on my desk I need to put somewhere. I was thinking the VBINX, but many talk about the VWELX being much much better if you have the initial $10k to invest (the fund has a minimum investment).

I don't have the $50k to do this with Admiral Shares...so that is not an option.

Please do not recommend other options that are closed to new investors. I really don't need a 'googler' to answer this, looking for someone with some experience.

Thanks

Å
 
so there are details missing that would be helpful.

what's the time horizon for this investment? is it considered a part of money for retirement? emergency funds? etc..

what's your risk tolerance for losing money? VWELX is roughly 65% stock/35 bond. can you handle losing a 33.5% portion of your investment in a bad year?

if it's retirement, what's your AA say to do with it?

edit- if you have space in your tax deferred, you can be more tax efficient by increasing a portion of bonds in that space. then in the taxable with the 11k buy something along the lines of total stock market or total international which are more tax efficient.
 
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There are better choices.

Expense ratio is 0.3%, but assets under management are 56 billion! (that is Fidelity type assets for an actively managed mutual fund).

Till proven otherwise, that is a quasi-index fund that may make some contrarian sector bets to outperform the market over time.

If this is truly set it and forget it money, VTSMX is boring but will serve you will over time (has even better advantage in taxable account because it is so tax efficient). It owns the whole U. S. stock market, so it will lag, and possibly lag badly, when one particular sector of the stock market is doing well. However, over the long term, it is extremely aggressive in the most important way - strategic asset allocation, in that it is always over 99% stock with minimal cash position. Most actively managed funds keep 5%, possibly 10%, in cash and over time stocks >> bonds > cash. Low expense ratio (Vanguard will automatically convert you to admiral shares when you reach minimums) and low hidden costs (buying and selling costs from turning over portfolio rapidly) give the fund say a 2% average annual return tailwind vs most actively managed funds (i. e. actively managed funds, because of high expense ratio and hidden trading costs, have to beat the market by over 2% a year just to keep up). Ideal for taxable account where you would first draw down ira type accounts and leave this as growth component till late in retirement because it is very tax efficient (can almost be considered tax deferred, but you don't have to start taking money out at a given age). Still, for someone with a 20 - 30, or ideally more, time horizon, it is still a great choice in tax deferred account, if you are truly set it and forget it type.

If you have access to Vanguard Brokerage account within the IRA, LLPFX is a fund I like alot.
 
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alkemyst said:
It is money just want to put away and forget.

It's IRA money
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if it's ira money, then follow your Asset allocation plan for where's it's supposed to go. review your percentiles and then add the money to the sectors that are short.

is this new contribution? max is 10k for two people.

if you dont have an asset allocation plan, it's time to come up with one. once you decide the bonds/domestic equity/foreign equity, vanguard has many low cost options. total stock market has already been mentioned and covers the entire US stock market in the same proportions. total international does the same outside of the US. total bond covers the bonds. you can put together a portfolio with just those three and they are all low cost options. there's the standby 110-age in bonds or the more conservative 100-age. just keep in mind that any equity position can lose up to 50% of it's value and if you cant stand that sort of loss and stand pat then you may want to hedge more towards bonds.
 
VTSMX just takes what the market gives you (you can't pick any index fund, you have to choose the proper index - the total U. S. stock market, or SP500 at worst, and steward of your money for the longterm, especially in a taxable account (hint, Vanguard, Vanguard, Vanguard), rather than trying to beat the market at any given time.

Funny thing is that, over very extended periods of time, this take what the market gives you strategy will beat the vast majority of actively managed mutual funds. Again, over extended periods of time, not the last month, year, or even 5 or 10 year period.

Time and compound interest are a powerful combination, and VTSMX can create a lot of wealth if you just set it and forget it for 30 or more years. Especially advantageous in a taxable account, but still quite valid in a tax-deferred account over very extended periods of time.

Google tyranny of compound interest.

http://www.amazon.com/Mutual-Dummies...2458582&sr=8-3

http://www.amazon.com/Common-Sense-M...2458530&sr=8-4




🙂
 
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Since it's for an IRA I would most likely put in an index like VTSMX and get admiral shares with an investment of $10k. But without knowing anything about your asset allocation it's impossible to make a good recommendation.
 
Can you buy Admiral Shares if you use a 3rd party brokerage? For example. I use Scottrade, and I have far more than $10k invested in various Vanguard funds. But those were accumulated over time. Can I convert them somehow to Admiral Shares?

Thanks.
 
paulney said:
Can you buy Admiral Shares if you use a 3rd party brokerage? For example. I use Scottrade, and I have far more than $10k invested in various Vanguard funds. But those were accumulated over time. Can I convert them somehow to Admiral Shares?

Thanks.
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Depends, depends.

Admiral shares of Vanguard non-index funds are available at Wells Fargo (Wells Trade). Admiral shares of Vanguard index funds are not available.
 
Guys..this is hardly my full portfolio, but this is an amount I want to just let ride.

VTSMX has not performed like VWELX at all. It's still rated at a higher risk too.

This is not money I am looking to manage day by day/month by month/etc.

It's a starter account with Vanguard that I want to get into other investments with.

My main 401k money is in JP and Hartford...
 
paulney said:
Can you buy Admiral Shares if you use a 3rd party brokerage? For example. I use Scottrade, and I have far more than $10k invested in various Vanguard funds. But those were accumulated over time. Can I convert them somehow to Admiral Shares?

Thanks.
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AFAIK if you come in with the minimum investment level you can convert.
 
mshan, all your recommendations only have good past year marks compared to VWELX...

I don't want to stay on top of this one.

VWELX out did both your recommendations and has been weighted since 1929.
 
alkemyst said:
Guys..this is hardly my full portfolio, but this is an amount I want to just let ride.

VTSMX has not performed like VWELX at all. It's still rated at a higher risk too.

This is not money I am looking to manage day by day/month by month/etc.

It's a starter account with Vanguard that I want to get into other investments with.

My main 401k money is in JP and Hartford...
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i'm not sure what you mean buy most of this statement. your portfolio should be looked at globally across all retirement accounts. what does part of your money here and part there have to do with anything?

either fund does not require watching day by day or month by month. VTSMX changes as the US stock market composition changes. it's an index.. if your plan calls for more US equity, it's hard to find anything else outside of other total market index funds that gives you the full spectrum proportioned in real terms that that.

comparing a 100% equity fund to a balanced fund is not an apples to apples comparison. as someone else noted, you can get admiral shares on VTSMX with a 10k investment resulting in a .07% expense ratio.

again, if you have a US equity need, this fulfills it quite well.

wellington, requires more watching as it's an active fund. the contents can vary, albeight they have a much lower turnover than other active funds..

if your goal is to consider this money a wholly new retirement fund, totally separated from your other accounts that is self contained bonds/stocks, you probably want a target retirement fund. there are no other funds that will combine US stocks, bonds, and foreign investments. all of vanguard target funds have less than .20% expenses. less than wellington's .30%

so what is it exactly that you want? not trying to sound like a smartass but your statements, at least to me, are conflicting. all we know is tax-deferred and you dont want to touch it. if it's not to be touched and considered separate, target fund. if it's to be part of the big plan, what sector need are you looking to fulfill? US equity? internation equity? international bond? reit? bonds? income? no risk? high risk? low risk?
 
I will 3rd, 4th, 5th, whatever the recommendation for VTSMX. I also like VWIGX for exposure to overseas companies. Both have done well sitting in my IRA account.
 
mshan, all your recommendations only have good past year marks compared to VWELX...
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If you are a truly long term investor, you need to look deeper into investments latest marketing sales pitch from whatever mutual fund. Is their strategy fundamentally sound and proven over time, are the managers shareholder friendly and have a lot of their own net worth tied up in same fund, or are they just asset gatherers who make a ton of money from management fees from collecting way to many billions of dollars before closing fund? IIRC, some talking head on tv said 10 billion seemed to be threshold where performance really gets hindered by too many assets, but that also really depends upon investing style (long term investor vs short term trader, contrarian style vs momentum investor).

Set and forget VTSMX will serve you very, very well, IF you can truly set it and forget it for decades, and not compare it to hot fund from last month, year, 5 years, or even decade.

In order not to get shaken out by next significant correction, you need to educate yourself about fundamentals of mutual fund investing (when stock market is going up and you are making money, obviously you are happy with whatever someone else recommends, but when inevitable severe correction occurs, can you make educated assessment of whether downturn in your fund is due to temporary market conditions, or did you actually buy a fund that has truly gone bad and will underperform consistently over time?):

http://www.amazon.com/Mutual-Dummies...2529592&sr=8-1

http://www.amazon.com/Common-Sense-M...2529615&sr=1-4

http://72.3.176.249/downloads/SFSuccInv1210.pdf

The most important figure for Wellington is 56 billiion under management (in that fund, they may have personal accounts also that are managed in same style). It is going to be hard for any manager to outperform market over time when they have to deploy that much money - quasi- index fund with decreased volatility is about all you can hope for (underweighting sectors that are obviously going to underperform, making sector bets in areas likely to outperform for quite some time). Still doesn't guarantee outperforming total market over time (again, because of expense ratio, hidden transaction costs, manager mistakes, manager not truly shareholder friendly and doing a lot of trading to make their short term numbers look good so people put money in, or at least don't pull it out when it lags other funds)
 
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I am thinking most of you guys take Brinker's show as gospel. I think based on comments that he was referring to the VTSMX as a fund for the year.

Everywhere I go, even MorningStar, scores VWELX as a less risky long term investment.

Now the VTSAX does bring the line closer in the short term, but over 10 years the VWELX still kicked it's ass.
 
mshan said:
mshan, all your recommendations only have good past year marks compared to VWELX.../QUOTE]

Past performance does not indicate future returns.

Especially if you are truly a long term investor, you need to look deeper into investments you are interested in.

Set and forget VTSMX will serve you very, very well, IF you can truly set it and forget it for decades, and not compare it to hot fund from last month, year, 5 years, or even decade.
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VWELX has been a nice fund for DECADES.
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Wellington did not have 56 billion under management then.

At best, this is going to be a quasi-index fund with decreased volatility.

There is a possibility it will outperform VTSMX over time, but I doubt it, especially if interest rates have stopped going down and may start an uptrend that could last decades.
 
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I just pulled up the Morningstar report for Wellington and looked at it a little more carefully.

Do you realize Wellington is a balanced fund, that seems to always hold a mix of stocks and bonds?

Bonds are probably at the tail end of a 30 year bull market and may produce dismal results going forward. And as a long term investor, you should be looking for funds that are pure stock plays, not balanced or mixed allocation funds. Greater volatility, but over time, stocks >> bonds > cash. Don't have up to date actual numbers, but ballpark stocks 8 - 10% / year (average annual return) vs. bonds 5 - 6% vs cash 2 - 3%. Over time, not many even very good / great mutual funds will be able to beat market (average annual return) by 2 or 3%. Unless you have access to really high quality hedge funds that can produce 20% average annual return, VTSMX is going to be very, very hard to beat over very extended periods of time, and particularly in taxable accounts.

VTSMX is extremely aggressive in the way a true long term investor should want (i. e. strategic asset allocation; always over 99% actually allocated in stocks; actively managed funds usually have 5 - 10% cash and that will be a drag over time).

Wellington or something like Dodge and Cox Balanced (DODBX - http://quote.morningstar.com/fund/f.aspx?t=dodbx) are types of funds you might add when you reach age 50, are starting to get closer to retirement, and can't stand short term losses or volatility that you may not be able to make up before you have to actually start drawing down those funds.

Tyranny of Compound Interest: http://books.google.com/books?id=ac...nepage&q=tyranny of compound interest&f=false
 
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Elbryn said:
i'm not sure what you mean buy most of this statement. your portfolio should be looked at globally across all retirement accounts. what does part of your money here and part there have to do with anything?

either fund does not require watching day by day or month by month. VTSMX changes as the US stock market composition changes. it's an index.. if your plan calls for more US equity, it's hard to find anything else outside of other total market index funds that gives you the full spectrum proportioned in real terms that that.

comparing a 100% equity fund to a balanced fund is not an apples to apples comparison. as someone else noted, you can get admiral shares on VTSMX with a 10k investment resulting in a .07% expense ratio.

again, if you have a US equity need, this fulfills it quite well.

wellington, requires more watching as it's an active fund. the contents can vary, albeight they have a much lower turnover than other active funds..

if your goal is to consider this money a wholly new retirement fund, totally separated from your other accounts that is self contained bonds/stocks, you probably want a target retirement fund. there are no other funds that will combine US stocks, bonds, and foreign investments. all of vanguard target funds have less than .20% expenses. less than wellington's .30%

so what is it exactly that you want? not trying to sound like a smartass but your statements, at least to me, are conflicting. all we know is tax-deferred and you dont want to touch it. if it's not to be touched and considered separate, target fund. if it's to be part of the big plan, what sector need are you looking to fulfill? US equity? internation equity? international bond? reit? bonds? income? no risk? high risk? low risk?
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I'd tend to agree with Elbryn (without the antagonism 😛 ). It's entirely dependent on what exactly you want to do. I will say that fees are very low in Vanguard's Target funds, and you get more diversity than in VTSMX, which is entirely domestic equity. If you're going to do a fire and forget IRA, then this is a great way to go. You can even tailor the allocation (more conservative or more aggressive) by playing with the retirement year of the target fund you choose (i.e. pick a year further out for more equity, or closer in for more bond). It automatically adjusts this allocation over time to a more conservative breakdown as you get closer to the targeted retirement year. And these target funds are fund of fund format, so really just a basket of other Vanguard funds. For example, Target Retirement 2040 (VFORX) top three holdings are Vanguard Total Stock Mkt Idx Inv (62.45%), Vanguard Total Intl Stock Index Inv (26.81%), Vanguard Total Bond Market II Idx Inv (10.09%). So right there, you get some of VTSMX, along with bond & international exposure from the other two.
 
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