Vanguard Balanced Funds

**Broken Arrow** · 10-06-2010, 04:27 AM

What does the rest of your portfolio look like?

What is your investment objective?

As for the target retirement funds, past performance is no guarantee of future performance.

**swampthing** · 10-06-2010, 08:30 AM

I wouldn't exactly call it a portfolio but, I've got a 15k inheritance rotting in a terrible CD about to be up, a small Roth IRA setup not long ago with the Vanguard Star Fund with the bare minimum in it, a little over 3k, over 10k in series EE bonds from the 80s earning around 4.25% which are doing well, probably have another 7-10 years on those before they are fully matured, a typical emergency fund and around 25k rotting in a savings account. I'll be nearing mid 30s in a few years and am starting to realize I don't have stuff together and just want to make sure i'm doing the right thing for retirement as I'm way behind at this point. Just trying to assess the situation and get grounded and then on the right track.

**Broken Arrow** · 10-06-2010, 11:13 AM

Hmm, I'm surprised there are no other responses yet.

The Wellsley is a static fund. It doesn't change over time, whereas the Target Retirement does. When it comes down to it, I think that's the major difference. So, which one you prefer will depending on your investment style. Specifically, do you want a fund that automatically re-balances over time, or do you want one that is locked in a static allocation?

**swampthing** · 10-06-2010, 11:48 AM

i have no idea, just looking at the comparisons between the two funds right now the wellsley looked a lot better both now and historically and projected... but you bring up a good point that i have no clue about haha

**Broken Arrow** · 10-06-2010, 08:48 PM

There's nothing wrong with not knowing something. It's a temporary condition that can be easily-fixed.

In fact, I believe that's how we know that we are moving forward... but I digress.

The Wellsley fund is basically a 60/40. That is, it's a set 60% stock / 40% bond kind of fund. There has been a lot of academic research that has gone into this fund, and it has been managed well over the years (by the Vanguard founder no less).

Some will argue that such a static fund is the way to go, and they have their own reasons for thinking so. If you believe that as well, then more power to you, buy it, and you can sleep soundly knowing that you've made a fairly good investment fund choice.

On the the hand, and I believe this as well, our asset allocation should change and evolve along with our changing lives. Things change, people change, our thinking changes, and I think our investments should reflect that as well. Target Date funds passively and automatically re-balance our funds to reflect that change. I think it's a great way to start out, at least until you have clearer ideas about what kind of changes you would like to see. Even now, my entire passive investment is nothing more than a Target Date investment fund.

As for past performance, again, you don't want to take that too literally. Target 2040 and 2045s are fairly recent funds, and given our on-going recessionary climate, it's not going to have a pretty track record to look at. I know it sounds counter-intuitive, but just because a fund does or does not have a good track record, that doesn't mean it is or is not a good idea. This is especially true with passive and index funds.

That may not have helped much, but if you have more specific questions, please ask and myself or others will help the best we can.

**disneysteve** · 10-07-2010, 04:47 AM

Originally posted by Broken Arrow View Post

On the the hand, and I believe this as well, our asset allocation should change and evolve along with our changing lives. Things change, people change, our thinking changes, and I think our investments should reflect that as well. Target Date funds passively and automatically re-balance our funds to reflect that change.

Just keep in mind that not all Target funds are created equally. They don't all allocate the same way. They don't all re-balance and adjust allocation the same way. Some are more aggressive. Some are more conservative. Some remain quite heavy in stocks even past retirement age. Others not so much. So before jumping into a Target fund, make sure that you understand how that particular fund does things.

**jIM_Ohio** · 10-07-2010, 05:33 AM

Originally posted by Broken Arrow View Post

There's nothing wrong with not knowing something. It's a temporary condition that can be easily-fixed.

In fact, I believe that's how we know that we are moving forward... but I digress.

The Wellsley fund is basically a 60/40. That is, it's a set 60% stock / 40% bond kind of fund. There has been a lot of academic research that has gone into this fund, and it has been managed well over the years (by the Vanguard founder no less).

Some will argue that such a static fund is the way to go, and they have their own reasons for thinking so. If you believe that as well, then more power to you, buy it, and you can sleep soundly knowing that you've made a fairly good investment fund choice.

On the the hand, and I believe this as well, our asset allocation should change and evolve along with our changing lives. Things change, people change, our thinking changes, and I think our investments should reflect that as well. Target Date funds passively and automatically re-balance our funds to reflect that change. I think it's a great way to start out, at least until you have clearer ideas about what kind of changes you would like to see. Even now, my entire passive investment is nothing more than a Target Date investment fund.

As for past performance, again, you don't want to take that too literally. Target 2040 and 2045s are fairly recent funds, and given our on-going recessionary climate, it's not going to have a pretty track record to look at. I know it sounds counter-intuitive, but just because a fund does or does not have a good track record, that doesn't mean it is or is not a good idea. This is especially true with passive and index funds.

That may not have helped much, but if you have more specific questions, please ask and myself or others will help the best we can.

All of this is good info.

Always check advice, as I know BA did not mean to mislead you, but Wellesley is a 40-60 fund (not a 60-40 fund). Simple mistake, but always check on people when you get advice.

The comments about- do you sleep at night, that is a very good one. Don't let me or anyone else tell you how much risk to take with your money.

If you like Wellesley at 40-60, but think you need to be more aggressive, consider owning wellesley, then also buying something more aggressive (like an S&P 500 index fund or wilshire 5000 total stock market index fund) and weight the two holdings accordingly.

For example maybe it is 75% index fund and 25% Wellesley (which would be 25%*60%=16% bonds and 84% stocks). Then as you get older sell off the stock fund as you need money and eventually you will have 40% stocks and 60% bonds and 100% Wellesley.

Wellesley is an AWESOME fund. It is not the riskiest or flashiest fund around, but it is a good fund.

**Broken Arrow** · 10-07-2010, 06:19 AM

Just keep in mind that not all Target funds are created equally. They don't all allocate the same way. They don't all re-balance and adjust allocation the same way. Some are more aggressive. Some are more conservative. Some remain quite heavy in stocks even past retirement age. Others not so much. So before jumping into a Target fund, make sure that you understand how that particular fund does things.

Yes, I fully agree. And when an investor gets to that point, they should have a better idea of how they would like to invest. Until then, and perhaps even afterwards, I think Target Date funds are a pretty good way to start out.

Always check advice, as I know BA did not mean to mislead you, but Wellesley is a 40-60 fund (not a 60-40 fund). Simple mistake, but always check on people when you get advice.

Oops! Thanks for the correction.

**swampthing** · 10-07-2010, 07:14 AM

thanks for the advice, maybe I'll dump some more into the star fund roth ira, then pickup the minimum for wellsely and look into that target retirement thing... are there other balanced vanguard funds anyone recommends? also, does it make sense to do this within the context of my Roth IRA or do I want to pickup funds in a different context?

**Aleta** · 10-07-2010, 08:07 AM

BA: Are you using the Target Date funds for IRA's or for non-retirement? I've considered selling my total stock market index fund and just buying into the target date fund which has the total stock market anyway.

**Broken Arrow** · 10-07-2010, 09:31 AM

Originally posted by Aleta View Post

BA: Are you using the Target Date funds for IRA's or for non-retirement? I've considered selling my total stock market index fund and just buying into the target date fund which has the total stock market anyway.

I technically have it in my 401(k), but yeah, I would only use these things within tax-deferred accounts. Maybe it doesn't matter much in the beginning, but it will eventually tilt towards more and more bond positions that generate dividends and interests. As such, they are more tax-efficient in retirement accounts.

It's easier in my mind to keep track of also.

I remember reading more about why this is for the best, but I don't remember what the details are.

**Scanner** · 10-08-2010, 11:44 AM

I think you could do worse than the Vanguard Wellsley fund.

That fund returns just about what the S & P 500 gets with a lot less risk.

I also think it is actually 60% bonds and 40% Blue chip stocks, not the other way around. Could be wrong.

**swampthing** · 10-12-2010, 10:20 AM

sounds good. i just have to decide to do something and not sit around doing nothing which to me is the hardest part about all this. also, is it dumb to open a wellsely ira while also maintaining the star fund ira? does it make sense to have separate iras? the wellseley fee is lower than star.

**Broken Arrow** · 10-12-2010, 10:41 AM

Originally posted by swampthing View Post

also, is it dumb to open a wellsely ira while also maintaining the star fund ira? does it make sense to have separate iras? the wellseley fee is lower than star.

You can do that, although I don't see why you would. If so, what % allocations do you have in mind?

Vanguard Balanced Funds