Author Topic: Vanguard Wellesley Fund - great for shorter term investment goals?  (Read 1036 times)

FinancialWarrior

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FinancialWarrior

  • 5 O'Clock Shadow
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  • Posts: 14
  • Location: Earth
Re: Vanguard Wellesley Fund - great for shorter term investment goals?
« Reply #1 on: February 16, 2017, 02:05:03 PM »
Comparing the popular 100% stock fund offered by Vanguard (VTSAX) to the more conservative and actively-managed Wellesley fund which is about 60% bonds (VWINX), the past performance indicates returns that are almost as high with the latter, with much less risk.

For longer time horizons of 5+ years, VTSAX is definitely the better choice and has produced the highest returns.  But I am very impressed by how Wellesley performed during the recession.  In 2008, Wellesley lost only 10%, while VTSAX lost nearly half its value.  The average 10-year return is 6.65% vs. 7.23% -- only 0.6% less, but with a whole lot less volatility.

One major risk going forward, though, is the Fed deciding to raise interest rates.  The average bond duration in Wellesley is 6.4 years, so it would take several years for bond asset values to recover.  Since the last recession was characterized by drastic interest rate cuts, the higher-yielding bonds in Wellesley did quite well during this time, but whenever the next recession comes, the interest rate environment may not be the same.

Thoughts?