Thoughts on Vanguard Wellesley Income Fund for a senior citizen

[disneysteve]

My mom has had the bulk of her portfolio in individual bonds for decades. Of course, given the current interest rate environment, which isn't likely to change anytime soon, as her 3 and 4% bonds are getting redeemed, her broker is finding very little available to replace them.

I realize that 3-4% in bonds is pretty much impossible today unless you really go after junk. I was thinking of talking to her about getting into a good conservative balanced fund and was taking a look at Vanguard Wellesley Income Fund (VWINX). It has a 30-day SEC yield of 2.11% and average annual returns of 3.2% for 1 year, 5.52% for 3 years, and 6.32% for 5 years.

As we've discussed in other threads, including more equity exposure introduces the option of selling shares to harvest cash if needed.

Wellesley is roughly 38% stock, 59% bond, and 3% cash so it's relatively conservative while still providing opportunity for growth. Other than the $3,000 opening requirement, which isn't a concern, any downsides I should be thinking about. Obviously being 38% stock, it's higher risk than 100% bond but if the trade off for that is higher average returns, I think she'd be okay with that.

Are there any other balanced funds, particularly at Vanguard as she already has an account there, that you'd suggest we look at?

[Jluke]

Wellesley is a really good choice. If possible look back at how it performed in 2008. Hint it didn’t take much of a beating as I recall.

alternative conservative choice at vanguard could be lifestrategy income fund. 20 stocks 80
bonds.

https://investor.vanguard.com/mutual.../profile/VASIX

check the ERs for due diligence.

[Like2Plan]

There are a lot of folks on Bogleheads that really like VWINX. But, your mileage may vary. When I compare it to what I have, it is not as tax efficient (But, maybe tax efficiency is not as important to your Mom in her situation.) and as Juke mentioned--the ERs are higher than if you created your own using index funds. I figure that it is probably fair because you don't have to do a lot of tinkering to achieve your allocation goal.

https://www.bogleheads.org/forum/viewtopic.php?t=309786

https://finance.yahoo.com/quote/VWINX/history?period1=315619200&period2=1585612800&interval=div%7Csplit&filter=div&frequency=1d

[Petunia 100]

Wellesley is a fine fund. I've seen quite a few people on Bogleheads say they have seen seniors split their money between Wellesley and LifeStrategy Income and have been very pleased with the results.

[cypher1]

For your mom, I think Wellesley is a great fund and may probably suite her goals best depending on age and risk tolerance. Others mentioned Lifestrategy (VASGX) is also good, I currently have it for my HSA investing, too. I also like Balanced (VBIAX) and Wellington (VWELX), which are a little less conservative for active funds. I typically recommend those to friends that have more time before retirement and are more fiscally conservative. If already retired, I'd say stick with VWIAX.

[disneysteve]

Thanks everybody. Sounds like I'm on the right track. I'll probably talk to her tomorrow. Right now, she's got about 15K sitting in her broker's cash account (earning essentially nothing) from bonds getting redeemed. I'll get her to withdraw that and use it to fund the new Vanguard investment. She already has a Vanguard account so that will be simple.

[scfr]

Wellsley is a good one. Another to look at would be VTINX (Vanguard Target Retirement Income)

[jIM_MI]

My mom has had the bulk of her portfolio in individual bonds for decades. Of course, given the current interest rate environment, which isn't likely to change anytime soon, as her 3 and 4% bonds are getting redeemed, her broker is finding very little available to replace them.

I realize that 3-4% in bonds is pretty much impossible today unless you really go after junk. I was thinking of talking to her about getting into a good conservative balanced fund and was taking a look at Vanguard Wellesley Income Fund (VWINX). It has a 30-day SEC yield of 2.11% and average annual returns of 3.2% for 1 year, 5.52% for 3 years, and 6.32% for 5 years.

As we've discussed in other threads, including more equity exposure introduces the option of selling shares to harvest cash if needed.

Wellesley is roughly 38% stock, 59% bond, and 3% cash so it's relatively conservative while still providing opportunity for growth. Other than the $3,000 opening requirement, which isn't a concern, any downsides I should be thinking about. Obviously being 38% stock, it's higher risk than 100% bond but if the trade off for that is higher average returns, I think she'd be okay with that.

Are there any other balanced funds, particularly at Vanguard as she already has an account there, that you'd suggest we look at?

I think Wellesley is the best you would find. I might also look at T Rowe Spectrum Income and Permanent Portfolio (this would have stable value, not generate income). I might also look at a TIPs fund, a Dividend fund, and a Muni bond fund to make sure the right rocks are looked under.

[disneysteve]

Thanks again for all of the replies. She ended up getting the check at the end of last week. It was for $16,100. I left $100 in her checking account and transferred $16,000 to her Vanguard account and just put in the order to buy the Wellesley shares. It should process on Monday.

I set it up to deposit the income in her checking account, though honestly, she really doesn't need it right now. Thanks to Covid especially, her spending has been minimal. If she finds that she has more coming in than she needs, I can always switch it to reinvest. It's only going to be about $100/quarter so not a big deal either way. However, as more bonds in her other account mature, we'll likely be adding more to the Vanguard account.