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The Vanguard Wellesley Income Fund (VWINX) is known as a highly conservative mutual fund composed of approximately 60% bonds and 40% equities.

In the current markets, this seems like a good conservative mix. But why is VWINX performing poorly over the last 6 months, as bond and equity prices have both increased?

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    "VWINX performing poorly" compared to what?
    – Dheer
    Feb 23 '18 at 8:35
  • I don't know what's in that fund, but the/an obvious answer is the "mix" might be fine (40%/60%), but the specific bonds and equities in each part might be the "wrong" ones (for some definition of "wrong" ... if they are looking for long-term gains, six month dips may not matter). In a similar vein, "performing poorly over the last 6 months" should be followed by "compared to what".
    – TripeHound
    Feb 23 '18 at 8:36
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    Bonds prices fall when interest rates rise, and interest rates have been rising.
    – RonJohn
    Feb 23 '18 at 11:13
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    The majority of bond ETFs are down this year. For example, the IShares 20+ Year Treasury Bond ETF (TLT) is down 7+ pct this year and nearly 10% in the past 6 months. Why would you expect VWINX with 60% exposure to fixed to perform well in such an environment? Feb 23 '18 at 12:52
  • Weak dollar, higher rates. It was all over the news for last year.
    – sanaris
    Feb 23 '18 at 20:08
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I checked the graph and found a drop of $0.52 after the dividend of 15th December 2017. Since the dividend was $0.2145 that would explain half that drop. Perhaps someone else can explain the remainder.

Large drops have occurred at other VWINX dividend dates too. I have read that the drop as shares go ex.div can be reduced by the tax paid by a typical investor. But VWINX is behaving in the opposite way!

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    The distribution on 12/18/17 was 52 cents (Div + STCG + LTCG) and VWINX dropped 52 cents (adjusted close). Paragraph two is confusing. The drop isn't reduced by taxation. The value of your position is. Feb 24 '18 at 1:18
  • Yep. That explains the 15th December drop and the previous drops I saw. Confidence restored. I hope the questioner is happy with his distribution-:) Feb 24 '18 at 21:52
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Over the past 6 months, VWINX has returned more than 2% better than a pure bond ETF like AGG (though both have negative return over this time period).

Since broad stock indices have done well over the last 6 months, it seems the VWINX is performing as expected.

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