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tony

How Did You Do In 2014?

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Steve usually starts this discussion but I just reviewed my portfolio so I will start off this time.

 

My 60/40 (more or less) Stock/Bond Portfolio managed an even 8% return. My avaerage expense ratio is about 30 basis points and I wish i could lower it more. Being well diversified, it is easy to spot the areas that lagged for me. My International Stock Index Fund lost money and that hurt my performance since I have a healthy stake in Total International Index. I also have a healthy stake in small caps/mid caps and they have not done all that well this year after a spectacular 2013. I also own Total Bond International Index which did surprisingly well. No regrets adding to Vanguard's relatively new international bond fund although I read critics say it was not worth investing money there. My top performer was my Global Reitt fund which I own through my state 457B plan. It was off the charts but unfortunately only 10% of my portfolio. I have to wonder if I would have done better with a simple three-four fund portfolio though.

 

I am happy with the return. Going forward I am putting a hold on my Reitt contributions and adding to my internationals which I get a feeling will eventually awaken from their slumber. Europe is ready to rebound I hope.

 

Of course, no one can predict a thing when it comes to the market so I plan to continue investing most new money into bonds with a portion of new money into internationals going forward.

 

How did you do ? . The most amazing thing to me is how well Steve S. does with such a heavy bond portfolio. He probably outperformed me again. Happy new year everybody and remember to keep saving through thick and thin!!

 

 

Tony

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Happy New Year Tony and everybody. Wow, what a year for the major indices. No, I did not outperform you Tony. As predicted my lower return than yours reflected my higher bond allocation.

Dow 7.52%
S&P 500 11.39%
Nasdaq Composite 13.40%
Russell 2000 3.53%
Barclays Bond Aggregate 5.97%

Internationals, depending on which fund lost from 2% to 4%.

 

My portfolio gained 6.0%, my allocation 35%/65% stock/bond allocation. Bonds did well.

Portfolio expenses was about .22%!!!

 

Come on everybody. Report your returns. It's was a great year and we should all be fortunate. The "active managed" aficionados (Bob?) must have killed Tony and I. To be fair, need to report your expenses which will be higher than our indexes.

 

According to the Boglehead poll, 61% of the 298 investors earned between 5% and 9.9% returns. https://www.bogleheads.org/forum/viewtopic.php?f=10&t=154376&newpost=2316862

Our teacher colleagues need to know how investing works so they can avoid the wholly expensive and inappropriate annuity traps.

Please let us know how you did for 2014.

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Did well, overall I'm about 75/25 stock/bond, but the employer-linked accounts have made so many changes recently that I can't access an annual performance number. Calstrs Pension2 jumped providers/record keepers during the year and my 457 provider has changed their web site such that I currently cannot see anything at all about my account! (It just has a clock face icon that spins and says "please wait...") I look forward to consolidating at Vanguard in retirement.

 

As for the accounts I can see, here are the details. Tony Steve is right, the "active" parts of the portfolio led the way. I have a brokerage account that contains nothing but Berkshire Hathaway shares: that was good for 26.64% this year (with an ER of 0, no dividends, no cap gains). My only active fund, Vanguard Primecap Core (ER .50) was up 20% (big cap gain distribution but this is in a tax-sheltered account). My traditional IRA (Berkshire + index funds) was up 13.76%. My roth--80/20, all Vanguard index slice-and-dice similar to Merriman's suggested portfolio (ER .12)--was up 7.3% I still have a chunk of my portfolio in TIAA Cref traditional which pays 3.25%. Then we get to the "black box" accounts, which includes the 403b that I currently contribute to. My best guess is that overall, my investments were up 10 - 11% this year.

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How did you guys calculated your ytd return? Did you add your balance on 1/1/14 with total contribution for the year; and then subtracted that total from the balance on 12/31/14? Then divided the difference by the balance at the beginning with total contribution for the year?

 

ytd = [(end balance)-(begin balance + total contribution)]/(begin balance + total contribution).

 

 

If that was the case, then my ytd was 3.3% with a 90/10 stock/bond. This is with 40% in international.

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Most fund providers or discount brokers have an online calculation for "personal performance" or "your rate of return" or some such, which takes into account purchases, withdrawals, exchanges, etc. Without that, it's tough to calculate if you are still contributing or if you moved things around during the year.

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Go to Morningstar and you can set up your portfolio and it will keep track of it. Others are out there too like mint.com

 

I have similiar questions as I did not include all the capital gains /dividends I earned so I may have done better . Not Sure. Since net asset value drops when a dividend is declared it might not matter.

 

Whyme where did I say active led the way? Both of my highest returns came from index funds. With Total Market Index second behind my Reitt fund.

 

Diversification works!! Internationals were big losers this year but next year they may just lead.

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Sorry, Tony, that was a misattribution--it was Steve who wrote "The 'active managed' aficionados (Bob?) must have killed Tony and I."

 

Lest there be any doubt, I do not interpret that as an endorsement of active management by Steve (nor do I myself place any new investments under active management--it's just that I've got those two exceptions in my portfolio, and they did particularly well in the last twelve months).

 

PS: Tony, why can't you get your ER below .30? I would expect that 60/40 in Vanguard ETFs or Admiral shares should cut that in half. Are you trapped in a plan with a "wrap" fee? And I, too, had some of the Vanguard REIT fund (the US REITS, not the global one) which was way up (about 30%), and the int'l funds that were down (Developed Markets was the worst of them, about minus 6%), in my more fully diversified accounts. Those make up the majority of my portfolio. I'm with you on diversification for the long haul.

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Whyme

 

I have a few funds in my wife's past 403B that I can't (or should say she can't)get rid of until she reaches 59.5 . I unloaded mine last year when I hit 59.5 but I still own two taxable accounts that would kill me if I got out of them now. I am still paying for past mistakes or not trying to pay for past mistakes you might say by holding on to them. Those are the reasons my expense ratio is what it is. Still .30 isn't so bad when you consider what I was paying many moons ago-five -6 times that much if not more.

 

Take care and keep posting

 

Tony

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Right, .30 isn't bad at all. I'm looking forward to some 403b "unloading" when my 59 1/2 th birthday rolls around, but I'm grateful for the 403b option, even with less-than-rock-bottom costs.

 

Kudos on your 8% with a well diversified 60/40: that will do the job. (And it's better than my well-diversified but higher risk 80/20 Roth account did this year. My Roth has a lot of international and small/value, none of which had a good year. Same is true for my 403b. But, as you say, diversification works and the portfolio emerged with a respectable return.)

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How did you guys calculated your ytd return? Did you add your balance on 1/1/14 with total contribution for the year; and then subtracted that total from the balance on 12/31/14? Then divided the difference by the balance at the beginning with total contribution for the year?

 

ytd = [(end balance)-(begin balance + total contribution)]/(begin balance + total contribution).

 

 

If that was the case, then my ytd was 3.3% with a 90/10 stock/bond. This is with 40% in international.

I just do a simple calculation. I take the end of last years balance, add on the distributions during 2014, and divide the small amount by the large figure. Mine is an estimation, of course, not an exact science and easier to calculate. Yours will be different because you are contributing. I think the Bogleheads Wiki SS program will be more beneficial to you. Let us know what you found: https://www.dropbox.com/s/mtvixar20u0zjyn/BogleheadsReturns.xls?dl=0 You have to be careful that your contributions do not inflate your return, that's how the Beardstone Ladies investment club got into trouble.

Happy new year,

Steve

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Here are my individual fund returns:

 

2014_Portfolio_Returns.jpg

 

Here is an update from 386 boglehead investors: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=154376&newpost=2321981&start=100. This is how to invest with the broadest diversification covering all asset classes, lowest costs and have a stock/bond split according to your age. You are well advised to follow the boglehead strategy. The returns speak for themselves. 74% of the 386 investors earned between 5%-12.4% depending on the stock/bond split.

 

 

If you earned more than the market indices, its because you were lucky to be in a sector or stock that did very well. There is nothing wrong luck, its still money, however, it is almost never a long term strategy and its a big mistake to think that it was your investing skill that led you to that gem. Hundreds of studies through the years have revealed last years gem will take a dive, whether mutual funds, sector funds, commodities, individual stocks or ETFs. In active managed funds, you have to pay more and then you are taking a big risk because your fellow investors in that fund will bail when the market gets shaky. I have lived through that mess and was left holding the empty bag. Never again. Vanguard investors stay put. They understand that markets go up and down and don't bail, in fact, its against Vanguard's rules to excessively trade.

 

I was lucky the last two years to have some money in 3M Co shares that I inherited from my mother. She was an excellent and lucky stock picker, it was the only stock she picked 50 years ago because she worked for the company. We were both lucky, the company never went bankrupt or lost so much it never recovered. Take a look at Cisco Systems, that stock has never recovered in 15 years since the bubble and its still an excellent company, but the stock is crap.

Healthcare sector have done well for a long time, but I still will never put my money in any sector fund. All I have is today and the future. Healthcare might continue to do well or it might finally crash. IMO, its speculation to invest in any sector even healthcare. And besides, with total stock market index I am invested in healthcare stocks!

2 cents,

Steve

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update;

 

73% of the almost 500 bogleheads had a return between 5.0% and 12.4%. Take a look. https://www.bogleheads.org/forum/viewtopic.php?f=10&t=154376&newpost=2326789

 

The reason I keep updating this discussion to show people how to structure your portfolio to get the average market returns with very low costs.

The good people at the bogleheads site are extremely savvy about diversification, low costs, eschewing advisers, using index funds or managed VG funds and the crucial stock bond split with the bond allocation appx equal to your age.

 

  1. If you are over 60 and you returned more than 12.0% you are taking on too much risk, unless you want to leave your nestegg to descendents.
  2. Like wise, if you are 40 or younger and your return is less than 5% you are not taking enough risk.

 

In the first example increase your bond allocation and the 2nd example, increase your equity allocation, assuming that the rest of your portfolio is diversified. If either of my examples has an adviser, fired them immediately and get a fee only fiduciary.

 

The lurkers have learned much about the returns offered here by whyme, DK, and Tony. Keep up your courageous work guys on the behalf of our educator colleagues. Hope more people will show their returns and ask questions about why they got more or less than 5.0% - 12.4% and perhaps figure out what their adviser is doing (if they have one): read this story about a fellow who LOST MONEY IN 2014!!!!!! returned -4.0%!!!: https://www.bogleheads.org/forum/viewtopic.php?f=1&t=155117&newpost=2326998 Yep, he has an adviser!!!

 

We are extremely lucky we can manage our portfolios without an adviser. Do you realize how rare we are! Its mind boggling. We have saved tens of thousands in excess adviser fees over many years while vast majority of people do not know they are paying 1.5% - 5% fees, while we pay a fraction of 1.0%.

 

have a great day,

Steve

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Great post Steve, you still teach me things. You educated me on bonds and it was nice to see them do well in a year everyone was saying to stay away from them. I follow Rick Ferri's advice on diversification and thats why I have High Yield bonds and Reitts in my portfolio. He likes them as part of a diversified portfolio.Rick did not think adding international bonds would add much diversification but I went against his opinion. I think he will change that opinion at some point.

 

I am curious why you like the GNMA as a separate allocation when you already own them in your Total Bond Fund ?

 

Tony

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Good point Tony. I might as well move the GNMA into the Total Bond Market Index. Both have done about the same, GNMA slightly more return at 6.7% with the TBM at 5.9%.

 

The international bond performance (Ticker: VTABX) was absolutely stellar at 8.82% in 2014!!!! I would be very happy with an 8% return for the rest of my life, but that's asking way too much.

 

Update on the Bogleheads poll on 2014 returns: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=154376&newpost=2326789

 

Here is another list that shows many more funds. http://online.barrons.com/mdc/public/page/9_3023-fundyrdstick.html

Notice that the extremely risky health bio fund is way up there at 28% for 2014. If you have most of your money in a health sector fund, your portfolio is not diversified! Don't be greedy. Some of us have learned that lesson during two of the biggest stock market crashes in history 2000-2002 and 2008-2009. Will there be another crash or correction? Absolutely! but we don't know when.

 

Stay diversified with all of the stock market asset classes. Health sector fund is not an asset class and I don't care if it has been doing fine for 20 years, cause those returns are past and its only a few companies when compared with all available stocks in the total stock market index.When any sector crashes its harsh, as the energy sector is doing right now.

 

BTW Total stock market index includes all of those currently h ot health care stocks anyway because they are in the total stock market index.

 

Have a great weekend,

Steve

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2014 went pretty well, +7.4% overall. AA is about 60/30/10 stock/FI/cash. Biggest single fund Wellesley but reducing that a bit to reduce bond holdings. International pulled things down, not sure if this is the time to buy international especially developing markets or just hold what I have.

 

Portfolio performance since retiring in 2008:

YEAR %

08-18.8%
09 18
10 11.2
11 3.8
12 11.7
13 14.82
14 7.4

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