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Q1 YTD Return

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Lost a minuscule .075

Considering the recent volatility of the past 3 months, my portfolio continues to be absolutely boring. I love it. 

What is yours? I think its just as important to readers who wonder how we handle volatility and losses. 

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I was down O.53% YTD but I am actually down like  $ 75, 000 from my all time high in early  January so I am not sure how this YTD works and I'm no math wiz. My best performer was Vanguard Small Cap index which is up 1.22%. 

Tony

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I'm not sure that we're offering a healthy model for newcomers by focusing on short-term changes, but I'll play.  (However, I think readers should consider John Bogle's advice, "don't peek.") My portfolio performance is minus 0.3% YTD.  

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Hah...  I'm so new to portfolio watching. It has been crazy to watch it go up and down and up and down.  Right now it is down.   It was easier to watch it go up and down when the account balance was smaller.  

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My opinion is that its a good thing to keep your eye on the portfolio . As long as you don't act hastily and emotionally and are satisfied and confident with your allocation. Look at Steve's allocation. If it wasn't for his postings I would never have believed a bond heavy portfolio could do so well over time while minimizing risk. I don't necessarily believe that ignoring your portfolio is a good thing. I understand the set and forget mindset but peaking keeps you motivated towards achieving your goals. It also helps you realize that the ups and downs are a necessary part of the equation and that proper diversification matters. Early on when I saw a fund fall in value i would want to sell it, to make changes, to improve it. I soon realized and learned to peak but to not  act.

 

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Hi,

Tony, I am down about $12000 from January 1st and down about $25,000 from the January 26 high. 

whyme, I agree with Tony. Of course, we think only in the long term. Hopefully, the models we provide are both the construction of a diversified portfolio with a stock-bond split and the emotions are set aside. On the emotional side my $25,000 "lost" is part of investing, and I have a plan that I will stick with through thick or thin. I have a great plan! I will never abandon it over short-term or long-term (3-5 years) bear markets. I have been through two of them, and of course, I feel much better when the markets go up than when they crash! I am human too. 

We have some experience we want to share and that is not to be concerned or panic! My goodness, the risk is about riding the markets up and down and over the long term we make progress. Our exposure to risk means that our returns can at least meet the inflation rate and pay enough for taxes whether capital gains in after-tax accounts or regular income taxes from IRA accounts and then there are the pesky those little expenses. 

Those of you who have an adviser have some data to work with when you ask him or her two questions:

  1. What is my return year to date (YTD)?
  2. What am I paying besides the AUM and the hourly rate? 

As I said above, my return is a -.75% and my expenses are about .07%. 

If your return is plus 15% that is a red flag!! You might be in individual stocks or a bear market ETF which goes up when the market goes down. Stay away from individual stocks or the hundreds of gimmicks that Wall Street has in mind for your money. Remember you are taking the risk, and they are not, but collecting trading commissions or other exchange costs. 

If your expenses are higher than 1.25% YIKES! Find another adviser quick! And get out of those expensive actively managed funds. 

So these are numbers to compare with so that when you talk to your adviser you have something in mind of what your portfolio should be doing at the end of the first quarter, 2018. 

EVERYONE deserves to know your return and what you are paying. If a bunch of amateurs here (K12 teachers no less!!!!) can report these simple facts here, your highly trained and competent financial adviser can do it too. DEMAND IT! 

Hope this helps,

Steve

2018 Q1 AA.JPG

2018 Q1 Expenses.JPG

2018 Q1 Returns.JPG

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5 hours ago, whyme said:

 

I'm not sure that we're offering a healthy model for newcomers by focusing on short-term changes

 

I’m with you on this. The beauty of owning total market index funds is not having to know what you made in any given time period because you already know you made exactly what the market returned.

I never calculate my rate of return and I definitely don’t think in terms of 3 month periods. 

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Jebjebitz

Jeb. Rebalancing can be done at anytime. I think most people review their portfolios once a year. Late January is a good time after capital gains and dividends are paid and which may have  effected the balance . The general rule is you should add more bonds as you get closer to retirement.I always consider rebalancing after I do my taxes.Within a tax sheltered account its easy because there are no tax consequences for doing so. I own some taxable accounts which makes it a little more tricky because any sale can create a taxable event. So in my case I use my IRA accounts(I no longer have 403B accounts) to change things  while keeping my taxable accounts in mind. If I could all do it again I would just do the target fund  or a life strategy fund through all my accounts and leave the rebalancing to the Vanguard folks.  But I just didn't know  any better when I was younger and created unnecessary complexity. At one point I owned 28 funds!!! But in my defense, those annuity advisors kept adding funds to my accounts until I said enough!!  

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Initially my new contributions were 100% of my account balance and now they’re down to 10%. During the 10 year bull market I haven’t had to “rebalance” once because every payday I just buy what I have too little of. The delta on my allocations has always been less than 1%  off the target.

As the new contributions get smaller and smaller (eventually 0) relative to my portfolio size then maybe I’ll have to rebalance.

I’d be hesitant to own a target date fund in a taxable account because eventually the fund will hold a ton of bonds. Bonds provide a ton of distributions that are taxed as ordinary income. I’ve listened to the counter argument that holding bonds in a tax advantaged account wastes valuable tax advantaged space that a faster growing equity fund could have taken advantage of. I haven’t done the math or a full analysis myself. Just something to consider.

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 I  agree with Ed. All my bonds are in tax deferred accounts. My taxable accounts are all stock index  funds which are tax efficient. I made sure of that for the very reason Ed describes . I do like owning  some taxable accounts in a way  because of better tax treatment as the money doesn't count as ordinary  income when you pull it out plus you can tax loss harvest should the market go down which saves you some big bucks on taxes. There are pros and cons to every approach.

If I could you it all over again it would be 100% Roth Ira/403b-457b contributions into a target fund for me  but that option did not exist when I was a younger lad.

 

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I rebalance when our asset allocation is off 5% from our 40/60 stock/bond AA. Last November we exchanged stock funds for bond funds in Roth IRAs. Because we are long retired, we can’t rebalance by altering our contributions. It was painful to sell stock funds when they were up over 20% YTD and rising, but I kept thinking of 2008. And 2001. Greed vs Fear!

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1 hour ago, tony said:

If I could you it all over again it would be 100% Roth

I was speaking with a veteran and however they were compensated they basically didn't have to pay taxes. So they were able to take that income and put it into a Roth (I think TSP and IRA). Talk about tax savings.

In the general case I like traditional accounts because I'd rather fill up the lower tax brackets in retirement than pay exclusively at my highest tax bracket to invest in a Roth. If I expected to be in a higher tax bracket in retirement then I'd try to put enough into a traditional to fill up those lower brackets in retirement and then put the rest in a Roth to pull from in the higher brackets. I think the optimization can get tricky so I tend to put my energy into saving/investing every dime.

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I am totally confused about the debate between Roth vs tax deferred retirement investing. Seems like every month I run into articles that touts the advantage of one over the other. I don't look forward to being taxed when I hit RMD age. From my perhaps simplistic view paying the taxes as you go and cashing out tax free makes sense for me. However I own tax deferred, Roth, and taxable accounts so I have some flexibility.

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I don't know how well I can explain it but this is the mathematical explanation:

Roth Value = $1 earned * (1 - Your Highest Tax Bracket) * (1 + Growth Rate) ^ (years invested)

Traditional Value = $1 earned * (1 + Growth Rate) ^ (years invested) * (1 - Your Effective Tax Rate in Retirement)

So the thing to note about those equations is that the only difference is the tax component. If you're in the 24% tax bracket then a Roth results in paying 24% tax on every dollar you invest. However, with a Traditional the first Y dollars you pull out in retirement are taxed at 0%, the next Z dollars at 10%, and so on and so forth. So even if you're in the 24% tax bracket in retirement, your effective tax rate will be well below 24%, making the Traditional a superior investment due to lower taxes.

Of course all of this assumes the tax code won't change because we can't predict how it'll change.

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