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sschullo

2020 YTD Return

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5 hours ago, ScottO said:

That's a serious account balance to manage. VTBLX being up 7% YTD has to be a pleasant surprise.

Hi Scott,

I was thinking about the complication when I talked about it at the Zoom presentation last week. As I said it boils down to the stock bond split and its not that complicated.

But it was a hard sell. Yeah, I agree with you. At first glance I would have said the same thing. I did not have enough time to explain what I was doing and am not sure if the audience understands Value vs Growth, small and mid cap have a little higher return over time and the bond diversification. My portfolio is not a perfect example to present to teachers who have all levels of knowledge. But the regulars here have little or no problem as its pretty basic and simple. 

So, it gets complicated when tilted to large cap value (Wellesley) and mid and small cap stocks (Extended Market index). On the bond side I wanted inflation protection with Treasury Direct, international bonds for additional bond diversification, and the fixed 3% return from TIAA, where I take my IRA mandatory distribution. Just this year because I paid huge tax bills in 2018 and 2019, I added took a chuck of Total Bond Market index and bought the tax advantaged Vanguard Muni California bond fund. Since I live in California I get both a State and federal tax exemption. 

I have Wellesley for another reason. I have my Roth in Wellesley and half in total international bond market. I only wanted 35% equity exposure with my Roth but since I am so damn risk adverse, only because of my age, I have enough and I need every penny for retirement. I cannot afford massive losses again. Its the preservation stage of my life. 

YEAH! those bonds are rip roaring. Last year the total bond market index was over 8.0%!  Looks like this year is another winner for bond investors. Who would have thought of this. As we know here, nobody knows nothing about the future. Since I have most of my money in bonds, I am a happy camper.  

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I am sure most of you noticed that the market is going back up despite this mess we are involved.

My boring portfolio is up YTD, 4.9%. What a year and it is not over yet. 

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Vanguard 403b

403bvanguard01.jpg.b9a01d1bea201bb8270a7683e9cd6273.jpg

 

I think you were lookin' for calculations in another thread:

403bvanguard02.jpg.325b4e6e4d626019042ff533380c3417.jpg

 

Other Vanguard Accts (Roth, IRA, Taxable)vanguardacct01.jpg.5e1d2a86cd4482ac70ec7e4c7f51a8d9.jpg

 

At 6.6% YTD for everything we've got going as of today. Was 3.9% at the end of Q3 (9/30). I was trying to rebalance through contribution changes(leaning more 80/20 instead of 90/10), but so far it hasn't moved the 403b allocations. Bulk of the other accounts is 100% stock.

 

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Here is my wordy and totally unsophisticated "equation" that I remember learning from middle school: 

  • End of 2019 value of portfolio.  Example: 100,000
  • Add in distributions (or subtract contributions) no contributions or distributions for this example
  • Get a current value. Portfolio grew to 110,000. Obviously you have the answer just by looking, 10% YTD RETURN. But lets finish this example.
  • Subtract the end of 2019 value from the YTD total value: 110,000 - 100000 = 10,000
  • Divide that difference with the end of the year value = the YTD return. 10,000/100000 = .1 or 10% (I still remember my teacher literally showing the class to move the decimal point two digits to the right, add the zero DON"T FORGET THAT ZERO! and replace the decimal point with the % sign). 
  • Check your answer by multiplying that RETURN by the end of 2019 value to get the growth of your portfolio:  100000 .10 = 10000

For a math phobic student, I know this is like climbing into the ring facing Muhammad Ali with all of the math power on this forum.  You guys will have fun picking this apart! Go for it! 

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After all of you newbies come here and get excellent information about changing from those annuities into something like Vanguard, Fidelity or NEA Direct Invest, you will get the returns that you deserve when you construct your diversified portfolio. I use mine as an example.

My portfolio is very boring and conservative because I need my portfolio to fund my retirement. It's not for anybody who has pension(s) or are young. You want to be much more aggressive by increasing the stock allocation over the bonds.

My Vanguard and TIAA portfolio YTD return is 6.8% for a 34/66 stock bond split after today's close. I am happy with this return. It's almost doubled from the Q3 report at the end of September. 

The second image is a report generated by Vanguard. It tells me I have too much value stocks, too little international bonds and stocks. 

Steve

Q3 2020 Asset Allocation.jpg

Q3 2020 Vanguard Portfolio Watch Report.png

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As of close of markets last Friday, December 4th, 2020 my portfolio returned:

8.9% YTD.

All three markets DJIA, Nasdaq, and S&P 500, and the fourth market, Russell 2000 small caps, all broke records!, including the value (dollar amount) of my portfolio. 

My extended market index allocation is 27%! and the biggest surprise, International index up 8.6%. This index has been in the negative for most of this year and in the past (my portfolio AA is above).  

What's driving this when the economy has not recovered? It's a familiar story, with tons of complications, but on the surface, "the rich get richer and the poor...."  Stimulus and the vaccine DUH!

In the meantime, my niece and her adult daughter are leaving California to stay with her son and his family in N. Carolina. They are both waitresses and lost their jobs this year and could not find another job, I helped pay some of their bills.

The people who can work remotely are doing better. I have a grand nephew who does IT design and has his own at-home business with Halliburton (yeah, he admits that Halliburton has history of less than a positive company) as a primary client, has tons of work, as a son of a friend, both are doing great. Both are in their 30s but they are both trained in IT and design. 

 

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Steve, you are doing really well on the risk/reward front!  My mostly-stocks portfolio is, as of Friday, up a smidge more than yours for the year (9.3%), but mine carries much greater risk of volatility than your portfolio and could sink dramatically at any point.  It does feel strange that the markets are up during this cataclysmic year (the pushed-down-to-nothing bond rates probably have a lot to do with it, driving up the value of your bond funds and forcing more money into the stock market since new fixed income investments may not even keep up with inflation).   It certainly does highlight the ever-widening economic gap in this country.  Not only are work-from-home types (like me) financially stable while millions face unemployment, reduced schedules and business closures (not to mention illness), but the benefit of holding investments is concentrated in a depressingly small sliver of the population: something like half of US households have zero market holdings, and most of the other half have only a little invested, with balances unlikely to produce much income in retirement. 

To quote from a government "fact sheet": "Among elderly Social Security beneficiaries, 50% of married couples and 70% of unmarried persons receive 50% or more of their income from Social Security [...] 21% of married couples and about 45% of unmarried persons rely on Social Security for 90% or more of their income."  

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On 12/6/2020 at 12:04 PM, whyme said:

Steve, you are doing really well on the risk/reward front!  My mostly-stocks portfolio is, as of Friday, up a smidge more than yours for the year (9.3%), but mine carries much greater risk of volatility than your portfolio and could sink dramatically at any point.  It does feel strange that the markets are up during this cataclysmic year (the pushed-down-to-nothing bond rates probably have a lot to do with it, driving up the value of your bond funds and forcing more money into the stock market since new fixed income investments may not even keep up with inflation).   It certainly does highlight the ever-widening economic gap in this country.  Not only are work-from-home types (like me) financially stable while millions face unemployment, reduced schedules and business closures (not to mention illness), but the benefit of holding investments is concentrated in a depressingly small sliver of the population: something like half of US households have zero market holdings, and most of the other half have only a little invested, with balances unlikely to produce much income in retirement. 

To quote from a government "fact sheet": "Among elderly Social Security beneficiaries, 50% of married couples and 70% of unmarried persons receive 50% or more of their income from Social Security [...] 21% of married couples and about 45% of unmarried persons rely on Social Security for 90% or more of their income."  

Very grim statistics, but the 45% of unmarried seniors relying on social security only has been steady for years. After all of the news media talking about the importance of planning for retirement more than half cannot or will not set aside some money. 

My portfolio has done well because both stocks and bonds are going through the roof. Interest rates dropped to near zero and that's the primary cause for the value of both stocks and bonds to rise in value (inverse relationship. Interest goes down bond prices go up and visa versa). This year interest rates plummeted again. 

Just lucky because I have had 65% or more in bonds for years. Still I am on track to be making a gross 2020 income and wealth of $200,000+. 

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16 hours ago, sschullo said:

Just lucky because I have had 65% or more in bonds for years. Still I am on track to be making a gross 2020 income and wealth of $200,000+. 

That is a fine level of retirement income!  Steve, your transparency about your finances (both your successes and your earlier stock market stumbles) is a valuable and inspiring model for teachers and others trying to find a path to retirement.  Please keep it up.

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16 hours ago, whyme said:

That is a fine level of retirement income!  Steve, your transparency about your finances (both your successes and your earlier stock market stumbles) is a valuable and inspiring model for teachers and others trying to find a path to retirement.  Please keep it up.

Thanks whyme! That's all I do is just share what I do. While people want authenticity and transparency, unfortunately the qualitative experience is not as respected as the quantitative analyses (Although The Psychology of Money by Morgan Housel is making huge inroads into this murky area: read my review of his book: https://www.amazon.com/gp/customer-reviews/R30TAIVAFIZBC8/ref=cm_cr_arp_d_rvw_ttl?ie=UTF8&ASIN=0857197681 ).

What I do is directly from Bogleheads and other readings. Nothing from me is original BUT my data is a case study and a qualitative example from one ordinary investor who learned a thing or two from the experts about diversification, COSTS, reasonable returns, long term thinking, and the pesky little variable--RISK-- with real and deep losses on the way to eventual success. My portfolio above reflects my emotional and rational story of discovery, learning, study, pain, and thrills!  Its about life from one ordinary investor! 

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All three markets Nasdaq, S&P and DJIA closed at record levels. And so did the dollar amount of my portfolio.

9.0% YTD return. 

AA: 36% stock / 64% bond 

Despite these terrible times, wishing Happy Holidays! 

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Steve - Does the approximately 30% Stock and 70% Bond allocation help you sleep better at night?  My 60/40 portfolio with Vanguard Index funds and our guaranteed account came in at 8%.  I'm considering dialing back to 30/70, just for peace of mind.  Through pensions and part time work in retirement we have not had to touch our 403b.  I've been  reading a lot lately about the 30/70 allocation.  What do you think? 

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The 30/70 allocation is not popular especially with financial advisers say this allocation is too conservative. As I have said before, I look at the data of this allocation and according to Vanguard it returns about 7.7% (15 years ago it was 7.3%): https://investor.vanguard.com/investing/how-to-invest/model-portfolio-allocation. What the heck is wrong with 7.7% return? NOTHING. My portfolio has average almost 6.0% per year since 2008 and I have spend a lot of money, and it's still growing! Of course, I am 100% lucky that I (we all) had a bull market all of these years. But what was unexpected is the bonds have done well too. I don't understand the usual negative narrative about bonds, consider this discussion on the bogleheads: https://www.bogleheads.org/forum/viewtopic.php?t=310761

Sleep better. Yes, I am loss averse because of two issues, my age and I need my investments for retirement. My pension is modest as I only worked for 24 years and retired at 61 because of my savings and property investments. Both my late spouse and my current one only have social security as with most Americans they do not have a pension. If I were like you and did not need my investments for retirement it doesn't matter what age, I would have a higher allocation to stocks absolutely. You said "we" so I am guessing both you and your spouse have pensions? If so heck, put 100% in equities and let your descendents worry about it. 

There is a lot written about drawdowns when retired whether it's the buckets, 3%, 4% rule brought about by the Trinity Study or more. Come January, I will draw down from capital gains, dividends from both my stocks and bonds. I will sell shares too: since my total stock market index is through the roof and my stock/bond balance is now about 36% stock 64% bonds, I will take out money from my VTI. I have to make a RMD so next year I will take 100% out of the Total bond Market index as it too is through the roof, at $11.51 a share! 

Nobody knows about the future and if the 30/70 will work as well as it did for me the last 12 years. But it looks like to me, you can keep your allocation at 60/40 because you don't need your investments for retirement purposes. Your pensions are plenty and that makes all the difference. 

Happy holidays,

Steve

 

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