$10,000 Benchmark Portfolio Update – December 2012

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As part of my Beat the Market Experiment, I started three portfolios on November 1st, 2012:

  1. $10,000 “Good Boy” Passive ETF Benchmark Portfolio that would serve as both a performance benchmark and an example portfolio that would be easy to build and maintain for DIY investors.
  2. $10,000 “Bad Boy” Beat-the-Benchmark Portfolio that would simply represent the attempts of an “average guy” who is not a financial professional and gets his news from mainstream sources to get the best overall returns possible.
  3. $10,000 Consumer Loan Portfolio – Split evenly between LendingClub and Prosper, this portfolio of peer-to-peer loans will have a target return of 8-10% net with the goal of beating the Benchmark portfolio over the long run.

This is the monthly update for the $10,000 Benchmark Portfolio as of December 1, 2012. I opened an account at TD Ameritrade due to their 100 commission-free ETF program, including the best low-cost, index ETFs from Vanguard and iShares. I funded it with $10,000 and bought all the ETFs required to be fully invested on 11/1/12. Due to simplicity and small portfolio size, I am going with 100% stocks and no bonds. My target asset allocation is below.

Here are the ETF components that represent each asset class:

Here are my holdings and their market value as of the end of day 11/30/12 (full screenshot):

Here’s the asset allocation:

Total value of stocks: $9,982.21
Cash balance: $24.18
Total portfolio value: $10,006.39

Not too much to talk about this month, I bought everything in a matter of minutes with no commissions at all, and a month into the experiment our total return to date is a snoozefest 0.06%. The Play Portfolio update will be up tomorrow.

(Side note: I had previously mentioned that I forgot to enroll in the commission-free ETF program and got dinged $50 for the 5 buy trades that I made which was my own darn fault. A call to customer service got them to rebate back 3 out of 5 trades. A few days later, I was offered a customer service survey where I mentioned the situation, and two weeks after that they called me and offered to rebate back the rest of the trades. So in the end, I was rebated back all my trades, I must give credit to TD Ameritrade for that. I’m enrolled now so all future ETF trades in this portfolio will indeed be free.)

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  1. Any portfolio with zero bonds could hardly be considered “good boy”.

  2. That’s funny, I was just thinking about how pre-2009, I kept hearing how you don’t need bonds.

    Certainly bonds are important for many people, and I hold them in my portfolio, but I would argue that it would be fine for a 20-something starting saving for retirement to have zero bonds. Sure, you should start with an emergency fund or cash reserve, keep that FDIC-insured. But you want your stocks to have as long a time horizon as possible, and while bonds have had a good run, their expected long-term return going forward is quite low. This is how William Bernstein proposed to set up a young investor portfolio in his Four Pillars of Investing.

  3. Just checked, Vanguard Target Retirement fund series glide path has 10% bonds until 25 years until retirement, which would be 40 years old using 65 as common retirement age. Not that much difference to me, especially if you have at least 3-6 months of emergency cash reserves.

  4. Was the cash balance just left over due to buying round numbers of shares or dividends?
    How often do you plan to rebalance? And how often do you plan to redeploy the cash you get from dividends?

  5. @Andy – Yes, the cash balance is left over due to the requirement of buying full shares. No dividends yet.

    I don’t plan on using automatic dividend reinvestment, but will rebalance on a quarterly basis if the change meets a certain % band (may be limited by share size) and will reinvest dividends manually when that occurs.

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