February 2007 Investment Portfolio Snapshot

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It’s time for another bi-monthly update on my investment portfolio.

2/07 Portfolio Breakdown
Retirement Portfolio
Fund $ %
FSTMX – Fidelity Total Stock Market Index Fund $11,212 15%
VIVAX – Vanguard [Large-Cap] Value Index $14,057 19%
VISVX – V. Small-Cap Value Index $14,184 19%
VGSIX – V. REIT Index $9,781 13%
VTRIX – V. International Value $8,052 11%
VEIEX – V. Emerging Markets Stock Index $7,814 10%
VFICX – V. Int-Term Investment-Grade Bond $7,631 10%
BRSIX – Bridgeway Ultra-Small Market $2,109 3%
Cash – Unreinvested Dividends $500
Total $75,340
December and January Fund Transactions
$500 deposited in 401k, not yet invested

Another two months with little activity in my low-maintenance portfolio. I don’t get the joy of reading about my fund picks in magazines, but I don’t worry about choosing the wrong one either.

I am still ironing out a slightly tweaked asset allocation, one that has a more balanced domestic/international distribution and something I hopefully won’t mess with again for a long time. I’m reviewing the model portfolio comparisons and the books they came from, including Ferri’s new book All About Index Funds.

You can see some older posts on how this portfolio came to be here, as well as my previous portfolio snapshots here.

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  1. That looks like a very diversified portfolio. Very nice.

  2. Question!

    If I have a CD that generates 5.2% APR, what would the real APR be if there is zero taxes to be paid on the interest.

  3. Let me rephrase that. What would a 5.2% APR TAX free cd be equivalent to a taxable cd APR?

  4. ^^^depends on your federal tax bracket, state, and local taxes.

  5. autologic is correct, please see the conversation here and also the subsequent comments, including another CNN calculator.

  6. How is your retirement portfolio above arranged according to Roth, Trad, 401k etc.? For example, what is the percentage in each retirement vehicle? Thanks

  7. The calculator doesnt seem right.
    It says 5.2% TAX FREE is equivalent to approximately 5.8%.

    Remember that interests come on a 1099 form, which means you have to pay 15% SSN tax, medicare etc……on top of the fed, state tax

    Am I right?

  8. Question Jonathan, I see you have the total stock market index, but other than that, is there a reason why you are light on growth stocks? they seem to be primarily “value” funds.

  9. Value outperforms growth. Adding small amounts of value will boost returns and decrease risk. Adding more value will boost returns and boost risk.

  10. Why not have all of your funds at Vanguard? Makes it easier to manage.

  11. tyler – All Vanguard funds are in Roth IRAs. Fidelity funds are in 401k (Fidelity is my administrator). Bridgeway is in a taxable account.

    sri – Unearned income such as interest is not subject to Social Security or Medicare taxes.

    b2a – Studies over long periods of time have shown that value stocks in general have outperformed growth stocks. Whether this will hold true in the future nobody knows, but I believe it will.

    Alex – My 401k and my wife’s 401k are both with Fidelity, so we’re kind of stuck there. All our IRAs are all at Vanguard. They have no micro-cap fund and charge $35 a trade for non-Vanguard funds, so my Bridgeway funds are held at Bridgeway (no transaction or account fees).

  12. Hi Jonathan,

    May I ask how do you decide your asset allocation? How often do you change your asset allocation plans? Do you have a quantitative model to support your current AA, or are you simply chasing performance of hot sectors? If EM or REIT funds performed badly in the last several years, would you still put so much on them?

    That’s something I really like about VTIVX: vanguard has a convincing quantitative model to support their asset allocation. Although they also chase performance of EM, the percentage is quite small. I am a big believer of indexing, and I will stick to my AA which is simply 60% VTSMX + 40% VGTSX on the equity part. REIT? Already in VTSMX. Small value? Already in VTSMX. EM? Already in VGTSX.

  13. Investing will have a never-ending debate as to what is better. Active, Passive, EMH, CAPM, 3-Factor… Nobody knows what the future will hold. But I am more in the camp of tilting towards value and small stocks. I think there is a long-term benefit in over-weighting those areas.. (Fama/French 3-factor model) But I could be wrong.

    My first stab at it was back in May. I don’t think my portfolio is better or worse than anyone else’s, including yours. It’s just what I think is best for ME based on what I’ve read. I’ve made my calculations, and also have made concessions to reduce fees and the fact that the funds are split across multiple IRA/401k accounts.

    I really hate buying into hot sectors, which is why I’ve been putting off increasing my international exposure considering the recent run-up. But that in a way is market-timing in itself, eh?

    To answer your question, if EM and REITs performed poorly, yes, I would still put 10% of my stock portion in each. Now, I only first heard the term “index funds” two years ago when I started this blog (check out the archives), so please don’t confuse me with an expert 🙂

  14. i dont see why u have bonds and i think ur overdiversifed considering, im sure if u looked, ud have a ton of overlap. i personally think u might want to consider increasing ur exposure overseas, especially in europe and india and asia.

    the us giant, wont be so giant in a few years.

  15. The problem of employer 401k plans with Fidelity is really vexing.

    My employer selected only one index fund, the Spartan (S&P500), a good fund with low fees. The rest are all actively managed mutual funds with fees to match. They got all the Freedom target funds, supposedly a smart selection, except that they are composed exclusively of actively managed mutual funds.

    The problem is that I can contribute much more to my 401k, 3 times as much in a year, than I can to my IRA with Vanguard. This makes constructing a diversified low-cost portfolio a thorny problem. I’m sure most employees are in the same situation.

    Because I would like access to focused international and value index funds with Vanguard, this leaves me with splitting the Fidelity 401k crudely between S&P500, REITs and precious metals, and get specific on the IRA side with Vanguard. Inevitably, rebalancing will force me to increasingly invest in actively managed mutual funds.

    It’s a real shame that 401k plans are such a pain to diversify with.

  16. Jonathan
    Thanks for sharing this. I see that you have all your assets in index funds. I don’t know enough about them and all my personal funds are in mutual funds. I intend to just leave them there for long term (retirement accounts). Are index funds better than mutual funds? Do they offer less commissions+fees than mutual funds?

  17. How are you tracking this? The graph looks like it was generated from an Excel spreadsheet. If that is true, can you post a “scrubbed” version of said spreadsheet? I’d like to be able to see the same information about my portfolio, but not reinvent the wheel doing so. Many thanks.


  18. Hi Jonathan.
    Is there an easy way to see my personal asset allocation without looking into the details of every fund? I have used the X-RAY tool but it leaves the “value” and “growth” stocks mixed with the domestic stocks. Are there any other tools or are you just doing it manually? Thanks

  19. William Riley says

    I think that you have to many funds.Try not to have more than 5. Try these 2–CREEX;Columbia real estate equity Fund[get rid of your real estate] and Baron Partners -BPTRX- this is not a diversified fund,but I think you will do very well with it!

  20. Hi Jason,

    There is a lot of great discussion here!

    I don’t have anything to add, but I wanted to say ‘thank you’ for hosting such a great site.

  21. On the topic of final asset allocation, Larry Swedroe, in his book “The Successful Investor Today – 14 Simple truths you must know when you invest”, states (in Truth 14): … “the location of the asset class in either the taxable or tax-deferred/nontaxable account. The issue is relatively straightforward. The easiest account to deal with is a Roth account. Withdrawals from such an account are tax exempt. Therefore, we should generally place within that account the asset class with the highest expected return ? small value. If no small value is being held, then, in order, the choices should be: large value, emerging markets, real estate, small cap, and finally large cap.”

    He then states to reverse the order for Traditional/Rollover IRA?s, and finally, … “In taxable accounts we want to place the most tax-efficient equity asset classes. This is basically a large-cap fund (like an S&P 500 Index fund), a total stock market fund, or any tax managed fund. The least tax-efficient asset classes (value, real estate, small cap and taxable fixed income) should be placed in tax-deferred accounts. If there is not any room inside of a tax-deferred account, and there is no tax-managed alternative available, then an exchange-traded fund can be used to gain exposure to the desired asset class (due to their operating structure, exchange-traded funds are highly like to prove more tax efficient than their non tax-managed mutual fund counterparts).”

    Remember this when you construct a portfolio that includes your 401K, a Roth IRA, Traditional/Rollover IRA, and taxable accounts.

  22. Your portfolio is not diversified enough. Yes, you did spread them among many asset types but all these asset types are highly correlated. The one that is not correlated is prob Bonds. REIT and stocks tend to move in tandem. To prove this point, i tried to construct a portfolio widely diversified among several sectors, REIT, energy etc. but the end result is that the portfolio still moves very closely to the market. I think David Swenson’s approach is more apt.

    My constructed portfolio: http://www.stockalicious.com/stock_journal/84/charts

  23. In the current world economy, it’s hard to find assets with low correlation. But having that in mind, REITs and stocks are very different animals and their correlation may change with different events in the economy.

  24. Smart way to run a blog. Good information.

    The diversification looks familiar to this:

  25. I need help.
    I have $100.000.00 in a CD- I have a Mortgage: $2000 monthly – single-no kids- annual income: $120.000.00 I don’t really know where and how to invest my $100K that I have in the CD. Can anyone give me some advice in how to invest that money in order to have at least $2000 profit every month? Thank you very much. By the way, I don’t have 401K.

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