Search Results for: bogle book

Here’s my quarterly update on my current investment holdings as of October 2021, including our 401k/403b/IRAs and taxable brokerage accounts but excluding our house, “emergency fund” cash reserves, and a side portfolio of self-directed investments. Following the concept of skin in the game, the following is not a recommendation, but just to share an actual, low-cost, diversified DIY portfolio complete with some real-world messiness. The goal of this portfolio is to create sustainable income that keeps up with inflation to cover our household expenses.

Actual Asset Allocation and Holdings
I use both Personal Capital and a custom Google Spreadsheet to track my investment holdings. The Personal Capital financial tracking app (free, my review) automatically logs into my different accounts, adds up my various balances, tracks my performance, and calculates my overall asset allocation. Once a quarter, I also update my manual Google Spreadsheet (free, instructions) because it helps me calculate how much I need in each asset class to rebalance back towards my target asset allocation.

Here are updated performance and asset allocation charts, per the “Allocation” and “Holdings” tabs of my Personal Capital account, respectively. (The blue line went flat for a while because the synchronization stopped and I don’t checked my performance constantly.)

Stock Holdings
Vanguard Total Stock Market (VTI, VTSAX)
Vanguard Total International Stock Market (VXUS, VTIAX)
Vanguard Small Value (VBR)
Vanguard Emerging Markets (VWO)
Avantis International Small Cap Value ETF (AVDV)
Cambria Emerging Shareholder Yield ETF (EYLD)
Vanguard REIT Index (VNQ, VGSLX)

Bond Holdings
Vanguard Limited-Term Tax-Exempt (VMLTX, VMLUX)
Vanguard Intermediate-Term Tax-Exempt (VWITX, VWIUX)
Vanguard Intermediate-Term Treasury (VFITX, VFIUX)
Vanguard Inflation-Protected Securities (VIPSX, VAIPX)
Fidelity Inflation-Protected Bond Index (FIPDX)
iShares Barclays TIPS Bond (TIP)
Individual TIPS bonds
U.S. Savings Bonds (Series I)

Target Asset Allocation. This “Humble Portfolio” does not rely on my ability to pick specific stocks, sectors, trends, or countries. I own broad, low-cost exposure to asset classes that will provide long-term returns above inflation, distribute income via dividends and interest, and finally offer some historical tendencies to balance each other out. I have faith in the long-term benefit of owning publicly-traded US and international shares of businesses, as well as high-quality US federal and municipal debt. My stock holdings roughly follow the total world market cap breakdown at roughly 60% US and 40% ex-US. I also own real estate through REITs.

I strongly believe in the importance of doing your own research. Every asset class will eventually have a low period, and you must have strong faith during these periods to truly make your money. You have to keep owning and buying more stocks through the stock market crashes. You have to maintain and even buy more rental properties during a housing crunch, etc. A good sign is that if prices drop, you’ll want to buy more of that asset instead of less.

I do not spend a lot of time backtesting various model portfolios, as I don’t think picking through the details of the recent past will necessarily create superior future returns. Usually, whatever model portfolio is popular in the moment just happens to hold the asset class that has been the hottest recently as well. I’ve also realized that I don’t have strong faith in the long-term results of commodities, gold, or bitcoin. I’ve tried many times to wrap my head around it, but have failed. I prefer things that send me checks while I sleep.

This is not the optimal, perfect, ideal anything. It’s just what I came up with, and it’s done the job. You may have different beliefs based on your own research and psychological leanings. Holding a good asset that you understand is better than owning and selling the highest-return asset when it is at its temporary low point.

Stocks Breakdown

• 45% US Total Market
• 7% US Small-Cap Value
• 31% International Total Market
• 7% International Small-Cap Value
• 10% US Real Estate (REIT)

Bonds Breakdown

• 66% High-Quality bonds, Municipal, US Treasury or FDIC-insured deposits
• 33% US Treasury Inflation-Protected Bonds (or I Savings Bonds)

I have settled into a long-term target ratio of 67% stocks and 33% bonds (2:1 ratio) within our investment strategy of buy, hold, and occasionally rebalance. This is more conservative than most people my age, but I am settling into a more “perpetual portfolio” as opposed to the more common accumulate/decumulate portfolio. I use the dividends and interest to rebalance whenever possible in order to avoid taxable gains. I plan to only manually rebalance past that if the stock/bond ratio is still off by more than 5% (i.e. less than 62% stocks, greater than 72% stocks). With a self-managed, simple portfolio of low-cost funds, we can minimize management fees, commissions, and taxes.

Holdings commentary. The fact that I did research about Shiba Inu coins today is the latest evidence that there is too much money sloshing around chasing speculative investments. Somehow, I own 4,000,000 SHIB from a recent Voyager referral promotion! You really have to wonder how 2021 events will be described in 2030 or 2040. All I can do is listen to the late Jack Bogle and “stay the course”. I remain optimistic that capitalism, human ingenuity, human resilience, human compassion, and our system of laws will continue to improve things over time.

My thought for the quarter is that there is all this focus on tech/crypto/cloud but I hope we still invest enough in physical things like farming/energy/infrastructure.

Performance numbers. According to Personal Capital, my portfolio is up +11.4% for 2021 YTD. I rolled my own benchmark for my portfolio using 50% Vanguard LifeStrategy Growth Fund and 50% Vanguard LifeStrategy Moderate Growth Fund – one is 60/40 and the other is 80/20 so it also works out to 70% stocks and 30% bonds. That benchmark would have a total return of +10.1% for 2021 YTD as of 10/15/2021.

I’ll share about more about the income aspect in a separate post.

Here’s my quarterly update on my current investment holdings as of July 2021, including our 401k/403b/IRAs, taxable brokerage accounts, and savings bonds but excluding our house, cash reserves, and a small portfolio of self-directed investments. Following the concept of skin in the game, the following is not a recommendation, but a real-world example of a mostly low-cost, diversified, simple DIY portfolio with a few customized tweaks. The goal of this portfolio is to create sustainable income that keeps up with inflation to cover our household expenses.

Actual Asset Allocation and Holdings
I use both Personal Capital and a custom Google Spreadsheet to track my investment holdings. The Personal Capital financial tracking app (free, my review) automatically logs into my different accounts, adds up my various balances, tracks my performance, and calculates my overall asset allocation. Once a quarter, I also update my manual Google Spreadsheet (free, instructions) because it helps me calculate how much I need in each asset class to rebalance back towards my target asset allocation.

Here are updated performance and asset allocation charts, per the “Allocation” and “Holdings” tabs of my Personal Capital account, respectively:

Stock Holdings
Vanguard Total Stock Market (VTI, VTSAX)
Vanguard Total International Stock Market (VXUS, VTIAX)
Vanguard Small Value (VBR)
Vanguard Emerging Markets (VWO)
Vanguard REIT Index (VNQ, VGSLX)

Bond Holdings
Vanguard Limited-Term Tax-Exempt (VMLTX, VMLUX)
Vanguard Intermediate-Term Tax-Exempt (VWITX, VWIUX)
Vanguard Intermediate-Term Treasury (VFITX, VFIUX)
Vanguard Inflation-Protected Securities (VIPSX, VAIPX)
Fidelity Inflation-Protected Bond Index (FIPDX)
iShares Barclays TIPS Bond (TIP)
Individual TIPS bonds
U.S. Savings Bonds (Series I)

Target Asset Allocation. I do not spend a lot of time backtesting various model portfolios, as I don’t think picking through the details of the recent past will necessarily create superior future returns. Usually, whatever model portfolio is popular in the moment just happens to hold the asset class that has been the hottest recently as well.

I believe in the importance of doing your own research and owning productive assets in which you have strong faith. Every asset class will eventually have a low period, and you must have strong faith during these periods to truly make your money. You have to keep owning and buying more stocks through the stock market crashes. You have to maintain and even buy more rental properties during a housing crunch, etc.

Personally, I try to own broad, low-cost exposure to asset classes that will provide long-term returns above inflation, distribute income via dividends and interest, and finally offer some historical tendencies to balance each other out. I have faith in the long-term benefit of owning publicly-traded US and international shares of businesses as well as high-quality US federal and municipal debt. I also own real estate through REITs.

Again, personally, I simply don’t have strong faith in the long-term results of commodities, gold, or bitcoin. I own my own house, but I choose not to participate in the higher potential gains but also higher potential risks (of both requiring more time and money) of rental real estate.

My US/international ratio floats with the total world market cap breakdown, currently at ~58% US and 42% ex-US. I’m fine with a slight home bias (owning more US stocks than the overall world market cap), but I want to avoid having an international bias.

Stocks Breakdown

• 43% US Total Market
• 7% US Small-Cap Value
• 33% International Total Market
• 7% Emerging Markets
• 10% US Real Estate (REIT)

Bonds Breakdown

• 33% High-Quality Nominal bonds, US Treasury or FDIC-insured
• 33% High-Quality Municipal Bonds
• 33% US Treasury Inflation-Protected Bonds

I have settled into a long-term target ratio of 67% stocks and 33% bonds (2:1 ratio) within our investment strategy of buy, hold, and occasionally rebalance. I use the dividends and interest to rebalance whenever possible in order to avoid taxable gains. I plan to only manually rebalance past that if the stock/bond ratio is still off by more than 5% (i.e. less than 62% stocks, greater than 72% stocks). With a self-managed, simple portfolio of low-cost funds, we can minimize management fees, commissions, and taxes.

Holdings commentary. The world seems to have stabilized since the March 2020 market drop and overall panic, but I try not to get too attached to these numbers. They seem too good to be true, even as things continue to open up. All I can do is listen to the late Jack Bogle and “stay the course”. I remain optimistic that capitalism, human ingenuity, human resilience, human compassion, and our system of laws will continue to improve things over time.

I would like to note that when few people were paying attention, TIPS have had a pretty good run for an insurance-like investment. The iShares TIPS ETF (TIP) went up 8.3% in 2019 and 10.9% in 2020. The 10-year breakeven inflation rate between TIPS and Treasury is currently about 2.3%. I’m still happy owning a chunk of my bonds as TIPS.

Performance numbers. According to Personal Capital, my portfolio is up +9.4% for 2021 YTD. I rolled my own benchmark for my portfolio using 50% Vanguard LifeStrategy Growth Fund and 50% Vanguard LifeStrategy Moderate Growth Fund – one is 60/40 and the other is 80/20 so it also works out to 70% stocks and 30% bonds. That benchmark would have a total return of +8.2% for 2021 YTD as of 7/18/2021.

I’ll share about more about the income aspect in a separate post.

Here’s an update on my current investment holdings as of April 2021, including our 401k/403b/IRAs, taxable brokerage accounts, and savings bonds but excluding our house, cash reserves, and a small portfolio of self-directed investments. Following the concept of skin in the game, these are my real-world holdings and what I’ll be using to create income to fund our household expenses. We have no pensions or other sources of income.

Actual Asset Allocation and Holdings
I use both Personal Capital and a custom Google Spreadsheet to track my investment holdings. The Personal Capital financial tracking app (free, my review) automatically logs into my different accounts, adds up my various balances, tracks my performance, and calculates my overall asset allocation. Once a quarter, I also update my manual Google Spreadsheet (free, instructions) because it helps me calculate how much I need in each asset class to rebalance back towards my target asset allocation.

Here are updated performance and asset allocation charts, per the “Allocation” and “Holdings” tabs of my Personal Capital account, respectively:

Stock Holdings
Vanguard Total Stock Market (VTI, VTSAX)
Vanguard Total International Stock Market (VXUS, VTIAX)
Vanguard Small Value (VBR)
Vanguard Emerging Markets (VWO)
Vanguard REIT Index (VNQ, VGSLX)

Bond Holdings
Vanguard Limited-Term Tax-Exempt (VMLTX, VMLUX)
Vanguard Intermediate-Term Tax-Exempt (VWITX, VWIUX)
Vanguard Intermediate-Term Treasury (VFITX, VFIUX)
Vanguard Inflation-Protected Securities (VIPSX, VAIPX)
Fidelity Inflation-Protected Bond Index (FIPDX)
iShares Barclays TIPS Bond (TIP)
Individual TIPS bonds
U.S. Savings Bonds (Series I)

Target Asset Allocation. I do not spend a lot of time backtesting various model portfolios, as I don’t think picking through the details of the recent past will necessarily create superior future returns. Usually, whatever is popular in the moment just happens to hold the asset class that has been the hottest recently as well.

Mainly, I try to own broad, low-cost exposure to asset classes that will provide long-term returns above inflation, distribute income via dividends and interest, and finally offer some historical tendencies to balance each other out. I make a small bet that US Small Value and Emerging Markets will have higher future long-term returns (along with some higher volatility) than the more large and broad indexes, although I could be wrong.

While you could argue for various other asset classes, I believe that it is important to imagine an asset class doing poorly for a long time, with bad news constantly surrounding it, and only hold the ones where you still think you can maintain faith through those fearful times. I simply don’t have strong faith in the long-term results of commodities, gold, or bitcoin. (In the interest of full disclosure, I do own tiny bits of gold and BTC amongst my self-directed investments.)

My US/international ratio floats with the total world market cap breakdown, currently at ~57% US and 43% ex-US. I’m fine with a slight home bias (owning more US stocks than the overall world market cap), but I want to avoid having an international bias.

Stocks Breakdown

• 43% US Total Market
• 7% US Small-Cap Value
• 33% International Total Market
• 7% Emerging Markets
• 10% US Real Estate (REIT)

Bonds Breakdown

• 33% High-Quality Nominal bonds, US Treasury or FDIC-insured
• 33% High-Quality Municipal Bonds
• 33% US Treasury Inflation-Protected Bonds

I have settled into a long-term target ratio of 67% stocks and 33% bonds (2:1 ratio) within our investment strategy of buy, hold, and occasionally rebalance. I will use the dividends and interest to rebalance whenever possible in order to avoid taxable gains. I plan to only manually rebalance past that if the stock/bond ratio is still off by more than 5% (i.e. less than 62% stocks, greater than 72% stocks). With a self-managed, simple portfolio of low-cost funds, we minimize management fees, commissions, and taxes.

Holdings commentary. Overall, all these numbers keep going up since the March 2020 drop, but I remain anxious about the future. There seems to be lots of money and optimism sloshing around, but there are also so many people still struggling. All I can do is listen to the late Jack Bogle and “stay the course”. I remain optimistic that capitalism, human ingenuity, human resilience, and our system of laws will continue to improve things over time.

In specific terms, I seem to be a little overweight REITs and underweight International Stocks. I may rebalance within tax-deferred accounts if this continues.

I have also been following with interest the new ETFs from both Dimensional Fund Advisors and Avantis (started by former DFA employees). Right now, I don’t need to rebalance out of anything, but in the future I may purchase the DFA Emerging Core Equity Market ETF (DFAE) and Avantis U.S. Small Cap Value ETF (AVUV) instead of my current holdings.

Performance numbers. According to Personal Capital, my portfolio is already up +5.6% since the beginning of 2021. Wow. I rolled my own benchmark for my portfolio using 50% Vanguard LifeStrategy Growth Fund and 50% Vanguard LifeStrategy Moderate Growth Fund – one is 60/40 and the other is 80/20 so it also works out to 70% stocks and 30% bonds. That benchmark would have a total return of +5.2% for 2020 YTD as of 4/9/2021.

The goal of this portfolio is to create sustainable income that keeps up with inflation to cover our household expenses. I’ll share about more about the income aspect in a separate post.

How do you know when you portfolio is enough to retire on? You have to figure out a withdrawal strategy first. This is a tricky question and full of worries about running out of money. You could take out a fixed amount (i.e. $50,000 a year). You could take out a fixed percentage (i.e. 4% a year). You can adjust for inflation. You can implement upper or lower guardrails.

Personally, I appreciate the behavioral reasons why living off income while keeping your ownership stake is desirable. The analogy I fall back on is owning a rental property. If you are reliably getting rent checks that increase with inflation, you can sit back calmly and ignore what the house might sell for on the open market.

I’ve also come to feel that dividend yield can be a quick-and-dirty way to adjust your withdrawal rate for valuation. For example, if the price of S&P 500 index goes up while the dividend payout stays the same, then wouldn’t it be prudent to simply spend the same amount? Check out the historical S&P 500 dividend yield via Multpl. Focus the last 20 years – the yield was highest in the 2008 crash and lowest in the 2000 tech bubble.

Now check out the absolute dividend amount (inflation-adjusted), also via Multpl:

Note that if you only buy “high-yield” stocks and “high-yield” bonds, that actually increases the chance that those yields will drop sooner or later. I am trying to reach some sort of balance where I spend the income on a “total return” portfolio.

Even the venerable Jack Bogle advocated something similar in his early books in investing. He suggested owning the Vanguard Value Index fund and spending only the dividends as way to fund retirement.

One simple way to see how much income (dividends and interest) your portfolio is generating is to take the “TTM Yield” or “12 Mo. Yield” from Morningstar (linked below). Trailing 12 Month Yield is the sum of a fund’s total trailing 12-month interest and dividend payments divided by the last month’s ending share price (NAV) plus any capital gains distributed over the same period. SEC yield is another alternative, but I like TTM because it is based on actual distributions (SEC vs. TTM yield article).

Below is a very close approximation of my most recent portfolio update. My current target asset allocation is 66% stocks and 34% bonds, and intend that to be my permanent allocation upon early retirement.

If I had a $1,000,000 portfolio balance today, a 2.5% yield means that it would have generated $25,000 in interest and dividends over the last 12 months. (The muni bond interest in my portfolio is exempt from federal income taxes.) Some comparison numbers (taken 10/23/2017):

• Vanguard LifeStrategy Moderate Growth Fund (VSMGX) is a low-cost, passive 60/40 fund that has a trailing 12-month yield of 2.06%.
• Vanguard Wellington Fund is a low-cost active 65/35 fund that has a trailing 12-month yield of 2.48%.

These income yield numbers are significantly lower than the 4% withdrawal rate often quoted for 65-year-old retirees with 30-year spending horizons, and is even lower than the 3% withdrawal rate that I usually use as a rough benchmark. If I use 3%, my theoretical income would cover my projected annual expenses. If I used the actual numbers above, I am close but still short. Most people won’t want to use this number because it is a very small number. However, I like it for the following reasons:

• Tracking dividends and interest income is less volatile and stressful than tracking market prices.
• Dividend yields adjust roughly for stock market valuations (if prices are high, dividend yield is probably down).
• Bond yields adjust roughly for interest rates (low interest rates now, probably low bond returns in future).
• With 2/3rds of my portfolio in stocks, I have confidence that over time the income will increase with inflation.

I will admit that planning on spending only 2% is most likely too conservative. Consider that if all your portfolio did was keep up with inflation each year (0% real returns), you could still spend 2% a year for 50 years. But as an aspiring early retiree with hopefully 40+ years ahead of me, I like that this method adapts to the volatility of stock returns and the associated sequence of returns risk.