Happy New Year!

How did your portfolio perform in 2015?

I am very sorry for the delay on my blog posts. I am happy 2015 is over. For me personally, it was a terrible year with Dan’s passing (Click here for my tribute to Dan). The holiday season was fine with visitations to both Dan’s family and my family, needless to say I will be grieving for many months. Happy to say that I have a large support group of friends and family and am doing all I can to address this by attending a weekly bereavement group, and continuing my work (and Dan’s) educating anybody who is interested in investing and personal finance.

Today’s blog is not about competition, heaven forbid! I am not a financial adviser. I show how I evaluated my portfolio so that it is following the overall stock and bond market index returns. Our goal is to earn the market averages, not exceed them. I invite you to share your portfolio return, so everyone learns.

Okay, how did our portfolio perform compared to Callan returns for 2015?

While my personal life was horrible in 2015, my portfolio return was flat. My overall portfolio performed a minuscule -.005% loss for 2015.  The international markets pulled my portfolio for a loss for the first time since 2008 (-11.8%). The stocks/bond split that the Bogleheads and I talk about all the time provide the necessary balance so that my portfolio followed the stock and bond market indices which resulted in a flat return. Thus, my portfolio performed exactly as it should have since the domestic stock market returns increased slightly and the international markets decreased slightly, my portfolio was flat. Nothing wrong with that performance.

Every end of the year, I calculated my return by this simple formula: end-of-the-year-value minus beginning-of-the-year-value divided by the beginning-of-year-value. If you are working, take out all of your contributions. For retirees put all of your distributions back in. Obviously, this method is not precise as it does not take into account the impact of distributions and contributions, but you will get a ballpark return average. For a calculator that takes into account the full impact of contributions and distributions throughout the year, log on to Bogleheads wiki and download a free Excel SS: https://www.bogleheads.org/wiki/Calculating_personal_returns.

For comparing returns across the different asset classes log on to Callan’s outstanding and informational annual table of which asset classes did well and which did not. Notice how the top performers one year become bottom feeders the next. That’s why it’s so important to diversify among the major asset classes. Callan creates this wonderful table and shows precisely how varied from year to year the asset classes perform. 

At the beginning of 2015, Dan and I consolated our money into Vanguard. Dan had money in Loomis Sayes and moved it all to Vanguard. I sold my 3M stock for $166.00 which I inherited from my mother. She bought this stock when she worked for Minnesota Minning and Manufacturing Co in the 1950s and 60s and that is how I learned about stocks and investing from her example. At the end of the first Quarter 2015, our equity allocation had grown over 40%. We also rebalanced from our Total Stock Market Index ETF to purchase short-term bonds in anticipation of higher interest rates. Dan

At the end of the first Quarter 2015, our equity allocation had grown over 40% of our portfolio. Our stock bond split grew out of wack. To keep back to our original 30 stock/70% bond split, we sold equities and put them into bonds: about a four of our position from the Total Stock Market Index ETF and all of my 3M stock. We used the proceeds to purchase short-term bonds to rebalance our portfolio to slowly get back to our goal of about 30% stocks/70% Bonds. Currently, the portfolio is still above our original stock bond split but since the New Year 2016, there has been a major sell-off of stocks and increase in bonds from the 2016 current stock market correction.

Below is my portfolio holdings, diversification, asset allocation and the returns for each of my Vanguard Index and managed funds.

I hope you find this helpful in setting up your plan.

Once again, HAPPY NEW YEAR!

Steve