Here is a year-end update on my investment portfolio holdings for 2017. This is my last-minute checkup in case I need to rebalance to make another other tax-related moves. This includes tax-deferred 401k/403b/IRAs and taxable brokerage holdings, but excludes things like our primary home, cash reserves, and a few other side investments. The goal of this portfolio is to create enough income to cover our regular 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 (my review, join free here) automatically logs into my accounts, tracks my balances, calculates my performance, and gives me a rough asset allocation. I still use my custom Rebalancing Spreadsheet (instructions, download free here) in order to see exactly where I need to direct new investments to rebalance back towards my target asset allocation.
Here is my portfolio performance for the year and rough asset allocation (real estate is under alternatives), according to Personal Capital:
Here is my more specific asset allocation, according to my custom spreadsheet:
Stock Holdings
Vanguard Total Stock Market Fund (VTI, VTSMX, VTSAX)
Vanguard Total International Stock Market Fund (VXUS, VGTSX, VTIAX)
WisdomTree SmallCap Dividend ETF (DES)
WisdomTree Emerging Markets SmallCap Dividend ETF (DGS)
Vanguard Small Value ETF (VBR)
Vanguard Emerging Markets ETF (VWO)
Vanguard REIT Index Fund (VNQ, VGSIX, VGSLX)
Bond Holdings
Vanguard Limited-Term Tax-Exempt Fund (VMLTX, VMLUX)
Vanguard Intermediate-Term Tax-Exempt Fund (VWITX, VWIUX)
Vanguard High-Yield Tax-Exempt Fund (VWAHX, VWALX)
Vanguard Inflation-Protected Securities Fund (VIPSX, VAIPX)
iShares Barclays TIPS Bond ETF (TIP)
Individual TIPS securities
U.S. Savings Bonds (Series I)
Target Asset Allocation. Our overall goal is to include 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 don’t hold commodities futures or gold (or bitcoin) as they don’t provide any income and I don’t believe they’ll outpace inflation significantly. I also try to imagine each asset class doing poorly for a long time, and only hold the ones where I think I can maintain faith.
Stocks Breakdown
- 38% US Total Market
- 7% US Small-Cap Value
- 38% International Total Market
- 7% Emerging Markets
- 10% US Real Estate (REIT)
Bonds Breakdown
- 50% High-quality, Intermediate-Term Bonds
- 50% US Treasury Inflation-Protected Bonds
I have settled into a long-term target ratio is 67% stocks and 33% bonds (2:1 ratio) within our investment strategy of buy, hold, and rebalance. With a self-managed, simple portfolio of low-cost funds, we minimize management fees, commissions, and income taxes.
Performance, details, and commentary. According to Personal Capital, my portfolio has gained 15.08% overall in 2017 (with a few days left to go). In the same time period, the S&P 500 has gained 19.73% (excludes dividends) and the US Aggregate bond index has gained 3.53%. For the first time in a while, my sizable allocation to developed international and emerging markets stocks has boosted my overall return.
My stock/bond split is currently at 70% stocks/30% bonds due to the continued stock bull market. I continue to invest new money on a monthly basis in order to maintain the target ratios. Once a quarter, I also reinvest any accumulated dividends and interest. I don’t use automatic dividend reinvestment. This way, I can usually avoid creating any taxable transactions unless markets are really volatile.
For both simplicity and cost reasons, I am no longer buying DES/DGS and will be phasing them out whenever there are tax-loss harvesting opportunities. New money is going into the more “vanilla” Vanguard versions: Vanguard Small Value ETF (VBR) and Vanguard Emerging Markets ETF (VWO).
I’m still somewhat underweight in TIPS and REITs mostly due to limited tax-deferred space as I don’t want to hold them in a taxable account. My taxable muni bonds are split roughly evenly between the three Vanguard muni funds with an average duration of 4.5 years. I may start switching back to US Treasuries if my income tax rate changes signficantly.
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Hi,
Any specific reason you are putting new money in VWO? I put some money in VWO in 2011 and bought at $49. Something went wrong and then it declined and have never touched $49 even though market has been very good.
Just curious about your VWO strategy…
Emerging Markets are well, emerging economies and thus subject to high volatility and extended periods of poor relative performance. But the hope is that the long-term expected return will be higher. VWO is up 30% YTD and valuations are still much more attractive than for example the US.
Also, the performance of US versus foreign stocks tends to alternate every 10 or so years. Many people who bought dot com stocks in 1990s lost money for 10+ years too, or their investments went to $0. Emerging Markets went WILD in the 2000s as the dot coms went down. This lead to “BRIC” discussion and dedicated funds (BRIC = Brazil, Russia, India, and China). In due course, this led to overbuying and high EM expectations that were undermined by various problems in the 2010s.
I have remained faithful to EM because I’m betting on another EM popularity cycle in the next 20-30 years. As said of EM and Real Estate in the 2000s, “these assets have been underpriced and are the future”… Most assets have a day in the sun every 20-30 years…that’s why you should diversify, rebalance, and remain patient.
” I don’t hold commodities futures or gold (or bitcoin) as they don’t provide any income and I don’t believe they’ll outpace inflation significantly”
I don’t want to start a large bitcoin discussion here but I’m surprised you don’t think cryptocurrency would outpace inflation significantly in the long-term.
At this point, a conservative approach is having 1%-5% of cryptocurrency in you portfolio. It’s too hard now to do easily but we’ll see ETFs that are a mix of cryptocurrencies that I bet you’ll buy someday. 🙂
You might be right. I’m not buying any bitcoin though, just as I don’t own gold or commodities. I prefer buying things that create value over time. If I buy a single bitcoin today, 40 years from now I’ll still own a single bitcoin.
I feel you, that’s very Warren Buffet of you. I am a bit confused by both your and Warren’s definition of “value” though. It’s easy to make an argument that Bitcoin adds value to society but I believe by your “I still own one bitcoin” statement means that’s not what you’re getting at.
Does a stock that doesn’t pay a dividend “create value over time”? If no, even though you’re buying ETFs, 80+ companies of the S&P 500 don’t pay a dividend.
If that’s not what you mean and you like the fact that those companies own assets and IP, what about cyrpotcurrencies that, unlike bitcoin, also provide some “value”?
Ehtereum is the largest cryptocurrency that has much more use than “just” a currency/value store.
Filecoin is another one that is easy to grasp.
Perhaps right now they’re appreciating because of speculation, but long-term, good chance some sort of fundamentals start to form (like internet companies before them).
One more thing. Bitcoin, unlike Gold, can fork. This is, for a lack of a better comparison, like a stock split and/or dividend. It’s definitely not apples and oranges but i’m not sure what else to compare it to.
If you bought one Bitcoin a year ago you’d have one Bitcoin now, one Bitcoin Cash and one Bitcoin Gold.
40 years from now? Well, you may have nothing but you may have 100s of different Bitcoin forks used for many different reasons.
@ Mike Siegel — Category error!
Bitcoin and the like are financial infrastructure tools rather than investments per se. They mean to be “non-government” cash; and yes similar technology may well be incorporated into future cash. However, it’s absurd to think that a computer transaction system can exist outside the real-world power structure. Computers are wildly dependent on 1,000 real world technologies — which are all vulnerable to real world control. Governments can create cash out of thin air only because they have genuine and deep power.
Bitcoin or something similar may continue as a tool for the black market, but governments must and will always control the mainstream economy. Political power is real power and it cannot be underestimated (no significant wars for the last 40 years means that younger people don’t appreciate true authoritarianism and government-led destruction…).
Now real gold, as a physical asset with 1,000s of years of history, will continue to be a reliable store of value. It was, is, and will remain the ultimate conservative/safe asset. As long as you keep it hidden in a secure location when the infantry comes to town…and don’t forget the storage place or die in a concentration camp…
The fact that Bitcoin (and its like) speculators get so defensive when you explain to them that your just not into them tells you a lot about its actual worth.
As far as gold, it didn’t perform as expected during the last deep Recession and the storage fees for gold bars are just about prohibitive for most people.
Jonathan,
Personal Capital signup URL doesn’t work.
Motti
Thanks for the heads up, but it just worked for me?
The sign up URL works for me too.
I was put off by having to link all my accounts directly to this 3rd party service. I just got a call from a rep who told me: in the field that says “institution” you can enter ” manual” and from then on you can manually enter your holdings. I am much more relaxed with that approach. Sure more work for me… but I can sleep at night 😉
“Once a quarter, I also reinvest any accumulated dividends and interest. I don’t use automatic dividend reinvestment. This way, I can usually avoid creating any taxable transactions unless markets are really volatile.”
How is that? You pay taxes on dividends regardless of whether you have automatic reinvestment.
Yes, I have to pay taxes on the dividends (no matter what), but if I can reinvest that cash into another asset class instead of selling something else, then I avoid an additional sale and the corresponding capital gains. Automatic dividend reinvestment only lets me reinvest in the same thing again.
How are you positioning for 2018 given the market continues to be an all time high? Any changes to the portfolio allocation?
Jonathan could you please explain the following statement below. I don’t understand whether you have dividend reinvestment or not you pay taxes:).
Also are TIPS a poor investment in a taxable account?
Thanks
“Once a quarter, I also reinvest any accumulated dividends and interest. I don’t use automatic dividend reinvestment. This way, I can usually avoid creating any taxable transactions unless markets are really volatile.”