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03-03-2016, 09:24 AM
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#161
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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Speaking of how to compute return, we have talked about this before, but I will reiterate something here. If there is no withdrawal nor deposit, it is simple. But when there cash flow in/out of the portfolio, that's where people may differ on how it is computed.
Let's say the market return is 5%, and you also make a withdrawal of 5%. So, your portfolio should stay the same, right? No, it depends on when you make the withdrawal.
Start out with $1M, if you let it grow to $1,050K then take out $50K, you still have $1M.
But if you withdraw $50K at the beginning, your $950K will grow to only $997.5K. It's $2.5K less or 0.25% less than the first case.
In the 1st case, the return is ($now+$wdrl)/$start, while in the second case the return is $now/($start-$wdrl). The difference between the two cases is the growth of that withdrawal, the 5% gain on the 5% withdrawal amount if delayed till the end.
If you now also have deposit it gets a bit more complicated. Worse, with multiple withdrawals and deposits, you will have to use the XIRR function, which mathematically accounts for the time of all the deposits and withdrawals. But I want to keep it simple, and just use ($now+$wdrl)/$start. I actually take money out throughout the year and not at the end, so the real return is actually a bit better than what I compute.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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03-03-2016, 10:08 AM
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#162
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Recycles dryer sheets
Join Date: Dec 2013
Location: Manhattan Beach
Posts: 195
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+2.3% YTD as of EOD Feb 29.
Not great, but given all the volatility, I'll take it.
Trading profits + small consulting > expenses.
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03-03-2016, 06:06 PM
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#163
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Dryer sheet aficionado
Join Date: Jul 2014
Location: Katy, TX
Posts: 27
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Quote:
Originally Posted by TallTim
+2.3% YTD as of EOD Feb 29.
Not great, but given all the volatility, I'll take it.
Trading profits + small consulting > expenses.
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Considering that I am -2.25% YTD as of today after the gains of the last week, I'd say you are doing pretty great.
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03-03-2016, 06:17 PM
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#164
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
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Quote:
Originally Posted by LOL!
I did not write that anybody had to agree with me.
OK, now let''s get back to the Tower of Babel that is everyone's YTD performance.
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How about this and everyone use 12 months as months elasped? While it sacrifices some precision to simplicity, at least it would offer consistency.
Investment Return Calculator: Measure your Portfolio's Performance
Quote:
This calculator can only give you an estimate (total accuracy would require you to give the date and amount of each addition and withdrawal) but it's a respected estimate, using a formula recommended by The Four Pillars of Investing and The Motley Fool, and widely used by many others.
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__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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03-03-2016, 06:20 PM
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#165
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Moderator
Join Date: Sep 2006
Posts: 4,029
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Quote:
Originally Posted by simple girl
Absolutely correct, and I have been looking at benchmarks, but I am lower than the benchmarks I've been looking at - so that has really been making me wonder about my allocation. For example:
as of 3/1:
VSMGX: - 1.69%
We are ~ 60/40 with international (when I have time I will rerun my rebalancing spreadsheet and post more details). Our return as of 3/1 (I verified with XIRR, a bit better than I posted earlier) was - 2.23.
Perhaps if I post more details you all can help me figure out what benchmark would be most appropriate for me to compare to...back later! Thanks!
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Ok my asset allocation currently is:
60% stock (17% of this is international)
33% bond
7% short term/cash
Seeing the above, what benchmark would you all recommend I compare my YTD return to?
__________________
simple girl
less stuff, more time
(55, married; Mr. Simple Girl, 59. FIRED 12/31/19!)
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03-03-2016, 06:32 PM
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#166
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
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In selecting a benchmark it is more important to know your target AA rather than your current AA because in comparing the benchmark to your actual results it reflects differences between your actual AA and target AA as well as different performance between your actual holding in each category and the indices in each category.
One idea would simply be the Target Retirement fund of your choice that best reflects your target AA... or you could select an index fund in each category and then compute a weighted average based on your target AA.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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03-03-2016, 06:48 PM
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#167
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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Quote:
Originally Posted by simple girl
Ok my asset allocation currently is:
60% stock (17% of this is international)
33% bond
7% short term/cash
Seeing the above, what benchmark would you all recommend I compare my YTD return to?
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Is that 17% of 60% so 10% of total portfolio? Or 17% of total portfolio?
Either way, I think VSMGX is a perfectly good benchmark for you.
At the end of today, below are the YTD total returns from Morningstar.com
VSMGX - LifeStrategy Moderate Growth - 60/40 asset allocation using total market weights, unchanging over time.
VTWNX - Target Retirement 2020, 60/40 now, but changing over time
DGSIX DFA Global 60/40 - small-cap and value-tllted with DFA fund managers
VBIAX - Vanguard Balanced 60/40 but no international.
One thing to note is that the dispersion of returns from similar passively-managed mostly index 60/40 portfolios is about 0.25%. So I do not think that being 0.3% different from your benchmark is that significant.
Clearly, international has done worse than domestic this year, so VBIAX is doing better than the funds with international equities.
I also think the only way to do much better or much worse than these benchmarks is to have a different asset allocation (or high fees). For instance, someone who panicked and sold out on Feb 11th for just a couple of weeks, then bought back in would way underperform. In contrast, someone who switched from 60/40 to 75/25 on Feb 11th would have outperformed even if they sold to get back to 60/40 yesterday.
And a change of stocks from 60% to 75% temporarily comes with risk and maybe not as much reward as one might think. If stocks go up 10% while at the higher allocation, that improves performance by only 1.5% total. If stocks up up only 5%, that extra 15% to stock improves performance by only 0.75% total. Of course, if one shifts to 75% equities and stocks go down, then that hurts instead of helps.
It might be easier for some folks to reduce fees to improve performance than it would be to do any market timing, too.
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03-03-2016, 06:51 PM
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#168
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Thinks s/he gets paid by the post
Join Date: Mar 2005
Location: yonder
Posts: 2,851
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Quote:
Originally Posted by pb4uski
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Good idea. But, I wonder if there might be another calculator we could use as this one didn't give me the numbers that I wanted to see.
__________________
When the people shall have nothing more to eat, they will eat the rich--philosopher Jean-Jacques Rousseau
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03-03-2016, 06:53 PM
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#169
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Moderator
Join Date: Sep 2006
Posts: 4,029
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Quote:
Originally Posted by pb4uski
In selecting a benchmark it is more important to know your target AA rather than your current AA because in comparing the benchmark to your actual results it reflects differences between your actual AA and target AA as well as different performance between your actual holding in each category and the indices in each category.
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Oh, sorry, I didn't mention - that is our target AA - we are currently balanced.
Quote:
Originally Posted by pb4uski
One idea would simply be the Target Retirement fund of your choice that best reflects your target AA...
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That is what I am asking for. Are there suggestions for a Target Retirement fund that is 60/40, which includes ~ 17% slant towards international in the stock section (43% US stock, 17% Int, 33% bonds, 7% cash). I can continue to research on my own but was hoping someone would have a suggestion of one they know is close to that.
__________________
simple girl
less stuff, more time
(55, married; Mr. Simple Girl, 59. FIRED 12/31/19!)
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03-03-2016, 06:55 PM
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#170
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Moderator
Join Date: Sep 2006
Posts: 4,029
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Quote:
Originally Posted by LOL!
Is that 17% of 60% so 10% of total portfolio? Or 17% of total portfolio?
Either way, I think VSMGX is a perfectly good benchmark for you.
At the end of today, below are the YTD total returns from Morningstar.com
VSMGX - LifeStrategy Moderate Growth - 60/40 asset allocation using total market weights, unchanging over time.
VTWNX - Target Retirement 2020, 60/40 now, but changing over time
DGSIX DFA Global 60/40 - small-cap and value-tllted with DFA fund managers
VBIAX - Vanguard Balanced 60/40 but no international.
One thing to note is that the dispersion of returns from similar passively-managed mostly index 60/40 portfolios is about 0.25%. So I do not think that being 0.3% different from your benchmark is that significant.
Clearly, international has done worse the domestic this year, so VBIAX is doing better than the funds with international equities.
I also think the only way to do much better or much worse than these benchmarks is to have a different asset allocation. For instance, someone who panicked and sold out on Feb 11th for just a couple of weeks, then bought back in would way underperform. In contrast, someone who switched from 60/40 to 75/25 on Feb 11th would have outperformed even if they sold to get back to 60/40 yesterday.
And a change of stocks from 60% to 75% temporarily comes with risk and maybe not as much reward as one might think. If stocks go up 10% while at the higher allocation, that improves performance by only 1.5% total. If stocks up up only 5%, that extra 15% to stock improves performance by only 0.75% total. Of course, if one shifts to 75% equities and stocks go down, then that hurts instead of helps.
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Thank you very much - that's exactly what I was looking for!
__________________
simple girl
less stuff, more time
(55, married; Mr. Simple Girl, 59. FIRED 12/31/19!)
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03-03-2016, 06:57 PM
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#171
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
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It is unlikely that any target retirement fund will be holding 7% in cash, but the 2020 fund would be a good benchmark IMO.
Ranking by Percentage | Fund | Percentage | 1 | Vanguard Total Stock Market Index Fund Investor Shares | 35.6% | 2 | Vanguard Total Bond Market II Index Fund Investor Shares* | 27.7% | 3 | Vanguard Total International Stock Index Fund Investor Shares | 23.5% | 4 | Vanguard Total International Bond Index Fund Investor Shares | 12.2% | 5 | Vanguard Short-Term Inflation-Protected Securities Index Fund Investor Shares | 1.0% | Total | — | 100.0% |
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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03-03-2016, 08:16 PM
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#172
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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Quote:
Originally Posted by pb4uski
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What that formula does is to assume 1/2 of withdrawal (deposit) is at the start, and the other 1/2 is at the end. It is a compromise, and works best if you continue to withdraw or deposit periodically through the period.
To use my earlier example of 5% return and a $50K withdrawal on a $1M portfolio (post #161) :
Case 1) Withdrawal at the end -> Portfolio end value = $1M
Return = ($now+$withdrawal)/$start
Case 2) Withdrawal at start -> Portfolio end value = $997.5K
Return = $now / ($start-$withdrawal)
Case 3) 1/2 Withdrawal at start, 1/2 at end -> Portfolio end value = $998.75K
Return = ($now+1/2 $withdrawal) / ( $start - 1/2 $withdrawal)
To compare two individual returns without knowing when they make any withdrawal (or deposit) without using the XIRR function, by using case 3) you assume the average case and have only 1/2 the error.
PS. I forgot about another case. The exact formula to match this is a bit more complex, but note how it comes close to Case 3).
Case 4) Withdrawal at 1/2 point in period -> Portfolio end value = $998.765K.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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03-03-2016, 08:23 PM
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#173
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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So, as of market close today, I am down only -0.7% YTD.
This is not at all shabby, considering that I am holding more than 30% cash with only 6% bond, and inside the 60% stock I have 16% foreign.
Bond is up 1 to 2% YTD which I do not have. Cash at 2.5%/year does not help much. Foreign stocks are still down -5.5% YTD as seen with VXUS. S&P is still down -2%. So, my short-term market timing trades and my domestic stocks save the day to bring the portfolio to nearly break even (I am not an indexer).
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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03-03-2016, 09:41 PM
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#174
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2009
Posts: 9,343
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Today was probably my best day of the year. Went from being up 1% to 2% in one day. Meaningless though, as most of money is in illiquid preferreds that jump up or down on 100-200 shares traded in a day. At the end of the year if I am up 6% it has been a solid year. I just mostly wait for dividend dumps.
Sent from my iPad using Tapatalk
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03-04-2016, 03:23 AM
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#175
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gone traveling
Join Date: Oct 2007
Posts: 1,135
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The entire YTD analysis is an arbitrary date - fools game ...
Broad SP500 domestic Market is Down 6.5% from all time highs.
I'm down 7.8% from all time highs
International is still lagging.
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03-04-2016, 04:30 AM
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#176
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Thinks s/he gets paid by the post
Join Date: May 2014
Location: Utrecht
Posts: 2,650
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As of today my equity portfolio:
-2.8% in trackers (VT & VOE)
+8.2% in individual portfolio
In the beginning of the year performance between my two segments (tracker & individual) suddenly differed quite drastically, after 5-6 years of moving roughly in sync.
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03-04-2016, 04:39 PM
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#177
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Moderator
Join Date: Oct 2010
Posts: 10,656
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Quote:
Originally Posted by sengsational
For the few here that reported at the end of January and the end of February, I've plotted the results. So, the month of February saw improvements in the range of .35% to .74% with the larger improvements seen by those that got hit the hardest in January. This is expected and it looks like we have some consistent reporting, for the most part. There is one outlying point not fitting the expectation. It's on the good side, so maybe that strategy should be examined
I could name names, but I figured it's more interesting to get comments (and see if you can spot yourself) first.
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Time to have a look at the results! I hope I got this right. It's left to right from the list.
But as we're talking about here..."timing is everything"
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03-04-2016, 04:56 PM
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#178
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Thinks s/he gets paid by the post
Join Date: Nov 2013
Location: Bay Area
Posts: 2,745
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Quote:
Originally Posted by sengsational
Time to have a look at the results! I hope I got this right. It's left to right from the list.
But as we're talking about here..."timing is everything"
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S&P 500 lost a fraction between 1/31/16 & 2/29/16. During the same span, my investment went up a bit b/c of short term trades, and dividends.
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03-04-2016, 08:16 PM
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#179
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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Wow, how nice to see that I brought up the rear of that short list as of 2/29.
As of today, I am back to even with 12/31/2015 (just missing a couple of $K). Yes, I made 3% this week. Does that change my standing any?
But seeing that most indices are still in the red YTD, and also that I have so little bonds to help my 60% stock which also has quite a bit of that stinkin' international, I do not think I am doing too badly.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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03-04-2016, 09:03 PM
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#180
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,686
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Quote:
Originally Posted by LOL!
Performance of
VWENX (Wellington) through 2/29/2016 is -3.01%
Through yesterday: -1.62%
Through today: -1.18%
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I found that the -3.01% VWENX number is the Year-to-Date as of 02/29/2016, listed on Vanguard Site. Googlefinance is using that as YTD performance.
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