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Old 04-03-2017, 06:11 PM   #181
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Let's say that you have $1 million in your IRA that is is $600k in stocks and $400k in bonds and that you also have $250k in CDs outside your IRA and that the IRA earns 5% and the CDs earn 1%.

The way I do it (and I think many others) would be that the AA of that person's total portfolio is 48/52 ($600/$1,250 and $650/$1,250) and the return is 4.2% ($1m@5% + $250k@1%... or $52.5k/$1,250k).

If that person thinks that their portfolio earns 5% because they look at their brokerage statement and it says 5% then IMO they are fooling themselves because they are conveniently ignoring that they have a substantial investment in lower performing assets.

So when it comes time to rebalance I would rebalance to a 48/52 AA across both accounts.

I don't include our homes or cars or anything like that in the portfolio... like you say... just investable assets.... but would include any financial assets that we have the we plan to or could be used in retirement so taxable accounts, tax-deferred accounts (tIRAs, 401ks 403bs, etc) and tax-free accounts (Roth IRAs, HSA's, etc.) but excludes our local bank accounts that we use to pay our bills that typically have de minimus balances so have no significant impact, homes, cars, boats, etc. In some situations I can see where college funds might be carved out and viewed separately, but I chose not to.
I don't apply a uniform AA across all my investable assets. Just a subset - the subset that I rebalance. That's how I have chosen to invest.
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Old 04-03-2017, 06:14 PM   #182
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This forum posting has turned into a debate about how to look at AA vs the ACTUAL YTD performance?? Ha.

How about the old: YTD return is 4.73% through March 31st 2017. AA 70/30.
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Old 04-03-2017, 06:32 PM   #183
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Huh? You said the same thing twice and put rather in between... doesn't make sense.
Nope. Read it again.

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Also, how does one "know" whether an AA is right or not?
Well, if you want to be philosophical, we can never really know anything. Plato's cave, etc. More the point, if my AA is consistently underperforming a broad benchmark like the ACWI or Russell 3000 I might begin to suspect that I have not made the right allocation. This applies more to semi-crazy allocations like 50% emerging market and 50% health care or something. With a passive portfolio and maybe a 5 or 10% tilt none of us will live long enough to be statistically confident that it is right or wrong. The data is too noisy. But I still like to compare (with the goal of trying to decide whether I am doing the right thing.)

Back to your post and to explain your confusion at my statement, if I am only comparing my AA to a benchmark with the same AA, then the comparison can only tell me whether I am doing the thing right. That is important, but making sure I am doing the right thing is more important IMO. Both types of benchmarking are needed. Sometimes they are called "dynamic" and "static."
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Old 04-03-2017, 07:13 PM   #184
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I'm a fool. Looking at my current 401(k), it is up 9.6% YTD.
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Old 04-03-2017, 07:17 PM   #185
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I think Wellington was great in 2016, up 3.5% more than the VTTVX TR fund and 2% more than DGSIX. This just shows that just looking at the stock:bond ratio is not the whole story. Wellington lacks small-caps and has limited foreign holdings. The bonds it holds have a longer average effective maturity than some other funds.

So if US large cap value stocks outperform other asset classes, then Wellington moves to the head of the class. But if they don't, then Wellington lags. Also, if bonds are hurt by rising interest rates, then Wellington suffers more than some other funds.

And Target Retirement funds should not get a bad rap. The low expense ratio ones can be very difficult to keep up with --- if one has them in tax-advantaged accounts. At least they take away the emotions of rebalancing.
I'm debating between Wellington and Target fund for my kid's account. I only keep Wellington because I worry that if you are not current Wellington holder, you might not be able to buy it in the future like some other funds she has. I know she doesn't need bonds at her age.
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Old 04-03-2017, 09:52 PM   #186
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I'm a fool. Looking at my current 401(k), it is up 9.6% YTD.
With individual stocks, one can gain 9.6% in a day easily. But 401k accounts are usually limited to MFs. So, my guess is you have a lot in international equities. These do very well YTD, although one of my US large cap MFs also does well at 9.58% YTD.

I usually do not pay attention to my MFs, but this now makes me curious. So I just look at this MF's holdings, and find out that its 4 largest holdings are: Apple, Alphabet (Google), Amazon, and Facebook.

Now, that explains everything. I do not own any of the FANG stocks myself.
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Old 04-03-2017, 09:57 PM   #187
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....Well, if you want to be philosophical, we can never really know anything. Plato's cave, etc. More the point, if my AA is consistently underperforming a broad benchmark like the ACWI or Russell 3000 I might begin to suspect that I have not made the right allocation. This applies more to semi-crazy allocations like 50% emerging market and 50% health care or something. With a passive portfolio and maybe a 5 or 10% tilt none of us will live long enough to be statistically confident that it is right or wrong. The data is too noisy. But I still like to compare (with the goal of trying to decide whether I am doing the right thing.)

Back to your post and to explain your confusion at my statement, if I am only comparing my AA to a benchmark with the same AA, then the comparison can only tell me whether I am doing the thing right. That is important, but making sure I am doing the right thing is more important IMO. Both types of benchmarking are needed. Sometimes they are called "dynamic" and "static."
I think we agree on the second part... that is the reason that I compare my actual portfolio returns to a benchmark... to assess I am doing the thing right as you like to put it.

On the first part, I would expect that my 60/40 portfolio will be quite different from the Russell 3000 or whatever 100% equity benchmark that you want to use so I don't see where that comparison is useful at all... the 100% equity portfolio will have a lot more risk and volatility than my 60/40 portfolio too.
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Old 04-03-2017, 11:10 PM   #188
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With individual stocks, one can gain 9.6% in a day easily. But 401k accounts are usually limited to MFs. So, my guess is you have a lot in international equities. These do very well YTD, although one of my US large cap MFs also does well at 9.58% YTD.

I usually do not pay attention to my MFs, but this now makes me curious. So I just look at this MF's holdings, and find out that its 4 largest holdings are: Apple, Alphabet (Google), Amazon, and Facebook.

Now, that explains everything. I do not own any of the FANG stocks myself.
On CNBC, it's reported that FANG stocks have been underperforming sp500 on relative basis. Since Oct 2016.
http://www.cnbc.com/2017/04/03/its-t...echnician.html
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Old 04-03-2017, 11:20 PM   #189
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The easiest time to catch the quarter-end...when it ends on a Friday, and I missed it, hehe! But with one extra trading day (4/3), it looks like I'm up 5.5% for the year, all-in, but adding-back a rough YTD spend.

It's nice to keep having such pleasant news on the YTD thread.
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Old 04-03-2017, 11:25 PM   #190
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I do not follow these FANG stocks, but they apparently do well YTD. Going further back, I don't know. It depends on whatever time frame one chooses to do the comparison over the S&P.
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Old 04-04-2017, 03:10 AM   #191
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(80%*4.66%) + (20% *1%) = 3.93%. That isn't so hard is it?
GENIUS!

And here I was thinking I was probably up slightly less than 4%.

Thanks for clearing that up.
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Old 04-04-2017, 05:19 AM   #192
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With individual stocks, one can gain 9.6% in a day easily. But 401k accounts are usually limited to MFs. So, my guess is you have a lot in international equities. These do very well YTD, although one of my US large cap MFs also does well at 9.58% YTD.

I usually do not pay attention to my MFs, but this now makes me curious. So I just look at this MF's holdings, and find out that its 4 largest holdings are: Apple, Alphabet (Google), Amazon, and Facebook.

Now, that explains everything. I do not own any of the FANG stocks myself.
RNWGX is 80%
RLBGX is 20%

Since our AA was off in int'l near the end of 2015, I went all RNWGX throughout 2016. That is not a pure EM MF, however.

In an attempt to keep things in balance, RLBGX is added to the mix this year.

I have to get my kicks somehow. Watching new money flow into this 401k gives me something to watch and contemplate. Everything else is Vanguard index funds or similar.
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Old 04-04-2017, 06:56 AM   #193
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You did not state what your overall return is, but if the rest of your stash is indexed then the overall number is darn good when mixed in with that foreign MF.
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Old 04-04-2017, 09:18 AM   #194
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Just catching up with various threads. I'm at an acceptable (for me anyway) 3.8% ytd on a 55/35/10 AA. Interesting information and discussion as always.
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Old 04-04-2017, 12:43 PM   #195
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OK - in the interest of full disclosure, I reviewed all our investable/liquid assets (Net Worth minus house) and looked at the YTD (March 31) performance and approx allocations. I only manage a target AA for a subset of the total assets (~75%). The rest I don't rebalance.

Our taxable retirement fund which we withdraw from now is the one I usually track. It has a target AA and I rebalance annually (90% is a target AA, 10% are balanced funds that I use as a comparison "benchmark"):

YTD gain is +3.29%. Current AA is ~55% equities.

We also have IRA accounts that we don't intend to draw on until age 70. These have always been ~100% equities and we just leave them alone. Combining these with the taxable retirement funds above - total retirement assets:

YTD gain is +4.77%. Current AA all retirement assets is ~61% equities.

We also have investable assets outside of those accounts that include our various checking accounts we use for living expenses, HSA funds, various high yield savings accounts, CDs stashed here and there, and a few stocks that we have held for a long time but have been slowly divesting over decades. Combining these with the above we get the Q1 performance of all our investable assets:

YTD: +3.77%. Current AA total assets is ~56% equities.
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Old 04-04-2017, 01:00 PM   #196
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We also have investable assets outside of those accounts that include our various checking accounts we use for living expenses, HSA funds, various high yield savings accounts, CDs stashed here and there, and a few stocks that we have held for a long time but have been slowly divesting over decades...
Unless you adjusted for year-to-date spending, you might be able to report a little higher number than 3.77%. as your "all-in" return.

We've been calling it "money chimp" style spending adjustment if you do it this way:

=(CurrentAllInBalance+YtdSpend/2)/(StartYearBalance-YtdSpend/2)-1
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Old 04-04-2017, 02:35 PM   #197
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Unless you adjusted for year-to-date spending, you might be able to report a little higher number than 3.77%. as your "all-in" return.

We've been calling it "money chimp" style spending adjustment if you do it this way:

=(CurrentAllInBalance+YtdSpend/2)/(StartYearBalance-YtdSpend/2)-1
Well, that's true, but I'm used to looking at my total net worth growth without accounting for spending. Personally I'm delighted when it keeps up with inflation.

But, yes, maybe I'll go back and take into account the spending - I know what it is YTD. Close - not all my credit card statements are in.
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Old 04-04-2017, 03:09 PM   #198
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Some people pre-withdraw what they are going to spend at the beginning of year. I can see them not including that set-aside fund in the return calculation. A 3.5% or 4% in cash is not going to change the number much.

I withdraw as needed throughout the year, hence the Moneychimp method works out very well as an approximation to the IRR method. I have a lot of cash, usually 30-40% in low-yield cash-like investments. Hence, if I excluded this cash, my return would beat the pants off the S&P, but the number is bogus.

I keep that much cash as insurance against market crashes, and it hurts the performance. So, I have to include everything in the calculation. In a bull market, I will not do as well as 100% invested. In a bear market, I will outperform. I want the calculated return to reflect that.
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Old 04-04-2017, 03:15 PM   #199
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Some people pre-withdraw what they are going to spend at the beginning of year. I can see them not including that set-aside fund in the return calculation. A 3.5% or 4% in cash is not going to change the number much.

I withdraw as needed throughout the year, hence the Moneychimp method works out very well as an approximation to the IRR method. I have a lot of cash, usually 30-40% in low-yield cash-like investments. Hence, if I excluded this cash, my return would beat the pants off the S&P, but the number is bogus.

I keep that much cash as insurance against market crashes, and it hurts the performance. So, I have to include everything in the calculation.
Interesting..."money chimp". I need to check that out!!
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Old 04-04-2017, 04:13 PM   #200
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Above was for YTD February.

YTD end of March 2017:

3.73% - YTD Wghtd Perf for Equity/Fixed/Cash (55/40/5)

7.75% - Port Total YTD
Above for NW-Bound. Posted a week ago. Definitely need to filter out some of the noise to find this.
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