Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Low returns for 2014
Old 01-03-2015, 09:06 PM   #1
Recycles dryer sheets
 
Join Date: Feb 2013
Posts: 186
Low returns for 2014

Hi all,

The thread someone else posted made me realize that my returns were materially lower than the S&P's 2014 return for the year. I don't generally pay attention much to my account balances day in and day out, or my overall asset allocation since I "set it" and am just on auto pilot going forward. I had a trusted/wise financial advisor suggest an overall asset allocation.

My returns (as calculated by Vanguard in the personal performance/portfolio analysis section of their website) for 2014 were only about 7%, and I believe the market (S&P 500) churned out about 12%.

I suspect the reason my returns were lower than is due to some funds/asset classes not performing as well. I could look into all of my funds below and see which ones brought my overall return down. But, I guess my question is more "looking forward" and seeing if I should make some changes.

On one hand, I could simplify things and put all my eggs into the S&P 500 fund and call it a day. On the other hand, I am looking at a 15-25 year horizon. So, I am willing to sacrifice some returns in one year if my overall yearly average return for that 15-25 year horizon is higher than it would be if I just put my eggs into one or two funds.

I also would prefer not to sell to trigger a taxable event, since some of these funds are non-retirement oriented.

What do you think of my asset allocation? It is listed below.

Thanks for any feedback!!

(All Vanguard ETFs)

VSS International, Small Cap 3%
VWO International, Emerging Markets 2%
VUG Domestic, Large Cap Growth 22%
VO Domestic, Mid Cap 11%
VOO Domestic, Large Cap S&P 500 Index 11%
VB Domestic, Small Cap 11%
VXUS International, Large Cap 16%
VTV Domestic, Large Cap Value 23%
__________________

__________________
younginvestor2013 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-03-2015, 09:39 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
As I answered on another thread:

When you have a diversified portfolio, you'll never beat the top returning asset class. But you never know in advance which will be the top performing asset class, so it's best to keep a well diversified portfolio.

The worst thing you can do is pile all your investments in last year's winners.
__________________

__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 01-03-2015, 09:49 PM   #3
Thinks s/he gets paid by the post
heeyy_joe's Avatar
 
Join Date: Nov 2012
Location: Madeira Beach Fl
Posts: 1,403
Monetary policy changing in Japan and the EU. I foresee money flows into Japan funds and European real estate funds. Tinker some, not too much.
__________________
_______________________________________________
"A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do" --Bob Dylan.
heeyy_joe is offline   Reply With Quote
Old 01-03-2015, 11:21 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
My target benchmark is a moderately aggressive portfolio which is 80/15/5 (cash)
It consists of 5% Citigroup 3 Month T-Bill, 45% S&P 500, 20% MSCI EAFE Developed Markets (TRN), 15% Russell 2000, 15% Barclays U.S. Aggregate Bond.

Last year the performance of this index was 6.8% the same as yours. As you can see the components are also the same. In particular you have 21% international vs 20% for the this index. Overall for international was down 5% and small caps (Russel 2000) was up 5%.

With US large caps up 14% this year and foreign stocks down 5% the case for having 20% of your portfolio in international stocks is stronger Jan 2015, than it was Jan 2014.
__________________
clifp is offline   Reply With Quote
Old 01-04-2015, 07:19 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,638
Yeah, I suffered the international blues this year also. I suspect that may repeat in 2015 with Greece on the way out again but if I (you) moved to domestic, Greece would reconcile with the EU, Merkel would become a Keynesian and Europe would blast ahead 30%.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 01-04-2015, 07:51 AM   #6
Thinks s/he gets paid by the post
 
Join Date: Mar 2011
Posts: 3,697
I was equally disappointed as well (7.1% performance).

International, oil and a small stake in high yield dampened what could've been a pretty good year.

Not complaining about 7% (off of a fairly large portfolio) mind you, but I usually hold 8% as my 'minimum acceptable return'.

Win some, lose some. Dividends and Cap Gains were unusually impressive however.

I am (perversely) happy to see that I"m not alone, but we have to remind ourselves that recent 12% runs have not been normal!

Began a larger stake in Mid Caps as I've been low in that area.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is offline   Reply With Quote
Old 01-04-2015, 08:24 AM   #7
Recycles dryer sheets
 
Join Date: Aug 2013
Posts: 188
I only saw 7.2% return on investments this past year on my diversified portfolio. I'm entertaining the idea of buying some of Fidelity's Select Health Care fund (FSPHX) if we see a 10% market correction this year. This fund has consistently outperformed the S&P500 over the short and long term.
__________________
Al18 is offline   Reply With Quote
Old 01-04-2015, 09:08 AM   #8
Thinks s/he gets paid by the post
 
Join Date: May 2014
Posts: 2,973
Yeah, mine was also running about 7% and I was feeling bad about that but remembered the "placemat chart" that Edward Jones (and probably other financial firms) produces. The columns represent years and the rows are colored blocks representing various investment segments (fixed income, large-cap stocks, small-cap stocks, developing countries, utilities, etc.). The blocks are arranged within each year from those with the highest return to those with the lowest on the bottom.


Not surprisingly, the way the blocks are ordered changes every year- in the financial crisis years, fixed income investments won out because their returns were positive! It really reinforces the importance of a balanced portfolio. You'll be in the losing segments but you won't lose out on the large gains in the highest-performing segments.


Personally, I wish I'd had the foresight to put all our $$ in Berkshire Hathaway and Lockheed (LMT) on 1/1/2014, but at least we had some of both!
__________________
athena53 is online now   Reply With Quote
Old 01-04-2015, 09:14 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
Search on the Callan Periodic Table of Investment Returns 2013

I'm sure they'll update it to include 2014 before too long.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 01-04-2015, 09:27 AM   #10
Recycles dryer sheets
Niuatoputapu's Avatar
 
Join Date: Nov 2014
Posts: 69
Quote:
Originally Posted by audreyh1 View Post
As I answered on another thread:

When you have a diversified portfolio, you'll never beat the top returning asset class. But you never know in advance which will be the top performing asset class, so it's best to keep a well diversified portfolio.

The worst thing you can do is pile all your investments in last year's winners.
+1 International equity was a drag on overall returns last year, but the tide will turn and that portion of your portfolio will ultimately be a top performer. Stay diversified and gauge your success over the longer term
__________________
ER'd 6/5/2015 at age 58, and DW targets ER in 6/2019
Niuatoputapu is offline   Reply With Quote
Old 01-04-2015, 10:08 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Quote:
Originally Posted by younginvestor2013 View Post
What do you think of my asset allocation? It is listed below.

Thanks for any feedback!!

(All Vanguard ETFs)

VSS International, Small Cap 3%
VWO International, Emerging Markets 2%
VUG Domestic, Large Cap Growth 22%
VO Domestic, Mid Cap 11%
VOO Domestic, Large Cap S&P 500 Index 11%
VB Domestic, Small Cap 11%
VXUS International, Large Cap 16%
VTV Domestic, Large Cap Value 23%
Thoughts:
1) There are no bonds in this allocation. That may be okay with you, or you may just be showing us your equities. But even with a 15-25 year horizon and a willingness to accept a lot of volatility now, having a small amount (20% or so) in bonds can significantly reduce volatility at only a very small reduction in expected returns. The returns from bonds are often not well correlated with the returns from stocks, so when you do your rebalancing you'll frequently get a chance to "buy low". Full disclosure: I have a very low allocation to bonds--still afraid of the coming interest rate climb (that hasn't happened).
2) You've got 20% in international. I'm not sure if there's a reason it is broken up into three funds, you could get good, broad intl exposure with the VXUS (Vgd Total Intl Stock ETF, .14% ER) you already own or VEU (Vgd FTSE All-World Ex US, .15% ER). It looks like your intl portfolio as presently constructed is tilted to smaller stocks and emerging markets, something I probably wouldn't do.
3) You've got your domestic stocks in several ETFs, (Large cap, small cap, value, growth, etc) but they roughly replicate the actual market. Unless this has been done for a particular reason (i.e. to tax-loss harvest when one category or another outperforms), it would be easier, less expensive, simpler, and more efficient (daily automatic rebalancing rather than less frequently doing it yourself) to just buy VITSX (Vgd Total Stock market (US) mutual fund) or VTI (Vgd Total Stock Market (US) ETF).
4) I lean a bit more toward small and value stocks, so I'd buy VTI and then augment a bit with VB and VTV (or other small/value offerings). But, that's me.

But, those are all very minor points (except maybe the bond thang). I'd bet your equity allocation as shown above is a better fit for most investors than what they already own, and that it will outperform most active traders.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 01-04-2015, 12:13 PM   #12
Thinks s/he gets paid by the post
Bikerdude's Avatar
 
Join Date: Jul 2006
Posts: 1,901
Psst.... Wellesley did 8.07%. Wellington 9.82%. Set it and forget it.
__________________
“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
Bikerdude is offline   Reply With Quote
Old 01-04-2015, 01:58 PM   #13
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,074
Quote:
Originally Posted by Bikerdude View Post
Psst.... Wellesley did 8.07%. Wellington 9.82%. Set it and forget it.
+1...almost. Set it, but never, ever forget it.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 01-04-2015, 02:10 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 6,321
I spent part of the morning looking into banks that pay more interest on regular savings. I figure that is a way to add a few tenths of a point to this year's return with no extra risk. I found one paying 0.99% compared to the 0.15% of the local credit union.



Sent from my iPad using Early Retirement Forum
__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is online now   Reply With Quote
Old 01-04-2015, 02:32 PM   #15
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,705
Quote:
Originally Posted by younginvestor2013 View Post

VSS International, Small Cap 3%
VWO International, Emerging Markets 2%
VUG Domestic, Large Cap Growth 22%
VO Domestic, Mid Cap 11%
VOO Domestic, Large Cap S&P 500 Index 11%
VB Domestic, Small Cap 11%
VXUS International, Large Cap 16%
VTV Domestic, Large Cap Value 23%
Are you aware that the holdings of VUG + VTV = VOO?

Essentially your portfolio was held back this year by the international diversification you have. The non-S&P500 US investments also held you back. If you go all S&P500, what will you think in the years when that places low in the returns?

VXUS is actually total international market, so the holdings of VSS + VWO are contained in that already. If you really intend that, then fine.
__________________
target2019 is offline   Reply With Quote
Old 01-04-2015, 03:03 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
Quote:
Originally Posted by Bikerdude View Post
Psst.... Wellesley did 8.07%. Wellington 9.82%. Set it and forget it.
Wellington will do well when US large cap stocks (like the S&P500) do well. ditto, Wellesley plus if the bond market does OK. Both were true in 2014, but all years aren't that way.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 01-04-2015, 03:05 PM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
Quote:
Originally Posted by Chuckanut View Post
I spent part of the morning looking into banks that pay more interest on regular savings. I figure that is a way to add a few tenths of a point to this year's return with no extra risk. I found one paying 0.99% compared to the 0.15% of the local credit union.



Sent from my iPad using Early Retirement Forum
You can get 1% from a few of the internet high yield savings accounts.

Also 1 year CDs are available for 1.1%, including PenFed.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 01-04-2015, 04:40 PM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by samclem View Post
Thoughts:
1) There are no bonds in this allocation. That may be okay with you, or you may just be showing us your equities. But even with a 15-25 year horizon and a willingness to accept a lot of volatility now, having a small amount (20% or so) in bonds can significantly reduce volatility at only a very small reduction in expected returns. The returns from bonds are often not well correlated with the returns from stocks, so when you do your rebalancing you'll frequently get a chance to "buy low". Full disclosure: I have a very low allocation to bonds--still afraid of the coming interest rate climb (that hasn't happened).
2) You've got 20% in international. I'm not sure if there's a reason it is broken up into three funds, you could get good, broad intl exposure with the VXUS (Vgd Total Intl Stock ETF, .14% ER) you already own or VEU (Vgd FTSE All-World Ex US, .15% ER). It looks like your intl portfolio as presently constructed is tilted to smaller stocks and emerging markets, something I probably wouldn't do.
3) You've got your domestic stocks in several ETFs, (Large cap, small cap, value, growth, etc) but they roughly replicate the actual market. Unless this has been done for a particular reason (i.e. to tax-loss harvest when one category or another outperforms), it would be easier, less expensive, simpler, and more efficient (daily automatic rebalancing rather than less frequently doing it yourself) to just buy VITSX (Vgd Total Stock market (US) mutual fund) or VTI (Vgd Total Stock Market (US) ETF).
4) I lean a bit more toward small and value stocks, so I'd buy VTI and then augment a bit with VB and VTV (or other small/value offerings). But, that's me.

But, those are all very minor points (except maybe the bond thang). I'd bet your equity allocation as shown above is a better fit for most investors than what they already own, and that it will outperform most active traders.

I disagree with Sam on point 1, for young person no need for bonds in this environment (if you were 40 or certainly 50 different story.)
2. I like both emerging and small cap international funds, more than a broad fund (although most of mine international is in VEU and the Schwab equivalent SCHF)
3. I think as long as you keep the number of funds to reasonable level no more than 12 I think I slice and dicing is superior to all in one funds for tax harvesting reason.
4. I do the same.

Still I strongly agree with Sam on the larger point, your portfolio is really quite good. If I was young and working and didn't have time/interest in individual stocks. I'd hope that my portfolio looked like yours.

Some year international and small cap stocks will comeback and crush domestic and large cap, and I'll regret having only 10% international and too much large cap. Just not this year.
__________________
clifp is offline   Reply With Quote
Old 01-04-2015, 05:03 PM   #19
Thinks s/he gets paid by the post
 
Join Date: May 2014
Posts: 2,973
Quote:
Originally Posted by audreyh1 View Post
Search on the Callan Periodic Table of Investment Returns 2013

I'm sure they'll update it to include 2014 before too long.
That's the chart. Thanks! Interesting to see segments such as emerging markets sink from top-performers one year straight to the bottom the next. Definitely not a good idea to chase last year's winners unless you think there's a good reason those wins will continue.
__________________
athena53 is online now   Reply With Quote
Old 01-04-2015, 06:10 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
Quote:
Originally Posted by athena53 View Post
That's the chart. Thanks! Interesting to see segments such as emerging markets sink from top-performers one year straight to the bottom the next. Definitely not a good idea to chase last year's winners unless you think there's a good reason those wins will continue.
Yes - that just shows how EM is the most volatile of the asset classes available for international exposure.
__________________

__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
2014 Investment Returns wingfooted FIRE and Money 93 01-05-2015 06:38 PM
Low Interest Rates until 2014! Chuckanut FIRE and Money 12 01-28-2012 09:43 PM
M* "Asset Allocator" tool: low expected annual returns... FIREd FIRE and Money 34 06-12-2007 05:23 PM
Investors' actual returns versus total returns JohnEyles FIRE and Money 0 11-14-2006 01:20 AM
Historical low returns for REITs ? poyet FIRE and Money 14 10-10-2006 05:43 PM

 

 
All times are GMT -6. The time now is 12:27 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.