Here’s my quarterly portfolio update for Q1 2019. Most of my dividends arrive on a quarterly basis, and this helps me decided where to reinvest them. These are my real-world holdings, including 401k/403b/IRAs and taxable brokerage accounts but excluding our house, cash reserves, and a few side investments. The goal of this portfolio is to create sustainable income to cover our household expenses for the next (hopefully) 40+ years. We are currently “semi-retired”, meaning we both work part-time while also spending a portion of our dividends and interest from this portfolio.
Actual Asset Allocation and Holdings
I use both Personal Capital and a custom Google Spreadsheet to track my investment holdings. The (free, ) automatically logs into my accounts, adds up my balances, tracks my performance, and calculates my asset allocation. I still use my (free, ) because it helps me calculate how much I need in each asset class to rebalance back towards my target asset allocation.
Here are my YTD performance and current asset allocation visually, per the “Holdings” and “Allocation” tabs of my Personal Capital account, respectively:
Stock Holdings
Vanguard Total Stock Market Fund (VTI, VTSMX, VTSAX)
Vanguard Total International Stock Market Fund (VXUS, VGTSX, VTIAX)
WisdomTree SmallCap Dividend ETF (DES)
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 Intermediate-Term Treasury Fund (VFITX, VFIUX)
Vanguard Inflation-Protected Securities Fund (VIPSX, VAIPX)
Fidelity Inflation-Protected Bond Index Fund (FIPDX)
iShares Barclays TIPS Bond ETF (TIP)
Individual TIPS securities
(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 make a small bet that US Small Value and Emerging Markets will have higher future long-term returns (along with some higher volatility) than the more large and broad indexes, although I could be wrong. I don’t hold commodities, gold, or bitcoin as they don’t provide any income and I don’t believe they’ll outpace inflation significantly.
I believe that it is important to imagine an asset class doing poorly for a long time, with bad news constantly surrounding it, and only hold the ones where you still think you can maintain faith based on a solid foundation of knowledge and experience.
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 of 67% stocks and 33% bonds (2:1 ratio) within our investment strategy of buy, hold, and occasionally rebalance. I will use the dividends and interest to rebalance whenever possible in order to avoid taxable gains. (I’m fine with it drifting to 65/35 or 70/30.) With a self-managed, simple portfolio of low-cost funds, we minimize management fees, commissions, and taxes.
Holdings commentary. On the bond side, I still like high-quality bonds with a short-to-intermediate duration of under 5 years or so. This means US Treasuries, TIPS, or investment-grade municipal bonds. I don’t want to worry about my bonds “blowing up”. Right now, my bond portfolio is about 1/3rd muni bonds, 1/3rd treasury bonds, and 1/3rd inflation-linked treasury bonds (and savings bonds).
On the stocks side, everything has had a nice bounce back up since the drop in late 2018. I didn’t really sweat the ride down, so I’m not celebrating the ride up. I remain satisfied with my mix, knowing that I will own whatever successful businesses come out of the US, China, or wherever in the future.
Performance commentary and benchmarks. According to , my portfolio went up 8.6% already so far in 2019. I see that during the same period the S&P 500 has gone up over 12%, Foreign Developed stocks up nearly 11%, and the US Aggregate bond index was up nearly 2%.
An alternative benchmark for my portfolio is 50% Vanguard LifeStrategy Growth Fund and 50% Vanguard LifeStrategy Moderate Growth Fund – one is 60/40 and the other is 80/20 so it also works out to 70% stocks and 30% bonds. That benchmark would have a total return of +8.6% for 2019 YTD. This quarter, I’m right at this benchmark with my customized portfolio.
I’ll share about more about the income aspect in a separate post.
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