Clicky

My Investment Portfolio: 2020

New Reader? Get free regular updates from Can I Retire Yet? on saving, investing, retiring, and retirement income. New articles weekly. Join more than 18,000 subscribers. Unsubscribe at any time:

This time last year I wrote that I can’t predict the future, but 2019 could be worse for the market. Well, I was dead wrong about the market, but right about the future! 

So, in 2019, the Dow Jones Industrial Average gained about 25% including dividends. What a gift!

Even my very conservative and diversified retirement portfolio returned double digits for the year. Every single one of my holdings, across asset classes, had a gain.

Just don’t plan on this performance repeating anytime soon. If you’re a seasoned investor, you know not to construct an investing strategy based on one year of double-digit returns.

If you’re a retiree living off assets, caution is always advised. I’ve been in a defensive posture for years. Most of my investing life I’ve held a roughly 50/50 stock/bond asset allocation. Now I have even less in stocks.

I may be wrong, but my concern is that the good news is closer to ending than beginning.  

Read on for my annual portfolio performance report….

Current Holdings

My core portfolio holdings have not changed since last year. The allocations are slightly different, due to different growth rates. But it’s still a familiar picture of low-cost Vanguard funds:

FundSymbol(s)Expense Ratio% of Portfolio2019 Return
OVERALL0.12%17.7%
Vanguard Wellesley IncomeVWINX/VWIAX0.23%/0.16%24.5%16.47%
Vanguard LifeStrategy Moderate GrowthVSMGX0.13%18.3%19.37%
Vanguard FTSE Social Index FundVFTSX/VFTAX0.18%/0.14%14.2%23.59%
Vanguard Intermediate-Term TreasuryVFITX/VFIUX0.20%/0.10%8.2%6.39%
Vanguard Total International Stock IndexVGTSX/VTIAX/VXUS0.17%/0.11%/0.09%7.9%21.51%
Vanguard Inflation-Protected SecuritiesVIPSX/VAIPX0.20%/0.10%5.1%8.16%
SPDR Gold SharesGLD0.40%5.0%18.36%
digital currencies1.5%84.9%
cash16.0%~1.5%

(Note: Multiple symbols are for Investor/Admiral/ETF shares. Portfolio percentages are as of 12/31/2019. Annual returns are for my shares -- generally the less-expensive Admiral or ETF shares. Overall return is not a weighted average of individual returns, because holdings changed slightly during the year, but is close.)

Overall, my portfolio is currently allocated 43% in stocks, 34% in bonds, 6% in gold and digital currencies, and 16% in cash.

Of the stocks, 30% is international. (Taking into account the actual reported international holdings in all of my funds, not just in those funds labeled “International.”) I continue liking a relatively large allocation to international as a diversification away from the U.S.’s potential long-term economic woes, including debt.

As has been my tradition, I was able to completely eliminate one of my holdings this year. (In years past I eliminated all of my expensive actively managed holdings, and most of my specialty funds.) Read on for details…

Fear vs. Greed

Warren Buffett has famously said “Be fearful when others are greedy and greedy when others are fearful.” Right now I see the world as greedy. 

We are in the longest-running bull market in history. And guess what comes after a bull market?

Yes, I’m taking money off the table. We’re financially independent. We’ve already “won” the game. Why take on any extra risk at this point?

When it’s necessary to make a decision about the timing of a sale for retirement income, I often fall back on my “principle of least regret.” If I sell some now and the market goes up, I’ll be fine and will still catch much of the upswing, because I always own stocks. And if I sell now and the market goes down, I will be relieved.

Cash

So this year, given the aging bull market, I wanted to ensure enough liquidity on hand for living expenses and buying opportunities. I sold a large position in late summer, to build up my cash. And followed with an even larger sale in the final days of the year.

I consolidated last year’s effort to get higher returns from that cash via the Schwab Money Market Fund, by adding to that position. (Details are in Getting Higher Returns on Your Cash.) 

(Note, the cash return stated in the table above is approximate. I don’t have a simple way to average my different accounts. But my USAA Savings account returned about 0.9% while the yield on my Schwab Money Market Fund is currently around 1.5%.)

Purchases and Sales

Early in the year I made a small IRA contribution, purchasing more Vanguard Inflation-Protected Securities (VAIPX). I don’t have strong opinions about the immediate prospects for inflation. But it’s a government bond fund, and I wanted to diversify out of stocks.

As I posted in late summer, I moved about 2% of my net worth from high-flying growth stocks to Vanguard’s Intermediate-Term Treasury Fund (VFIUX). Then I harvested about 3% of our net worth out of Vanguard Wellesley Income (VWINX/VWIAX), as cash.

Though I have written in favor of Wellesley in my article on balanced funds, and still own a substantial position, I’ve grown disenchanted with the managers’ attempts to actively outguess the market. 

Reading the annual report has become a depressing exercise. This year there were numerous mentions of “out-of-benchmark” allocations and a healthy laundry list of the fund’s winners and losers. Sure, the returns have been good, but it all makes me wonder what the fund stands for anymore. I just see another group of fund managers making bets, trying to outperform their peers. And haven’t we learned that doesn’t work?

So I sold the the rest of our Wellesley Income (VWINX/VWIAX) in our taxable account. It was about 25% of our total position. I first checked that we would remain securely in the first two tax brackets and pay no capital gains tax. 

The index-based Vanguard LifeStrategy Moderate Growth (VSMGX) remains my go-to balanced fund. By sometime in my 60’s I expect to consolidate most of our investments into it, plus some annuities.

Vanguard

Currently, 78% of our holdings are at Vanguard. When I think about it, that does make me a little nervous. Eventually, I’d like to diversify management companies more, but that’s a long-term, low-priority project.

Vanguard’s efforts to reduce expenses were a mixed picture for me this year:

On the one hand, they added low-cost Admiral shares (VFTAX) of their FTSE Social Index Fund (VFTSX), cutting the expense ratio from 0.18% to 0.14%. (The benefits of social investing can be debated, but I’m glad I’ve made the effort.)

However the expense ratio of Wellesley Income (VWINX/VWIAX) actually seems to have increased by 0.01%. It’s a trivial amount, but psychologically telling. This is the first time in decades of investing that I can recall seeing a Vanguard expense ratio increase. Another point against Wellesley Income for me.

Alternative Investments

My tiny Bitcoin and digital currency position soared skyward again after a disastrous 2018. 

Only the most seasoned investors, who can also afford to lose it all, should even consider digital currencies. I’m a software engineer, with some feel for the underlying blockchain technology. But I don’t think digital currencies have any role in the average retirement portfolio. 

There are good arguments both for and against gold as an investment hedge. I’ve owned it for many years and it’s been an effective diversifier for me. Many experienced investors disagree. But Early Retirement Now just published some research confirming my experience.

Overall Returns

There’s no denying, this was a great year for investors. Over the 15 years I’ve been keeping detailed records, only my gains in 2009 and 2017 were better.

My overall investment return for 2019 was 17.7%. That compares to 19.4% for the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) — a possible benchmark for my balanced portfolio. Though, at this point, my portfolio is considerably more conservative and less risky than VSMGX.

In 2018 I had an almost 6% loss. This year most of us won big. To be a successful stock market investor you must stomach such swings, and take the long view. 

The geometric mean of my returns going back for the 15 years I’ve closely tracked them now is at 6.7%. That’s a respectable average for a conservative portfolio in these times, including the 2008-2009 Great Recession. You can live extremely well in retirement if you can count on a nearly 7% long-term return, though you probably shouldn’t.

Retirement Planning

We remain in a strong position here as we head into our 60’s, thanks to past savings and investment performance, small inheritances, and modest earnings from this blog.

Last year I said we’d be tightening our belts in 2019. But our net worth climbed more than 10% during the year, and we continued spending on luxuries like travel.

When the market permits, I don’t see anything wrong with enjoying your gains. As long as you keep an eye on the long game. Though most “experts” see no imminent threat of a downturn, the economic conditions of the past decade could change at any time….

Last week I fired up the latest version of one of my favorite retirement calculators, to evaluate our financial situation. It was the first comprehensive analysis I had done in several years.

With Social Security and Medicare on the horizon, we are in good shape. Unless we make a blunder or there is a black swan event in the market, money should never again top the list of our concerns. 

And how about you? How did your portfolio fare in 2019? 

* * *

Note: Before commenting, please understand that I am not a financial advisor and cannot give personal financial advice or discuss investments that I’m not familiar with. My portfolio is just my portfolio. I’m not recommending it for anyone else. 

Some think I should have a more aggressive portfolio, or they speculate on what an ideal portfolio looks like, but actually haven’t experienced it. Please remember that I have been actually retired for almost a decade now. My wife and I are actually supporting ourselves, without any significant pensions, by drawing on our portfolio. If we run out of money, there is no Plan B. Further, mine is a real-life portfolio that has been assembled and pruned over many years, much of it long before I or the rest of the world knew as much about investing and early retirement as we do now. This is not necessarily the portfolio I would design from scratch today. That said, it has grown steadily, we enjoy a comfortable lifestyle, and we are financially better off than we’ve ever been. Maybe some lessons there.

* * *

[The founder of CanIRetireYet.com, Darrow Kirkpatrick relied on a modest lifestyle, high savings rate, and simple passive index investing to retire at age 50 from a career as a civil and software engineer. He has been quoted or published in The Wall Street Journal, MarketWatch, Kiplinger, The Huffington Post, Consumer Reports, and Money Magazine among others. His books include Retiring Sooner: How to Accelerate Your Financial Independence and Can I Retire Yet? How to Make the Biggest Financial Decision of the Rest of Your Life.]

* * *

Disclosure: Some links on this site, like the Amazon links, may be affiliate links. As an Amazon Associate we earn from qualifying purchases. If you click on one of these links and buy from the affiliated company, then we receive some small compensation. The modest income helps to keep this blog going. Affiliate links do not increase your cost, and we only use them for products or services that we're familiar with and that we feel may deliver value to you. By contrast, we have limited control over most of the display ads on this site. Though we do attempt to block objectionable content. Buyer beware.

Comments

  1. Thanks for sharing Sir. And for a really timely reminder – Right now I see the world as greedy.

  2. Greg Howard says

    Just curious, which calculator did you use for this “…I fired up the latest version of one of my favorite retirement calculators”?

    • Good question. Pralana Gold, the very best. More about my recent calculator experiences to come…

      • Greg Howard says

        Good answer. Wanted to be sure you still considered it your favorite since I bought it on your recommendation years ago and still strongly prefer it to the other 12 calculators I’ve tested. I’m anxiously awaiting the 2020 release any day now.

  3. Have you guys thought of evaluating/reviewing MaxFI calculator/planner. Top choice of Dirk Cotton. TheRetirementCafe.com. It’s one of the few that focuses on “consumption smoothing” over the course of retired years and has lots and lots of variables and ability to “what if” to your heart’s content.

    • Thanks Doug, my understanding is that MaxiFi is derived from ESPlanner, which we have reviewed in the past. At the time I preferred Pralana Gold, which also offers consumption smoothing.

  4. Darrow, Happy New year! When you combine everything in the future why not just use the Vanguard LifeStrategy Conservative Growth Fund that holds 40/60? Is Moderate Growth different?

    Thanks, Ed

    • Thanks Ed, Conservative is a strong possibility. However, since much of our holdings might be in annuities at that point, I might be willing to take on a little more risk with the 60/40 Moderate Growth.

      • Great! I love the concept of annuities especially since I expect my wife will be around a lot longer than I will. Who are you looking to get them through or will you just shop the market?

        • Hard to say down the road but in the past when pricing annuities I’ve use ImmediateAnnuities.com and Vanguard. But Vanguard’s annuity business appears to be changing, so I’m not sure what they’ll offer in the future.

  5. Three things:

    -Greed. You and I have been through the Dotcom Meltdown and the Great Recession. We should be able to see signs of greed but they aren’t always visible and Wall St. will find new ways to conceal their creativity. Are we seeing common investors feeling exuberant and making stupid bets? Are valuations hugely inflated or are we in a tech revolution? Are risky items like junk bonds and derivatives back in style? Is consumer confidence rapidly dropping while people are playing games with their mortgages and adding credit card debt? Are loans being handing out to unqualified people? I’m not doubting you. I’d just like to hear what signs of greed you’re seeing.

    –Vanguard. I have about 15% of my retirement savings in Vanguard. The rest is in the new mega-conglomerate, TD-Schwab. I don’t feel comfortable being in a mega-conglomerate and last night, I explored what it would take to transfer my entire portfolio to Vanguard. There was all this stuff about getting a medallion and asking if TD-Schwab about whether there will be any fees to transfer. Now, I see that you’re feeling uncomfortable with having all of your stash with Vanguard. It’s tough to know the best way to protect oneself. I guess if anything untoward happens, the mega-conglomerates, they will be the first to bailed out by the government, since they have the lobbyists.

    –Dropper post. We can’t predict the stock markets fall but I should’ve predicted my butt falling on a rutted, steep mountain bike trail. This year I’m getting a dropper post. You’re wise enough to already have one, I suspect.

    • Hi Robert. True, there don’t seem to be many of the familiar financial signs of greed. I sense it in the social atmosphere, but that’s a philosophical discussion for elsewhere.

      Agreed, if one of the top financial services firms ran into trouble, I would expect a government bailout. But I also think of risks like hacking or system failure. Yes, ultimately, our money should be “safe,” but it could take months to straighten out. I like diversification in all forms.

      And I do have a seat dropper post! Required safety equipment IMHO. Thanks Robert!

    • Darrow, I very much enjoy reading your post. And thanks for sharing the content of your portfolio, helpful for others to see, comment on, and compare and contrast to their own portfolios.

      To both you and Robert – I do disagree somewhat with the comments that there is a lack of financial signs of greed.

      I don’t think the Shiller PE Ratio is getting nearly enough attention paid to it. The current S&P 500 PE is about 24.25 with a historical median of 14.8, that’s 63.85% premium being paid for the market. The Shiller PE is at 31.03 with a historical median of 15.76. A 96.89% premium to historical valuations. The only times IN US HISTORY (back to 1880 anyway) when the Shiller PE has been higher was in 1929 (Black Tuesday) and the DotCom bust of 2000. An investor’s potential gain for the S&P 500 in 2020 may be as high as 4-6% for the year, but the downside is an easy 10% with a real potential for 20% or 30% loss. Why take the risk? I know timing the market can be a fools errand, but the current valuation is not worth the risk to me.

      I too have “Won the Game” and can stop playing (or be much more conservative). I have shifted much of my stock holding to better valuations outside the US. I would suggest that people be cautious with US markets at this time, there are very real signs of irrational exuberance once again.

      Good luck to all.

      • Thanks Dothemath. I’ve always taken high PE’s seriously, but a lot of people seem to think it’s old news or doesn’t apply anymore. I appreciate you putting the numbers in front of us.

  6. So what retirement calculator ARE you using? The link lists over a dozen. I am pretty happy with the Monte Carlo simulation based tool I get with Fidelity which gives you 95%, 75% and 50% confidence level results. As for Gold – it’s a nice buffer but you have to hold too much for my comfort to have it make a difference, and the prices can swing wildly year to year. Digital currencies are also interesting but the marketing for them is still highly speculative. Surprised you don’t have anything like eREITS or real estate as 3-5% of your allocation? Things like Fundrise that are good income generators and offer diversity?

    • Pralana Gold is the calculator. Fidelity is good too, but not in the same class the last time I looked. Thanks for the other investing points. I owned REITs at one time but sold them as part of my long-term portfolio simplification. And I have looked at the crowd-sourced real estate options. Almost dove in at one point, but just not enough advantages for me to carry a small position now. Thanks.

  7. About 22% over all last year. I lost last year over all.Most still in stocks with the rest in short term money and bonds. I have a generous pension, on SS and have a generous medicare advantage plan from the company I retired from. So I have enough safe money to live very well. I am converting over the next few years a regular IRA to a ROTH IRA. Taxes will soon I think go back up.

  8. None of your stock funds matched the S&P500 – evidence yet again that the best stock investment is one simple index fund.

  9. Great web site! Not needing my Red’s, I have been plowing back into the MARKET about 75% of them, with the thought of trying to keep my investments stable and the principle stable and in tact…any thoughts? I like you have a majority of my investments with Vanguard, and do my own investing…this year a return of 22%…..crazy, BUT, what goes up mist come down, We know that market timing NEVER WORKS and I am in it for the long haul. Keep up the good work of informing us!

  10. Thanks for sharing your insight! So helpful to me to see how others are using Vanguard Wellesley in their portfolio.

    I recently retired and did an extensive review of my portfolio AA. Vanguard Wellesley always seemed to rise to the top primarily based on risk adjusted return. That is of course based on past performance which of course may change.
    As a newly retired investor I am naturally concerned about sequence of return risk which I know can be mitigated somewhat with holding 3 years of cash. I didn’t want to endure any 35%+ downturns even though I wouldn’t necessarily be locking in those losses by making withdrawals.

    I have been using portfolio visualizer (free tool) extensively and did this direct comparison between Wellesley and LifeStrategy.
    https://www.portfoliovisualizer.com/fund-performance?s=y&symbol=VWIAX&symbols=VSMGX
    Not trying to change your mind but simply posting for others to see how each might fit into their portfolio.
    It seems LifeStrategy is better at matching the market so when things are good and Wellesley is better at protecting gains during down markets.
    Historically speaking (not a given going forward) Wellesley has better returns with lower risk.
    I think your concern is that going forward Wellesley may under-perform because the managers are trying to outguess the market. We shall see
    Thanks

    • Thanks Brian. I appreciate the analysis. Yes, that’s my concern. With an actively managed fund, it seems even harder to make the case that future returns will necessarily match the past. At any rate, I still own plenty of Wellesley — almost 25% of my portfolio!

  11. Darrow,
    You’ve done well. Congrats! I’ve been reading your posts since the beginning. Since you were kind enough to share, and I’m anonymous, I figured I share my stats since I took a severance pkg in 2013. I have waaay too many fund buckets and I’m not able to sell enough to avoid tax on gains and reduce fees. (A terrible problem, I know.)

    Yr Personal S&P 500 Benchmark
    2013 18.74 32.39
    2014 12.56 13.69
    2015 3.76 1.38
    2016 7.88 11.96
    2017 14.71 21.83
    2018 -3.29 -4.43
    2019 18.73 31.46

    Avg 10.44 15.47

  12. Bruce Edwards says

    HI Darrow, As usual thanks for sharing your experience. Two questions. On Cash holdings do you consider short term bonds in that category as they are pretty close?

    Also on your gold holdings do you hold them pre or post tax? and why may one be better for gold than the other in your view?

    thanks again for your insights.

    • Hi Bruce, I don’t personally consider short-term bonds as cash, like I do money market holdings. But it’s not a point I would argue with somebody. Close enough either way IMHO.

      My gold is in a taxable account, but I can’t say I’ve thought through that issue. My investing mentor Dick Young always said you buy gold with the intent of never selling it. So that might make the tax implications less important.

  13. Robert Johnson says

    I think we all would be interested in reading about your strategy for taking Social Security

  14. Hi Darrow:

    Any thoughts or past analysis on the Vanguard Prime Money Market Fund (VMMXX) vs. Schwab? Not sure how history compares, but VMMXX is at 1.7% today. I think I moved my cash there like a year ago. The Federal Money Market is at 1.55%.

    Definitely immaterial and nothing worth getting bent out of shape for, just throwing it out there in case anyone else is interested : ) Couple hundred dollars if you have 100k in cash : )

    Thanks so much for sharing your information!

    Max

  15. Thanks for sharing your portfolio and results. At retirement 3 1/2 years ago I went from 60/40 to 30/70 in order to reduce the sequence of returns risk. I’m gradually increasing the amount of stock (rising glide path). In 2019 with a 34/66 allocation my portfolio grew 13%! As you said it was a remarkable year for a conservative portfolio.

  16. wade shanley says

    “And how about you? How did your portfolio fare in 2019?” up 28%, but mostly because i hold a healthy position in MSFT which was up nearly 60% in 2019, along with a number of Vanguard growth and balanced funds (Primecap being my largest). I also hold a healthy stake in Vanguard International Growth. 80% stock, 20% bond/cash overall across our accounts. My wife will have a healthy pension so we invest a bit more aggressively…knowing that the pension will pretty much cover our expenses.
    I also manage my retired mothers finances…we decided to cash in some gains for her (Vanguard Wellington) after the big 2019 to replenish her MM account for the next few years. I’m with you…I think the likelihood of a correction is growing so this seemed prudent. I can wait it out, but she can’t.

  17. I always enjoy the perspective you provide in these posts. Thanks for putting in the work to share these details with us.

    I have an all-equities portfolio with brokerages in Japan (where I live) and the US with stock positions I started 25+ years ago supplemented by index funds where I do the bulk of my new investing. In 2018 I suffered the market return of around -6% but in 2019 some of those tech and financial stocks had an outstanding year and my US portfolio returns were a little over 40% and the Japanese accounts were up 9%. I expect that to come down a lot in the next downturn but know that I can’t predict when that will happen. My unrealized gains (over half the portfolio value) and tax rate on longterm capital gains (23.8% in the US plus an additional 10-20% tax applied in Japan depending on how the foreign tax credit and AMT interact) are high enough that I am reluctant to sell the individual stocks or add fixed income which faces even higher tax rates.

  18. Darrow –
    I appreciate your articles in general and this one in particular. However, let me make a couple of (counter) points.
    1. Would you agree that saying “bull market is old”, greed, etc. you essentially trying to time the market?
    2. Would you further agree that timing the market is a loosing proposition for most people?

    I recently saw somewhere that if one comes to a large sum of money (inheritance or whatever way) the optimal solution is to dump the whole sum into an index fund at once. W/o regard of how high the market is or what the bull market stage.
    I also lived through ’87, 2000 and 2007 drops and I attribute my relative success in investing to NOT selling at the bottom. As simple as that.
    I think it is very important to find your comfort level in investing.
    If that is what you are trying to achieve – general level of comfort – I would agree with some adjustments, but by now you are a seasoned investor and your comfort level should be a known quantity. I my view it should not depend on where the market is (assuming nobody knows what the market is going to do tomorrow or the next year).
    My level of comfort is to have about 5 yr worth of expenses in cash (CD lather, or what have you) and the rest in equity index (500, whole market – does not matter much) with up to 10% of it international.
    There is one theory that says that this kind of allocation is suboptimal because it does not let me buy equities when they are cheap. However, I can soundly sleep at night knowing that I will not be forced to sell at the bottom. Hence, I am comfortable.
    My comments/questions/points of view intend no disrespect for you, but I would like to see your thoughts/answers.
    I retired last april at 59 1/2. So far I love my decision.

    • Hi Boris, congrats on your retirement, and thanks for the comment. I think those are valid counterpoints. But, when we go to the store, we pay attention to prices. P/E’s give us some valid information about prices in the stock market. I’m funding a retirement. Every year I have to choose how much to sell of stocks and fixed income. I wouldn’t fully equate market timing with being sensitive to valuations when I make that decision. I have gradually drawn down my stock allocation from around 49% in 2014 to around 43% now. That, and more cash on hand, seem prudent to me given my objectives (secure our retirement) and my view of the world.

  19. Crash Davis says

    Way too much in cash. That is just producing cash drag. Dump all the Vanguard funds, except VGTSX, and buy VTI, for an ER of only 0.03% and falling. You’ll love it, maybe add some VIG and VNQ for great dividend growth rate and dividend yield. Dump the gold and digital currencies, they are pure speculation plays that produce no earnings nor dividends.

  20. Happy New Year, Darrow! Great article and as always perfect timing for me.

    I want to sell some equities from my taxable account (Vanguard Index Total Stock) and add it to something safer – like bonds. I’ll retire at the end of this year. My question – do you recommend holding bonds in taxable?

    Thanks much!

    DJ

    • Hi DJ, thanks. I try not to make personal recommendations because everybody’s situation is unique. I will note that bonds generally produce regular income which will take a hit in taxable accounts. The unrealized capital gains from equities give you more control over taxation. That said, bonds are more conservative of course and will usually fluctuate less when the market is stressed. That’s the type of asset I want to keep some of readily available. And that has meant keeping some (though not all) of my bonds in taxable accounts. Though that may be less true now that I can touch my retirement accounts without penalty.

  21. Hi Darrow,

    Our AA’s are similar

    I am 62 — single. I can’t seem to pull the trigger on increasing international % — I am at 15% of my 40% allocated to equities. Been disappointed w/international performance over my investing life…even at what appears to be bargain prices.

    Thinking of putting some of my cash (40%) in CDs

    Enjoy your work,
    Mike

  22. Mark Ortega says

    Hi Darrow, been following you about 2 years – thanks for your site. A few of questions please:
    1. You said you’re nervous about having 78% of your investments with Vanguard. I have close to that amount invested with them. If you’re invested in mutual funds, the only risk I see is what the NAV for each is at the end of the day.
    What other risk do you see?
    2. Related to item 1 above. I have a sizeable amount of money in Vanguard’s MM fund. I may invest it when we have the next 10% drop I do worry a bit about the money in that fund because of the hiccup we saw with MM’s in 2008. Any thoughts about this?
    3. You invested in the Vanguard Inflation protected fund. I also see this fund in many portfolios out there. We have been in a prolonged low inflation environment for many years, even lately, and likely in the future. Yet you made 8.16% in this fund last year. I don’t understand how such a fund can make money in a low-interest environment. Please enlighten me.
    4. Mutual Funds versus ETF’s: Mutual funds are valued at the end of each day by their net-asset-value. Whereas ETF’s are valued anytime during the day bid/ask price. To me this means that at any time, an ETF is only worth what buyers are willing to pay. Taken further, if everyone panics, an ETF could theoretically go to well below the value of the stock prices within their portfolio. While true that with time, this could balance out, who knows how long that might take. This has been the reason I don’t own any ETF’s. Am I seeing this all wrong?
    Thanks in advance for your answers.

    • Hi Mark, thanks. Briefly:

      1. Aside from old-fashioned larceny, the main risk I see is probably systems failure — not being able to get to my money until databases are repaired/verified. Unlikely, but even less likely if I use multiple financial services companies.
      2. I’m not at all expert in this area but I don’t personally worry much about MM’s, feeling they were stress tested in 2008 and the few problems were addressed.
      3. I believe most bond funds did well generally because of the Fed’s interest rate moves last year. Interest rates go down / bond prices go up.
      4. There are similar arguments against mutual funds, especially bond funds. I just don’t have the experience to say anything authoritative on this topic. You will find discussions if you Google, and maybe another reader will chime in…

  23. Thanks for putting your portfolio out there and going through the thought process to make ’20 changes. It is a very low volatility portfolio with safeguards for unforeseen changes/events (black swan). I do understand your objective. The 60:40 lifestrategy moderate growth fund is designed for such, but the fund’s past history not a good indicator. It should work well for you, but I do judge more on past history. International fund did well as you social responsible fund. VFTAX is to new for my taste. I did read the annual report on Wellesley. They bet on oil for a reason. They made a great bet on oil back in the 2000’s that paid off. The value spread of that sector is presently historically max.

    After reading the excellent JPM ’20 guide to markets came away with different ideas to consider. I’m investing with goals of good return at moderate risk. Cash provides much security and dry powder, but at a high cost. The info that on average just staying out of the market for 6 mo’s is practically always a losing proposition. Even averaging into the market on average a loser. The historical market drawdowns for rolling averages of 1,5,10,20 year for S&P, bonds, 60/40 and 40/60 investments was an eye opener for me. The loss of return vs volatility decrease trade off is high for bond investments. Remember Buffet was caught telling a professional athlete that “bonds were stupid”. My current thinking, one year of cash needs a good place to maintain. For slightly longer security the 2-3 years of annual spending needs parked at Wellesley fund. Past that Wellington as the safe fund with historical protection such as what gold does when things were tough on the market for long duration. Past that the S&P 500 seems to be good as any other growth fund. The S&P market swings are o.k. even in retirement if one has more stable funds backing the choice. Good to spend from the high winning stock funds and a majority of time that would be the S&P.

    It does look like having two years of cash on hand would avoid the lion’s share of the loss in S&P fund. I would venture 2 years of cash and S&P fund would work the best for investments even in retirement. Yes, that would involve spending money below peak, but the fund growth rate is usually better than alternatives. Meaning your account balance will be higher all given over time.

    • Shock is over. I looked at the ’20 J.P. Morgan graph again for Range of stock, bond and blended total returns annual total returns, 1950-2019, pg 63. It’s five years not two. Misread, sorry for that, now not surprising at all.

  24. Connor Davis says

    Thanks for a good article! It inspired me to look more closely at my returns over the last 15 years.

    Last year: similar portfolio to David Guy, similar results
    11 years: astonishingly high, about 12 percent
    15 years: very very roughly 9 percent.

    As you say, we have “won the game”(I think), but it was a near thing. Looking back made me realize how close one really bad decision can make the process. Fear really bit me once. After the dot com collapse I sold a lot of stock, locked in my losses and went to CDs. reinvested that cash in stocks in 2010. If I’d stayed fully invested, the kitty would be about 40% higher.

  25. Mike Cawley says

    My portfolio returned just under 23%. I maintain a 70/30 mix stock/bonds. I am 56 this year and have around 4 to 6 years left to work. I contribute the max to my 401k. I hope to have around $1.8M to $2M in my retirement and investment accounts and close to $300K in cash. When I retire at 62 I will have around a $15K pension and will get around $25K in Social Security benefits. I think I should be in good shape come retirement. I plan to do a lot of travel and move south from the NE. I am debating whether to rent or buy. Will be doing a lot of analysis to determine best path forward.

  26. Hi Darrow, you mention in the article an intention to move additional funds to the LifeStrategy Moderate Growth fund later in your 60’s. The case for using low cost balanced funds during the accumulation years is compelling. During withdrawal years it seems less compelling, since you’ll always be selling a portion of stocks and bonds. Can you elaborate your main thoughts on continuing to use a LifeStrategy fund during retirement, instead of two separate stock and bond index funds with similar asset allocations, that would allow better targeting of assets to sell based on recent performance, market valuations, etc.? Thanks

    • Hi John, thanks for the question. No question, owning separate stock and bond funds would allow for more precise liquidation and control over asset allocation. My long-term intention for a LifeStrategy fund is all about simplicity and cognitive reality, especially if I’m gone and my wife needs to manage our assets on her own. There is only one position to sell.

  27. Hi Darrow, do you like the Paralana Gold calculator better than the Can I Retire Yet calculator? I’ve been using the CIRY calculator for a couple years and am comfortable using it. Has it been discontinued? I haven’t seen it mentioned for awhile.