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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
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%

(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.


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.


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? 

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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.

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[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.]

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