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This time last year I wrote about the surprisingly good market returns in 2019. Well, the market did it again, in the middle of a pandemic and a volatile election. Do we need any more proof that markets are unpredictable? Sometimes the surprises can even be good ones.

In 2020, the Dow Jones Industrial Average gained more than 9.6% including dividends. The S&P 500, bonds, and some other asset classes did even better.

My conservative and diversified retirement portfolio again returned double digits for the year. Every single one of my holdings, across asset classes, gained.

If you’re a seasoned investor, you know not to construct a retirement strategy based on back-to-back double-digit returns. We have been extremely fortunate to see such a scenario unfold, and it may not repeat anytime soon. 

For retirees living off assets, caution is always advised. I’ve been in a defensive posture for most of my investing life, holding a roughly 50/50 stock/bond asset allocation. Historically I’ve held a large stockpile of cash too — more than two years of living expenses. As you’ll see, that positioning was helpful to us last year.

When I wrote this post last January, my concern was that the good news was closer to ending than beginning.  I saw the world as greedy, in the longest-running bull market in history. We were financially independent. We’d already “won” the game. So I took money off the table. Why take on extra risk? 

Though I could not predict the pandemic in advance, once I started reading the reports from China, I knew a black swan event was about to unfold. And it did. Now, thanks to government stimulus and human ingenuity, the market has recovered. There are reasons to believe, with vaccines on the horizon, that more good economic news may lie ahead. But only time will tell.

Meanwhile, read on for my annual portfolio performance report….

Current Holdings

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

FundSymbol(s)Expense Ratio% of Portfolio2020 Return
Vanguard Wellesley IncomeVWINX/VWIAX0.23%/0.16%33.1%8.54%
Vanguard LifeStrategy Moderate GrowthVSMGX0.13%6.1%13.59%
Vanguard FTSE Social Index FundVFTAX0.14%20.5%22.67%
Vanguard Intermediate-Term TreasuryVFITX/VFIUX0.20%/0.10%12.9%8.32%
Vanguard Total International Stock IndexVTIAX/VXUS0.11%/0.08%12.0%11.28%
Vanguard Inflation-Protected SecuritiesVIPSX/VAIPX0.20%/0.10%7.1%10.96%
SPDR Gold SharesGLD0.40%1.4%23.68%
digital currencies5.3%350.7%

(Note: Multiple symbols are for Admiral/ETF shares. Portfolio percentages are as of 12/31/2020. Annual returns are for my shares -- generally the less-expensive Admiral or ETF shares. Overall return is not necessarily a weighted average of individual returns, because holdings changed during the year.)

Overall, my portfolio is currently allocated 49% in stocks, 41% in bonds, 7% in gold and digital currencies, and 3% in cash, taking into account the actual reported cash holdings in all of my funds. (Note, the cash return stated in the table above is approximate. I don’t have a simple way to average my different cash accounts.)

Of the stocks, 28% 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.

Purchases and Sales

In March, as we watched the market swoon from pandemic news, I made a small purchase of equities — Vanguard Total International Stock Index (VTIAX) — with my annual IRA contribution. 

Then I also moved a few percent of my net worth from Vanguard Intermediate-Term Treasury Fund (VFIUX) to Vanguard FTSE Social Index Fund (VFTAX). Thus, I was doing some minor rebalancing, moving more cash and bonds into depressed stocks.

Then, in July, as the market recovered, I moved back in the other direction, from VFTAX (social stocks) to VFIUX (Treasury bonds). I made another move of about 1% in the same direction in August.

This wasn’t full-scale rebalancing back to my target asset allocation. But it was a nod of a few percent in that direction, something I’ve often done during market crises. When I know my allocation is drifting off target due to extreme events, making a small move is a way to address some risk, without inadvertently overreacting.

Alternative Investments

My tiny Bitcoin and digital currency position soared embarrassingly skyward again, juicing my overall return. (As a reminder of the volatility and risk though, remember that digital currencies had a disastrous 2018, losing more than 50%.)

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. And I invested only a tiny fraction of my net worth back in 2016/2017. I don’t think digital currencies have any role in the average retirement portfolio, so I won’t discuss them further here. If you want additional perspective, see my post on alternative investments.

Gold has had a long-term role in my investment portfolio. It’s both grown in value and been an effective diversifier for me. There are good arguments both for and against gold as an investment hedge. Experienced investors continue to debate the issue. Chris recently shared his own thoughts on investing in gold.


The big financial news for us this past year is that we bought a house. Long-time readers of this blog may find this ironic, since I’ve been an advocate of renting in retirement, or at least taking a hard look at the rent versus buy decision. My bottom line — controversial news to many — has been that home ownership is often overrated, from a financial point of view. But I always acknowledged that buying a home is also an emotional decision, and other factors could outweigh the financial ones. That finally became true for us.

Long story short, rents in our ideal retirement location continued to increase, while maintenance issues on our rental kept being deferred. Meanwhile a sea change was underway around us: The pandemic has forced many employers of white-collar workers to realize those employees could be just as effective, and a lot cheaper, working from home. Consequently, affluent workers and their families are bailing out of the big cities to smaller towns like ours. Our local paper reported 20% year-over-year growth in real estate prices here. Meanwhile, both Caroline and I have entered our 60’s and are more certain than ever that we want to stay put and age in place. I was concerned that if we delayed buying any longer, we might be priced out of the area.

So, a couple of months ago, facing a highly competitive market, we made a full-price offer on a home. On the day we saw it for the first time, there were five showings scheduled, and two offers already in place. What clinched the deal for us was the ability to close quickly, with cash. There simply wasn’t time to line up a mortgage, even if I’d been OK with going into debt again. Thus in one transaction we wiped out all of our emergency cash stockpile, and then some, for the worthy goal of securing a long-term home. It was one of the hardest financial and life decisions we’ve had to make in many years. 

In addition to using our cash, I liquidated some of our Vanguard LifeStrategy Moderate Growth (VSMGX), SPDR Gold Trust (GLD), and digital currency to buy the house. The tax impacts should be minimal: I was able to engineer most of the capital gains into the zero percent bracket due to our generally low income in retirement. Conveniently, the assets I sold resembled our remaining holdings, so our overall asset allocation didn’t change much. And we still have a sizable retirement portfolio with the well diversified holdings listed in the table above. 

In the long run, I may replenish our cash and GLD somewhat. But with a paid-off house in our portfolio now, it won’t be like the old days where I kept a huge cash cushion on hand. We no longer have the luxury or need for such a large cash stockpile. One purpose of that large cash position was always in case we had to buy a house quickly — which ultimately we did. Going forward, we will likely favor earnings from our diversified portfolio over the security, and performance drag, of cash.


Unlike in many recent years, Vanguard didn’t reduce expenses on any of my holdings this year. With most of their expense ratios already razor thin, perhaps Vanguard has run out of water it can squeeze from that stone.

As I reported last year, Vanguard has added low-cost Admiral shares (VFTAX) for their FTSE Social Index and other funds, with only a $3K minimum. The benefits of social investing can be debated, but I’m glad I’ve made the effort. The former investor-class shares for FTSE Social Index Fund (VFTSX) and Total International Stock Index (VGTSX) appear to be closed to new investors now.

Currently, more than 90% of our holdings are at Vanguard. Despite my affection for and trust in the company, that’s just too many eggs in one basket for my comfort level:

I’ve already had one experience this year of being denied access to investment accounts due to a security glitch. I don’t ever want to face being locked out of the majority of our holdings while a company fixes its systems.

So I will be diversifying management companies. One of my top projects in the new year is to transfer some of our Vanguard assets to Schwab, reinvesting them in similar, low-cost, Schwab ETFs.

Overall Returns

My overall investment return for 2020 was 17.7% (exactly the same as the previous year). It would have been about 13.5% without the digital currencies. That compares to 13.59% for the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) — a possible benchmark for my balanced portfolio that holds about 60% stocks and 40% bonds. 

The geometric mean of my returns going back for the 16 years I’ve closely tracked them now is at 7.3%. 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  7% long-term return, though you probably shouldn’t.

And how about you? How did your portfolio fare in 2020? 

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Note: Please understand that I am not a financial advisor and cannot give personal financial advice or discuss investments other than my own. My portfolio is just my portfolio. I’m not recommending it for anyone else. It’s a real-life portfolio that has been assembled and pruned over many years, much of it long before we all 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, over a decade of retirement, it has grown steadily and supported a comfortable lifestyle for us. 

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A Message From Chris

Financial coach, Geremy Chavez, has organized a virtual conference called Financial Freedom Conference 2021. 

Geremy has recruited 10 experts in their respective fields including doctors, coaches, speakers, and authors. Each will get you closer to achieving your goals for 2021. Topics include:

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I’m excited to be a part of this line up.  I’ll be speaking about applying FIRE principles to build a better lifestyle.

This virtual conference, happening this Wednesday January 13th, will provide you with tools, methods, and strategies that are proven to move you towards your best 2021. Best of all it is FREE.  You’ll be able to watch the live virtual conference from the comfort of your home or office. Click here to learn more and register.

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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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