Best 2012 Stocks Contest — Diversified ETF Portfolio
Posted on | January 4, 2012 | No Comments
As you may be aware, I am not the only investment or financial blogger on the web! The web has provided such a great resource for everyone interested in investing; the collaboration is incredible. The Financial Blogger has a yearly contest in which other bloggers develop portfolios of four stocks that they think will outperform the market in that calendar year. Last year’s winner was Dividend Growth Investor (DGI), who has an awesome 15.36% return. Dividend Growth Investor’s performance highlights the power of strong, international, dividend-paying companies. DGI kept the same four stocks for the 2012 contest—what conviction! I believe this also shows that stocks of companies that increase their dividends are truly an investment (as opposed to a trade).
Since I do not want to promote individual stocks on this blog, I am going to propose a diversified portfolio of four ETFs in my contest entry. This contest has simple rules; they are as follows:
- Four stocks picked at the beginning of the year
- No trading allowed (buy and hold)
- Canadian or USA stocks
- Dividends count in end-of-year yield calculation
1. I am big fan of dividend-paying stocks. They provide income (and “free” shares if the dividends are reinvested, lowering your cost per share) and can have a “floor” to their prices. If the price drops too much (for example, because of bad news from Europe), the yield increases. As the yield increases, the stock becomes more and more attractive to buyers. The financial sector is still too risky for me, especially when it comes to dividends. Some banks are reinstating dividends and some are actually increasing their dividends, but it just takes one act of Congress (during an election year) or a new regulation to reverse the positive dividend trend.
ETF: WisdomTree Dividend ex-Financials Fund
WisdomTree Dividend ex-Financials index measures the performance of high dividend-yielding stocks outside the financial sector. The index consists primarily of large- and mid-capitalization companies listed on major U.S. stock exchanges that pass WisdomTree Investments market capitalization, liquidity and selection requirements.
2. Next it is time for some diversification. Typically, different sectors or asset classes act independently of each other (this is referred to as correlation, or lack thereof). Last year, everything was correlated. All sectors and/or asset classes would go up or down together. I hope some of the correlation goes away this year. Typically, real estate investment trusts (REITs) have a low correlation to stocks. I like their income, and as the economy slowly improves, the sector should improve.
ETF: Vanguard REIT Index Fund ETF Shares
The fund employs a passive management or indexing investment approach designed to track the performance of the MSCI US REIT Index. The MSCI US REIT Index, a free float-adjusted market capitalization index, consists of equity REITs that are included in the MSCI US Investable Market 2500 Index, except for specialty equity REITs that do not generate a majority of their revenue and income from real estate rental and leasing operations.
3. As mentioned previously, I am a little cautious of the financial sector. There is one niche sector that I do like, even though it is a little more risky: business development companies (BDCs). BDCs are typically closed-end management investment companies that make long-term private investments. For tax purposes, they are commonly structured as regulated investment companies (RICs), which means that the companies have to pay much of their taxable income out to shareholders as dividends. These companies focus on making business loans to lower- and middle-market companies. They provide long-term debt as well as equity capital. Most BDCs will also offer managerial expertise to assist the companies they invest in, as needed. I like BDCs because they are filling in the void left by regional banks, which, since the financial crisis, have stopped or limitied thier lending to small and midsized companies.
ETF: ETRACS Linked to the Wells Fargo Business Development Company Index
The ETRACS Linked to the Wells Fargo Business Development Company Index due April 26, 2041 is designed to track an investment in the Wells Fargo Business Development Company Index (“Index”), and may pay a variable quarterly coupon linked to the cash distributions associated with the underlying BDC constituents, less investor fee. The Wells Fargo Business Development Company Index is a float adjusted, capitalization-weighted Index that is intended to measure the performance of all Business Development Companies (“BDC”) that are listed on the New York Stock Exchange (“NYSE AMEX”) or NASDAQ and satisfy specified market capitalization and other eligibility requirements. To qualify as a BDC, the company must be registered with the Securities and Exchange Commission (“SEC”) and have elected to be regulated as a BDC under the Investment Company Act of 1940 (“1940 Act”).
4. Finally, my fourth pick. As mentioned in my previous post, inflation can be a killer. I would like some inflation protection. Typically, dividend-paying stocks can keep up with inflation over time. A short-term spike in inflation can dampen profits in the short term, though. I am guessing the inflation we will see over the next year will be either food or energy related. One way to invest would be through Treasury Inflation-Protected Securities (TIPS), which are special bonds from the U.S. government. The TIP ETF from iShares currently has a nice yield around 4%. There is one other risk I would like to hedge against over the next year, and that is geopolitical tensions. Any issues in the Middle East could upset energy prices and drive down stock prices; I would like a hedge against that. I decided to go with a commodity ETF that follows the energy sector. I hope to get some inflation protection and a hedge against geopolitical tensions.
ETF: PowerShares DB Energy Fund
The PowerShares DB Energy Fund (Fund) is based on the DBIQ Optimum Yield Energy Index Excess Return™ (Index) and is managed by DB Commodity Services LLC. The Index is a rules-based index composed of futures contracts on some of the most heavily traded energy commodities in the world: Light Sweet Crude Oil (WTI); Heating Oil; Brent Crude Oil; RBOB Gasoline; and Natural Gas. The Index is intended to reflect the performance of the energy sector.
Here is a final summary of my ETF portfolio for 2012:
| Ticker | ETF | Expense Ratio | Yield |
|---|---|---|---|
| DTN | WisdomTree Dividend ex-Financials | 0.38% | ~4.0% |
| VNQ | Vanguard REIT Index | 0.12% | ~4.4% |
| BDCS | ETRACS Business Development Company Index | 0.86% | ~7.5% (variable) |
| DBE | PowerShares DB Energy | 0.80% | 0%(ouch) |
I will provide quarterly updates and track the dividend reinvestments. For a benchmark, I am going to use Vanguard S&P 500 Index ETF, ticker: VOO. Here are my starting positions for each ETF:
| ETF | Jan. 3, 2012 price @ open |
|---|---|
| DTN | $52.76 |
| VNQ | $59.05 |
| BDCS | $20.53 |
| BDE | $27.95 |
| VOO | $58.45 |
Tags: BDC > BDCS > Business Development Companies > Commodity > DBE > Dividend Investing > DTN > Investment Contest > REIT > VNQ
Inflation: The Killer of Investment Returns
Posted on | January 2, 2012 | No Comments
We know what inflation is: the rising of prices. If you had $20 today and put it under your mattress, 20 years from now, that $20 would have a lot less buying power. Let’s look at an example. The government tracks inflation in order to make adjustments to Social Security. Its inflation metric is called the Consumer Price Index (CPI). From November 2010 to November 2011, the CPI increased from 218.803 to 226.23, a 3.39% increase. The Vanguard S&P 500 Index Fund (VFINX) returned 5.63% (with dividends reinvested). The real return, after inflation, was only 2.24%.
The nice folks at the PNC Financial Services Group (PNC) have continued the tradition of determining the cost of the 12 Days of Christmas. This year, the cost has increased only 3.5%, in line with the CPI. Remember, last year, the cost increased 9.2% over 2009, and in 2009 it increased only 1.8% over 2008 prices. This year, two turtle doves increased by 25% and four calling birds decreased by –13.3%.
PNC really did a great job on the interactive website this year; I recommend taking some time and playing around with it. Great for little ones!
Link: PNC – Christmas Price Index
Tags: Christmas Gifts > Christmas Price Index > Inflation > PNC
Nov-2011 Vanguard 529 Index Fund Portfolio Performance
Posted on | December 31, 2011 | No Comments
Happy New year to everyone. I hope 2011 was a rewarding year for you and that 2012 will be even better. Even though this is my Nov-2011 performance post (little late, life got in the way, I had to take some time off to study for a professional exam). Let’s take a second to look at the market performance over the past calender year. Over the last year the Vanguard S&P 500 Index fund was down -1.14% without dividends. If you take into account dividends and those dividends are re-invested, the Vanguard S&P 500 Index fund was up +0.24%. (Source: Yahoo! Finance) Never under-estimate the power and importance of dividends, espically, reinvesting dividends. In a couple months we can review the 2-year performance of our 529 Index Fund portfolio.
November was another volatile month for the markets. The month started off well behaved and traded “flat”. Need the end of the month the market took a nose dive based on bad news out of Europe, only to recover by the very end of the month. I added a third line to the chart of the Vanguard S&P 500 Index fund. One can see a second, higher, trading range forming between 111.5 and 118.
S&P 500: Nov-2011 (Year to Date)
Overall market performance between October 31, 2011, and November 30, 2011:
- S&P 500 (^GSPC): -0.51%
- Dow Jones Industrial Average (^DJI): +0.76%
- NASDAQ (^IXIC): -2.39%
Our sample actively managed mutual fund, the Growth Fund of America (CGFAX), was down -0.55% (before fees) between October 31, 2011, and November 30, 2011. Whereas our age-based benchmark, the Oppenheimer Blended Age-Based 0–6 Years Portfolio, was down -1.26%.
Our more conservative Vanguard index fund portfolio was down -1.57% between October 31, 2011, and November 30, 2011 (before the monthly automatic investment). The heavy weighting in the International Index fund hurt us this month, in addition to the High-Yeild Corporate Bond fund. All five funds were in the red this month. Here is the performance of each individual fund in our index fund portfolio:
|
-2.88% |
|
-0.29% |
|
-0.40% |
|
-2.07% |
|
-0.33% |
At the end of October, the allocation of our Vanguard portfolio was:
- Vanguard Small-Cap Index (NAESX):
- 16.16% (up from 16.01%; goal = 15%)
- Vanguard Total Stock Market Index (VTSMX):
- 15.79% (up from 15.62%; goal = 15%)
- Vanguard Total International Stock Index (VGTSX):
- 37.05% (down from 37.45%; goal = 40%)
- Vanguard High-Yield Bond (VWEHX):
- 15.68% (down from 15.79%; goal = 15%)
- Vanguard Total Bond Market Index (VBMFX):
- 15.32% (up from 15.14%; goal = 15%)
You can see the relative performance of each portfolio on the performance page: Vanguard Index Fund 529 Performance.
Tags: 2012 > 529 Performance > CGFAX > Index Fund > Oppenheimer > Vanguard
Oct-2011 Vanguard 529 Index Fund Portfolio Performance
Posted on | December 12, 2011 | No Comments
October was a good month for the markets, especially when you use the end of September as your comparison. You will remember, the last update had poor performance because our end-of-month trades happened to correspond with the high of the trading range and the low of the trading range. During October, the S&P 500 broke out of its trading range after testing the “ceiling” a few times in early October.
S&P 500 Trading Range, Oct-2011
Overall market performance between September 30, 2011, and October 31, 2011:
- S&P 500 (^GSPC): +10.77%
- Dow Jones Industrial Average (^DJI): +9.54%
- NASDAQ (^IXIC): +11.13%
Our sample actively managed mutual fund, the Growth Fund of America (CGFAX), was up +10.45% (before fees) between September 30, 2011, and October 31, 2011. Whereas our age-based benchmark, the Oppenheimer Blended Age-Based 0–6 Years Portfolio, was up +10.21%. Even though the performance of CGFAX is impressive, it still did not outperform the Total Stock Market Index, Small-Cap Index, S&P 500, or NASDAQ.
Our more conservative Vanguard index fund portfolio was up +8.79% between September 30, 2011, and October 31, 2011 (before the monthly automatic investment). Even though this is less than the other two more aggressive investments, 8.79% is not bad by any means. The money that was put into the account for the month of September has already had more than a year’s worth of growth. Keep in mind, our yearly target is 7% on average. Here is the performance of each individual fund in our index fund portfolio:
|
+10.15% |
|
+11.51% |
|
+15.24% |
|
+5.34% |
|
+0.20% |
At the end of October, the allocation of our Vanguard portfolio was:
- Vanguard Small-Cap Index (NAESX):
- 16.01% (up from 15.11%; goal = 15%)
- Vanguard Total Stock Market Index (VTSMX):
- 15.62% (up from 15.23%; goal = 15%)
- Vanguard Total International Stock Index (VGTSX):
- 37.45% (down from 36.93%; goal = 40%)
- Vanguard High-Yield Bond (VWEHX):
- 15.79% (down from 16.30%; goal = 15%)
- Vanguard Total Bond Market Index (VBMFX):
- 15.14% (down from 16.43%; goal = 15%)
You can see the relative performance of each portfolio on the performance page: Vanguard Index Fund 529 Performance.
The age-based fund has taken back first place by a small margin and all three investment options are back to the positive territory. Last month the actively managed fund had actually lost money (its value was below the money put into the fund).
Finally, here is an interesting article to read in regard to index fund investing: Indexing Fans Have a Lot to Thank Vanguard for This Year, by William Samuel Rocco of Morningstar.
Sept-2011 Vanguard Index Fund 529 Portfolio Performance
Posted on | October 13, 2011 | No Comments
September was another not-so-great month for the markets—well, sort of. The market was actually “flat” for the month, even though the difference between the two dates we happen to be dealing with (Aug. 31 and Sept. 30) shows a huge decline. The market is still trading in a “range.” For one day the market did close (as measured by the Vanguard S&P 500 index fund) below the lower level of the range. I’m glad I do not trade using charts because this should have been a sign to sell, but instead the market has been rising since. August 31 was at the top of the range and September 30 was at the bottom! Which means last month we got a super-sale.
There was some positive economic news recently. From the September-2011 ISM report:
Manufacturing continued its growth in September as the PMI registered 51.6 percent, an increase of 1 percentage point when compared to August’s reading of 50.6 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
A PMI in excess of 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 28th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 26th consecutive month. Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through September (56.2 percent) corresponds to a 4.8 percent increase in real gross domestic product (GDP). In addition, if the PMI for September (51.6 percent) is annualized, it corresponds to a 3.2 percent increase in real GDP annually.”
ISM’s Employment Index registered 53.8 percent in September, which is 2 percentage points higher than the 51.8 percent reported in August. An Employment Index above 50.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
Also, a quote from Mr. Warren Buffett himself:
Our railroad carried 200,000 carloads last week,” Buffett said Oct. 4 at a Fortune magazine conference in Laguna Niguel California. “That’s the highest total in three years. And that’s stuff moving around the country, supplying merchants and doing all kinds of things.
Overall market performance between August 31, 2011, and September 30, 2011:
- S&P 500 (^GSPC): –7.17%
- Dow Jones Industrial Average (^DJI): –6.02%
- NASDAQ (^IXIC): –6.36%
Our sample actively managed mutual fund, the Growth Fund of America (CGFAX), was down –8.77% (before fees) between August 31, 2011, and September 30, 2011. Not sure what caused its poor performance. If you look at the two sectors that did the worst over the past month, CGFAX is only 20% international and underweight to the S&P 500 in regard to financials. The 20% in international must have been a huge drag on the performance. CGFAX underperformed (before fees!) by more than 1% in one month alone.
Our age-based benchmark, the Oppenheimer Blended Age-Based 0–6 Years Portfolio, performed better than CGFAX, down –7.90%. The Oppenheimer age-based fund performed almost a full percentage point better than CGFAX but still underperformed the general (U.S.) market. Oppenheimer has officially given up the lead to the Vanguard index fund portfolio in regard to overall portfolio value. Both still have positive “profits”; the Vanguard portfolio’s is currently greater.
Our Vanguard index fund portfolio was down –7.83% between August 31, 2011, and September 30, 2011 (before the monthly automatic investment). Of the portfolios, the Vanguard did the best, because of its weighting in bonds. It would have done better if the equity portion were not weighted toward international. The only funds outperforming the general market were the two bond funds; even one of those was in the red for the month. Here is the performance of each individual fund in our index fund portfolio:
|
–12.28% |
|
–7.77% |
|
–11.00% |
|
+0.86% |
|
–1.92% |
At the end of September, the allocation of our Vanguard portfolio was:
- Vanguard Small-Cap Index (NAESX):
- 15.11% (down from 15.65%; goal = 15%)
- Vanguard Total Stock Market Index (VTSMX):
- 15.23% (unchanged from 15.23%; goal = 15%)
- Vanguard Total International Stock Index (VGTSX):
- 36.93% (down from 38.76%; goal = 40%)
- Vanguard High-Yield Bond (VWEHX):
- 16.30% (up from 15.34%; goal = 15%)
- Vanguard Total Bond Market Index (VBMFX):
- 16.43% (up from 15.03%; goal = 15%)
You can see the relative performance of each portfolio on the performance page: Vanguard Index Fund 529 Performance.
August-2011 Vanguard 529 Index Fund Portfolio Performance
Posted on | September 12, 2011 | 3 Comments
What a great month August was. I know, I have to be crazy to think that. I love buying when everything is on sale. The markets were down big during the month of August. Since we have another 17 odd years until we need to cash out this 529 portfolio, this sell-off in the market is a great buying opportunity and helps lower our average cost per share. It also helps to demonstrate what a great year we just had. After two very bad months for stock prices, our Vanguard 529 portfolio still has a profit of approximately $400. I have added the cost basis to the performance page.
If the Greece debt issue is resolved smoothly (meaning no last-minute surprises of some sort), we should be in good shape. If there are any surprises from Europe, an overreaction is bound to take place in the U.S. markets. The S&P 500 is trading in a range finally, so hopefully, the sell-off is complete.
Vanguard S&P 500 Index Fund Prices
Here is a very good article by Dirk Van Dijk of Zacks Investment Research, Expectations Starting to Fall, dated 12-Sept-2011. The title sounds a lot more glum than the text of the article. For example:
“…The expectations for the full year are very healthy, with total net income for 2010 rising to $793.0 billion in 2010, up from $543.6 billion in 2009. In 2011, the total net income for the S&P 500 should be $916.1 billion, or increases of 45.9% and 15.5%, respectively. The expectation is for 2012 to have total net income passing the $1 Trillion mark to $1.009 Trillion, for growth of 9.4%. That will also put the “EPS” for the S&P 500 over the $100 “per share” level for the first time at $105.79. That is up from $56.90 for 2009, $83.12 for 2010 and $96.02 for 2011. In an environment where the 10-year T-note is yielding 1.92%, a P/E of 14.3x based on 2010 and 12.4x based on 2011 earnings looks attractive. The P/E based on 2012 earnings is 11.2x. Those P/Es are based on the Thursday close, so are even lower after Friday’s fall.“
Overall market performance between July 29, 2011, and August 31, 2011:
- S&P 500 (^GSPC): –5.68%
- Dow Jones Industrial Average (^DJI): –4.36%
- NASDAQ (^IXIC): –5.34%
Our sample actively managed mutual fund, the Growth Fund of America (CGFAX), was down –6.86% (before fees) between July 29, 2011, and August 31, 2011.
Our age-based benchmark, the Oppenheimer Blended Age-Based 0–6 Years Portfolio, performed a little better than CGFAX, down –6.51%. Oppenheimer has officially given up the lead to the Vanguard index fund portfolio in regard to overall portfolio value. Both still have positive “profits”; the Vanguard portfolio’s is currently greater.
Our Vanguard index fund portfolio was down –5.91% between July 29, 2011, and August 31, 2011 (before the monthly automatic investment). The only funds outperforming the general market were the two bond funds; even one of those was in the red for the month. Here is the performance of each individual fund in our index fund portfolio:
|
–8.52% |
|
–5.99% |
|
–8.29% |
|
-3.17% |
|
+1.48% |
At the end of June, the allocation of our Vanguard portfolio was:
- Vanguard Small-Cap Index (NAESX):
- 15.65% (down from 16.07%; goal = 15%)
- Vanguard Total Stock Market Index (VTSMX):
- 15.23% (down from 15.24%; goal = 15%)
- Vanguard Total International Stock Index (VGTSX):
- 38.76% (down from 39.85%; goal = 40%)
- Vanguard High-Yield Bond (VWEHX):
- 15.34% (up from 14.91%; goal = 15%)
- Vanguard Total Bond Market Index (VBMFX):
- 15.03% (up from 13.94%; goal = 15%)
This is a sign of a well-balanced portfolio (if I do say so myself). Most improved goes to the Total Bond fund, which is back to a 15% asset allocation. High-Yield Bond has also corrected itself. Small-Cap Index is still correcting itself and the Total International is losing ground.
You can see the relative performance of each portfolio on the performance page: Vanguard Index Fund 529 Performance.
July-2011 Vanguard 529 Index Fund Performance
Posted on | August 29, 2011 | No Comments
Overall market performance between June 30, 2011, and July 29, 2011:
- S&P 500 (^GSPC): –2.14%
- Dow Jones Industrial Average (^DJI): –2.18%
- NASDAQ (^IXIC): –0.62%
Our sample actively managed mutual fund, the Growth Fund of America (CGFAX), was down –1.42% (before fees) between June 30, 2011, and July 29, 2011. The Growth Fund of America was on par with the market as a whole (before fees). It outperformed the S&P 500 and the Dow but lost to the NASDAQ.
Our age-based benchmark, the Oppenheimer Blended Age-Based 0–6 Years Portfolio, performed worst than CGFAX, down –2.02%.
Our Vanguard index fund portfolio was down –1.22% between June 30, 2011, and July 29, 2011 (before the monthly automatic investment). Best monthly performance of the three but still not strong enough to outperform the NASDAQ. Here is the performance of each individual fund in our index fund portfolio:
|
–1.60% |
|
–2.29% |
|
–3.86% |
|
+1.38% |
|
+1.57% |
At the end of June, the allocation of our Vanguard portfolio was:
- Vanguard Small-Cap Index (NAESX):
- 16.07% (down from 16.52%; goal = 15%)
- Vanguard Total Stock Market Index (VTSMX):
- 15.24% (down from 15.41%; goal = 15%)
- Vanguard Total International Stock Index (VGTSX):
- 39.85% (down from 40.00%; goal = 40%)
- Vanguard High-Yield Bond (VWEHX):
- 14.91% (up from 14.52%; goal = 15%)
- Vanguard Total Bond Market Index (VBMFX):
- 13.94% (up from 13.54%; goal = 15%)
This is a sign of a well-balanced portfolio (if I do say so myself). The two bond funds are correcting their way back to 15% and the small-cap fund is correcting its way down to 15%.
You can see the relative performance of each portfolio on the performance page: Vanguard Index Fund 529 Performance.
June-2011 Vanguard 529 Index Fund Performance
Posted on | July 12, 2011 | 1 Comment
The month of June was another poor month. We are at two in a row now. July is not off to good start either. Earnings season just kicked off. We will have to following earnings to see what the forecasts are for the rest of the year.
Overall market performance between May 31, 2011, and June 30, 2011:
- S&P 500 (^GSPC): –1.82%
- Dow Jones Industrial Average (^DJI): –1.23%
- NASDAQ (^IXIC): –2.17%
Our sample actively managed mutual fund, the Growth Fund of America (CGFAX), was down –1.65% (before fees) between May 31, 2011, and June 30, 2011. The Growth Fund of America was on par with the market as a whole (before fees). It outperformed the S&P 500 and the NASDAQ but lost to the stronger index as of late, the Dow Jones Industrial Average.
Our age-based benchmark, the Oppenheimer Blended Age-Based 0–6 Years Portfolio, performed better than CGFAX, down –1.57%, but its performance wasn’t any better when compared with the market as a whole.
Our Vanguard index fund portfolio was down –1.39% between May 31, 2011, and June 30, 2011 (before the monthly automatic investment). Best monthly performance of the three but still not strong enough to outperform the Dow Jones. Here is the performance of each individual fund in our index fund portfolio:
|
–1.50% |
|
–1.81% |
|
–1.90% |
|
–0.41% |
|
–0.99% |
Even though the market was down an average of –1.74% for the month and our Vanguard portfolio was down –1.39%, the total value of our 529 is relatively flat from last month because of the Upromise contribution.
At the end of June, the allocation of our Vanguard portfolio was:
- Vanguard Small-Cap Index (NAESX):
- 16.52% (down from 16.65%; goal = 15%)
- Vanguard Total Stock Market Index (VTSMX):
- 15.41% (down from 15.94%; goal = 15%)
- Vanguard Total International Stock Index (VGTSX):
- 40.00% (down from 40.04%; goal = 40%)
- Vanguard High-Yield Bond (VWEHX):
- 14.52% (up from 14.45%; goal = 15%)
- Vanguard Total Bond Market Index (VBMFX):
- 13.54% (up from 13.37%; goal = 15%)
This is a sign of a well-balanced portfolio (if I do say so myself). The international portion is back to its target allocation of 40%. The two bond funds are correcting their way back to 15% and the small-cap fund is correcting its way down to 15%.
You can see the relative performance of each portfolio on the performance page: Vanguard Index Fund 529 Performance.
Tags: 529 Performance > Asset allocation > Index Fund > Vanguard
Free Money from Upromise!
Posted on | July 2, 2011 | 1 Comment
Good news: Genevieve got her first Upromise deposit into her 529 college savings account. We had previously linked our Upromise account to her Vanguard 529 college savings plan and set the transfer minimum with Upromise to $50. Upromise makes transfers only once a quarter. When we hit $50 in our Upromise account, the transfer was automatically set up for the end of the next quarter. The value at end of this quarter was $65.25, which is not too bad, considering our monthly contribution is currently $62. We got an extra month’s payment free this month.
How did we earn $65.25 in about one year? It wasn’t that difficult, actually. We registered our credit card with Upromise (we did not get the Upromise credit card). Whenever we made qualifying purchases, our account got credited. We were sure to keep our eyes on the special deals. However, we were careful not to make extra purchases we were not originally going to make just for the sake of earning Upromise credits. The best example is that Walmart was offering a 10% Upromise credit for purchases made during a one-week period. We were in the process of researching car seats, and Walmart happened to sell the car seat we had chosen to buy. So we purchased a $200 car seat through Walmart.com and received $20 in our Upromise account. Also, I have started using Mobil gas. Normally I would not spend the extra 2¢−3¢/gallon for the Mobil gas, even with the Upromise credit (you have to buy at least 20 gallons in one month, or you get $0 Upromise money), but my credit card also offers 3% back on gas purchases at Mobil. With the 3% from my credit card and the Upromise credit, it is worth filling up with Mobil. Finally, we have a list of restaurants in our area that offer Upromise money. The few times we do eat out, we visit those restaurants.
Time for some housekeeping. I will not be counting the Upromise money when I determine my cost basis. Therefore, this $65.25 will show up as market gain (or profit). I do count gift money from relatives as part of the cost basis since it is from relatives directly funding Genevieve’s college savings plan. The Upromise money is really free money and therefore pure “profit.”
Do you like getting free money? Click on the Upromise banner on the right side of this page and join; it is free to sign up. Ensure your 529 plan is one of the qualifying plans to link to first. If you want, ask friends and family to register their credit cards also for some extra savings.
Similar posts: Boost Your 529 College Savings Plan with Upromise
Vanguard 529 College Saving Plan Performance: Performance Update
May 2011 Vanguard 529 Index Fund Portfolio Performance
Posted on | June 4, 2011 | No Comments
The month of May was not a great month for the markets. Despite some very positive news, like solid April sales for the auto industry (Chrysler posted quarterly profits for the first time since 2009 and GM profits tripled), and Osama bin Laden being captured and killed by U.S. Marines, the old saying “Sell in May and and go away” has applied again. The following were all drags on the market: discussions around raising the debt ceiling, the slowdown in China’s manufacturing growth, weak corporation earnings due to Japan-related interruptions in their supply chains and rising input (commodity) costs, consumers being squeezed by higher gas prices, the silver commodity market bubble popping, and Standard & Poor’s downgrade of Italy’s credit rating to negative.
Overall market performance between April 29, 2011, and May 31, 2011:
- S&P 500 (^GSPC): -1.35%
- Dow Jones Industrial Average (^DJI): -1.87%
- NASDAQ (^IXIC): -1.33%
Our sample actively managed mutual fund, the Growth Fund of America (CGFAX), was down -1.71% (before fees) between April 29, 2011, and May 31, 2011. The fund substantially underperformed both the S&P 500 and the NASDAQ. It was able to keep up with the Dow Jones.
Our age-based benchmark, the Oppenheimer Blended Age-Based 0–6 Years Portfolio, performed better, but was still down -1.34%. On par with the S&P 500 and the NASDAQ.
Our Vanguard index fund portfolio was down -1.44% between April 29, 2011, and May 31, 2011 (before the monthly automatic investment). Here is the performance of each individual fund in our index fund portfolio:
|
-2.91% |
|
-1.14% |
|
-2.01% |
|
+1.31% |
|
+0.61% |
Having 40% of the total portfolio in international really hurt this month, the opposite of last month. The bond holdings helped weaken the impact of the overweight position in international, but they were not enough to match the S&P and NASDAQ performance. It is interesting to note that the Total Stock Market Index fund outperformed the S&P 500, the Dow Jones and the NASDAQ.
At the end of May, the allocation of our Vanguard portfolio was:
- Vanguard Small-Cap Index (NAESX):
- 16.65% (down from16.77%; goal = 15%)
- Vanguard Total Stock Market Index (VTSMX):
- 15.94% (up from 15.45%; goal = 15%)
- Vanguard Total International Stock Index (VGTSX):
- 40.04% (down from 40.64%; goal = 40%)
- Vanguard High-Yield Bond (VWEHX):
- 14.45% (up from 13.75%; goal = 15%)
- Vanguard Total Bond Market Index (VBMFX):
- 13.37% (up from 12.99%; goal = 15%)
Finally, my favorite news event of the month: GM to invest $131 m at Kentucky Corvette plant. By the way, Reuters, the first Corvette built in Bowling Green was the 1984 Corvette. FACTOID: There was no 1983 Corvette because the plant was not ready.
You can see the relative performance of each portfolio on the performance page: Vanguard Index Fund 529 Performance.
Tags: 529 Performance > Actively Managed > Age-Based > Asset allocation > Oppenheimer > Vanguard
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