Vanguard 529 Index Fund Portfolio Performance for April & May 2012
Posted on | June 11, 2012 | 5 Comments
This is going to be a quick post this month, very mechanical. Playing catch-up. Considering the market performance during the month of May, I want to ensure everything is accurate.
At the end of April, the allocation of our Vanguard portfolio was:
- Vanguard Small-Cap Index (NAESX):
- 16.59% (down from 16.69%; goal = 15%)
- Vanguard Total Stock Market Index (VTSMX):
- 16.39% (down from 16.43%; goal = 15%)
- Vanguard Total International Stock Index (VGTSX):
- 36.85% (down from 37.21%; goal = 40%)
- Vanguard High-Yield Bond (VWEHX):
- 15.62% (up from 15.39%; goal = 15%)
- Vanguard Total Bond Market Index (VBMFX):
- 14.54% (up from 14.28%; goal = 15%)
Now let’s look at May. Here is the allocation of our Vanguard portfolio at the end of May 2012:
- Vanguard Small-Cap Index (NAESX):
- 16.48% (down from 16.59%; goal = 15%)
- Vanguard Total Stock Market Index (VTSMX):
- 16.37% (down from 16.39%; goal = 15%)
- Vanguard Total International Stock Index (VGTSX):
- 35.02% (down from 36.85%; goal = 40%)
- Vanguard High-Yield Bond (VWEHX):
- 16.48% (up from 15.62%; goal = 15%)
- Vanguard Total Bond Market Index (VBMFX):
- 15.65% (up from 14.54%; goal = 15%)
How exciting! Our threshold for rebalancing has been tripped by the Total International Stock Index fund. Our rules state that the threshold has to be tripped for two straight months in order to avoid reacting to onetime shocks in the market. Yes, I am going to call 35.02% close enough to 5% from ideal asset allocation (this is a government-sponsored program and all). Not knowing what is going to happen next month, let’s think this through for a second. We are allowed only one rebalance a year; does this feel like the correct time? The year is half over, so that is a plus (as opposed to this occurring in January). The bond market has been in a bull market for quit some time because of the Federal Reserve asset purchase program. As a matter of fact, the yield (inversely related to price) has recently hit 1.5%, the lowest yield since before I was born (yikes). If I were a betting man, I’d say the price is going to go down (increasing yield—lucky I did not make that bet in 2001), not up from here. Naturally, we have all heard what is going on in Europe (pay attention, if our yields climb back up, we will be in the same boat); rebalancing would mean buying international stock when everyone else is selling. Only a percentage of the International index fund is Europe.
Thumbcharts.com - Ten Year Treasury Note
The performance of our benchmarks between April 30, 2012, and May 31, 2012:
- Growth Fund of America (CGFAX): -6.80% (without fees)
- Oppenheimer Blended Age-Based 0–6 Years Portfolio: -7.10%
The performance of our Vanguard Index Fund portfolio between April 30, 2012, and May 31, 2012:
- Vanguard 70/30 Stock/Bond Index Fund Portfolio: -6.42%
|
-11.06% |
|
-6.23% |
|
-6.78% |
|
-0.98% |
|
+0.96% |
Yes, an 11% drop in one month! Let’s see what June brings and see if we need to rebalance or not.
You can see the relative performance of each portfolio on the performance page: Vanguard Index Fund 529 Performance.
Tags: 10-Year Yield • 529 • 529 Performance • Index Fund • rebalance • Vanguard
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5 Responses to “Vanguard 529 Index Fund Portfolio Performance for April & May 2012”
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June 12th, 2012 @ 8:54 pm
On your performance tab page, you have a chart with four different color lines on it. The chart has no “key” so I have no idea what each line represents.
Your chart should have a key. This is chart building 101.
June 12th, 2012 @ 9:07 pm
I agree 100% ! There is no excuse for poor chart etiquette. Issues with Google documents, the legend has fallen off for some reason. May have to add a legend outside the chart.
June 16th, 2012 @ 7:29 am
SLOB- graph has been corrected, lets hope it stays corrected!
June 21st, 2012 @ 12:00 am
Duke, just wanted to add another thanks for continuing to update this blog. I’m one month into my own Vanguard 529 with a slightly different investment strategy, but very similar to your own thanks in large part to your blog. I love your enthusiasm at the prospect of rebalancing “How exciting!” I secretly hope the International fund will allow you to rebalance, but it looks like after the Greek election, you may not meet your 2 months criteria. Oh well. I’m curious based on the bullish bond market (you even discuss it in this month’s entry), if you’d ever consider a temporary shift from your rebalance strategy if you have high confidence you could take advantage of the rabalance earlier (e.g., say in mid 2014 the Fed starts raising the interest rates, would you consider temporarily shifting out of bonds or lowering the 30% criteria, until you see them start to level off)? Basically, while still being a passive investor and taking advantage of rebalancing, having high confidence that bond yields will rise, once this pattern starts you’d effectively just be “rebalancing” earlier than your 5% threshold.
July 1st, 2012 @ 8:55 pm
Starting Up – thank you for the kind words. And you are correct, we are close, but no cigar! Posting an update this evening. Good luck with your investing (and more importantly, your planning).
Interesting question in regard to the bonds. Sticking to a plan and removing emotions is very important. With that being said, if your thesis changes or some other global/macro event occurs, changes may be required.
I almost broke my rule and rebalanced last month just because the bond fund was at an all-time high. I did not though.