I used to add up my net worth every month (if not more frequently), but nowadays I limit myself to quarterly portfolio checks to coincide roughly with when my dividends arrive. There is so much daily noise about stock market prices these days that I’ve found it much more relaxing this way. However, I do enjoy a brief reflection at the end of the year. Here are the annual returns for select asset classes as benchmarked by ETFs per Morningstar after market close 12/31/19. Commentary. As of 2017 year-end, the performance of every asset class was positive. The lowest positive return was from short-term US Treasuries. As of 2018 year-end, the performance of nearly every asset class was negative. The highest return was from short-term… [Read More...]
Vanguard ETF & Mutual Fund Expense Ratio Changes (December 2019)
Updated December 2019. Vanguard announced another round of expense ratio cuts to 56 of their mutual funds and ETFs. Here are a few highlights: Vanguard Total International Stock Market (VXUS) is now 0.08%. Vanguard Short-Term Inflation-Protected Securities (VTIP) is now 0.05%. Vanguard FTSE Emerging Markets ETF (VWO) is now 0.10%. Vanguard FTSE All-World ex-US ETF (VEU) is now 0.08%. Vanguard Tax-Exempt Bond ETF (VTEB) is now 0.06%. Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) is now 0.11%. Vanguard Total World Stock ETF (VT) is ow 0.08%. Vanguard Select ETFs. These 13 ETFs are what Vanguard thinks should be the building blocks of your portfolio. Here are expense ratios on the four broadest ones + their classic S&P 500 ETF: Vanguard Total US … [Read More...]
Investing is not so different from playing the lottery – just less fun
Many who sneer at the national lottery – now turning 25 – will coolly hand large sums to a smooth fund manager“The Lottery, with its weekly pay-out of enormous prizes, was the one public event to which the proles paid serious attention. It was probable that there were some millions of proles for whom the Lottery was the principal if not the only reason for staying alive. It was their delight, their folly, their anodyne, their intellectual stimulant. Where the Lottery was concerned, even people who could barely read and write seem capable of intricate calculations and staggering feats of memory. There was a whole tribe of men who made a living simply by selling systems, forecasts and lucky amulets.”That was George Orwell’s take on lotteries … [Read More...]
Best Interest Rates on Cash – January 2020
Here’s my monthly roundup of the best interest rates on cash for January 2020, roughly sorted from shortest to longest maturities. I track these rates because I keep 12 months of expenses as a cash cushion and also invest in longer-term CDs (often at lesser-known credit unions) when they yield more than bonds. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you’d earn by moving money between accounts. Rates listed are available to everyone nationwide. Rates checked as of 1/9/2020. High-yield savings accounts While the huge megabanks like to get away with 0.01% APY, it’s easy to open a new “piggy-back” savings account and simply move some funds over from your existing checking account. The interest rates … [Read More...]
Long Cycles and Hot Asset Classes: Large Cap Growth vs. Value Stocks
As this decade comes to an end, I find it noteworthy that Large-Cap Growth stocks have outperformed Large-Cap Value stocks during most of the the 2010s. When I first started learning about investing in the previous decade of the 2000s, much was made of how Large-Cap Value stocks historically outperformed Growth. You can see this cyclical behavior below, taken from this Morningstar article: Similar to economic cycles, growth and value stocks have alternated leadership roles based on past performance, as shown here over the rolling three-year periods starting 1973. While value beat growth during the 2000s, the trend reversed in the 2010s as growth outperformed value and continues to post large gains year-to-date 2019. Nonetheless, it’s challenging to predict whether the growth’s premium … [Read More...]
Low Stock Market Return Expectations For The Next Decade (2020-2030)
We’ve seen that stock market investors have been rewarded for investing regularly during the last decade. $10,000 invested in the Vanguard Target Retirement 2045 fund in January 2010 would have grown to $25,000 in January 2020. $10,000 invested in the Vanguard S&P 500 Index fund would have grown to $35,000 from 2010-2020! However, the FactorResearch article Global Pension Funds: The Coming Storm summarizes why we should have more reasonable expectations for the next decade. First up, we have low interest rates. If you have low interest rates now, then your future bond returns are highly likely to be similarly low. For stocks, we have a historically low earnings yield (or historically high P/E ratio). While the correlation is not as high, a low earnings yield usually leads to low … [Read More...]
Stocks, Bonds, and Gold: Historical Charts Since 1800
StarCapital Research has shared a series of interesting long-term charts comparing the long-term returns, drawdowns, and volatility of stocks, bonds, and gold over the last 220 years. There are also some stats on relative market valuations and forward return expectation for different countries and regions. You must accept some terms before viewing, but it is available to US individual investors. Here is a sample chart of the return distributions of stocks, bonds, and gold since 1800, depending on holding period, along with their takeaway, via Norbert Keimling @CAPE_invest: Conclusion: For periods of 10 years or more, stocks are safer than bonds or gold! This is because for a 10-year holding, the worst inflation-adjusted performance of stocks (-5.9% annually) was better than the worst performance for bonds … [Read More...]
What If You Invested $10,000 Every Year For the Last 10 Years? 2010-2019
Now that you’re done reading articles about what happened in 2019, how about stepping back and taking in the longer view? Most successful savers invest money each year over a long period of time, these days often into a target-date fund (TDF). It may not get you doing silly things on a super-yacht, but this slow-and-steady behavior is a perfectly legitimate way to build wealth. Not everyone gets rich with IPOs or Bitcoin. Investment benchmark. I chose the Vanguard Target Retirement 2045 Fund as this all-in-one fund is low-cost, highly diversified, and available both inside many employer retirement plans and anyone with an IRA. During the early accumulation phase, this fund holds 90% stocks (both US and international) and 10% bonds … [Read More...]
Minimizing IPO Investing Risks in 2020: The ETFs to Own
In an effort to mitigate this risk and concern about picking the winners or the losers with each company that comes public, exchange-traded funds are available that offer a sampling and exposure to… [Read More...]