Here’s my quarterly portfolio update for Q3 2018. These are my real-world holdings and includes 401k/403b/IRAs and taxable brokerage accounts but excludes our house, cash reserves, and a few side investments. The goal of this portfolio is to create enough income to cover our household expenses. As of 2018, we are “
Actual Asset Allocation and Holdings
I use both Personal Capital and a custom Google Spreadsheet to track my investment holdings. The
Here is my portfolio performance for the year and rough asset allocation (real estate is under alternatives), according to Personal Capital:
Here is my more specific asset allocation broken down into a stocks-only pie chart and a bonds-only pie chart, according to my custom spreadsheet:
Vanguard Total Stock Market Fund (VTI, VTSMX, VTSAX)
Vanguard Total International Stock Market Fund (VXUS, VGTSX, VTIAX)
WisdomTree SmallCap Dividend ETF (DES)
Vanguard Small Value ETF (VBR)
Vanguard Emerging Markets ETF (VWO)
Vanguard REIT Index Fund (VNQ, VGSIX, VGSLX)
Vanguard Limited-Term Tax-Exempt Fund (VMLTX, VMLUX)
Vanguard Intermediate-Term Tax-Exempt Fund (VWITX, VWIUX)
Vanguard Intermediate-Term Treasury Fund (VFITX, VFIUX)
Vanguard Inflation-Protected Securities Fund (VIPSX, VAIPX)
iShares Barclays TIPS Bond ETF (TIP)
Individual TIPS securities
Target Asset Allocation. Our overall goal is to include asset classes that will provide long-term returns above inflation, distribute income via dividends and interest, and finally offer some historical tendencies to balance each other out. I personally believe that US Small Value and Emerging Markets will have higher future long-term returns (along with some higher volatility) than US Large/Total and International Large/Total, although I could be wrong. I don’t hold commodities, gold, or bitcoin as they don’t provide any income and I don’t believe they’ll outpace inflation significantly.
I believe that it is important to imagine an asset class doing poorly for a long time, with bad news constantly surrounding it, and only hold the ones where you still think you can maintain faith.
- 38% US Total Market
- 7% US Small-Cap Value
- 38% International Total Market
- 7% Emerging Markets
- 10% US Real Estate (REIT)
- 50% High-quality, Intermediate-Term Bonds
- 50% US Treasury Inflation-Protected Bonds
I have settled into a long-term target ratio of 67% stocks and 33% bonds (2:1 ratio) within our investment strategy of buy, hold, and occasionally rebalance. With a self-managed, simple portfolio of low-cost funds, we minimize management fees, commissions, and taxes.
Holdings commentary. On the bond side, as Treasury rates have risen, last quarter I sold my shares of Vanguard High-Yield Tax Exempt and replaced it with Vanguard Intermediate-Term Treasury. I liked the slightly higher yield of that (still pretty high quality) muni fund, but as I settle into semi-retirement mode, I don’t want to worry about the potential of state pension obligations making the muni market volatile. In addition, my tax bracket is lower now and the Federal tax-exempt benefits of muni bonds relatively to the state tax-exempt benefit of Treasury bonds is much smaller now. On a very high level, my bond portfolio is about 1/3rd muni bonds, 1/3rd treasury bonds, and 1/3rd inflation-linked treasury bonds (and savings bonds). These are all investment-grade and either short or intermediate term (average duration of 6 years or less).
No real changes on the stocks side. I know that US stocks have higher valuations, but that’s something that is already taken into account with my investment plan as I own
The stock/bond split is currently at 68% stocks/32% bonds. Once a quarter, I reinvest any accumulated dividends and interest that were not spent. I don’t use automatic dividend reinvestment.
Performance commentary. According to
An alternative benchmark for my portfolio is 50% Vanguard LifeStrategy Growth Fund (
I’ll share about more about the income aspect in a separate post.
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