One of the real stars of my portfolio over the last year or two has been the Vanguard GNMA Fund. This fund is a five star Morningstar rated mutual fund with at least 80% of its assets in Ginnie Mae backed mortgage securities. Typically with a price per share between $9.50 and $10.50, it’s been seeing rising prices and is now over $11. It continues to pay a nice dividend (last check 3.10%), seen a return to date of 6.48%, and is about as secure as possible. And it has a legendary Vanguard low expense ratio of 0.23% versus the typical 1.00% for this kind of fun.
Everyone needs at least some bonds in their portfolio and it’s hard for me to find a better fund than this one.
When I start writing this post every month (like right now), I tend to have a general idea of how the model portfolio did, but have not yet run the numbers. It’s the same this month, and I’m sure this time that May was an absolutely ugly month for investing.
The Vanguard Total Stock Market Index (VTSMX) was down a very ugly 9.26% for the month, giving up all of its gains for 2010. The Vanguard Total International Stock Index (VGTSX) was down an even worse 11.09%, also in negative territory for the year.
On the positive side, the Vanguard GNMA Fund (VFIIX) was up 1.30% while continuing to pay a healthy 3.44% yield, and the Vanguard Total Bond Market Index (VBMFX) was up 0.76% while paying a 3.77% yield.
Unfortunately, one negative month gave up all of our gains for the year. Let’s hope June treats us better.
I haven’t run the numbers up until writing this post, but I think that our model portfolio did very nicely in April. So let’s see what those numbers look like now:
Starting this time with the fixed income portion of our porftolio, the Vanguard GNMA Fund (VFIIX) was up 0.654% for the month while paying that 3.44% yield; the Vanguard Total Bond Index Fund (VBMFX) was also up, 0.762% while paying 3.77% yield. These bond funds have done just beautifully for quite some time.
On the equity portion of our portfolio, the Vanguard Total Stock Market Index Fund (VTSMX), where we maintain our single largest position, was up 1.40% for the month, while also paying a 1.66% yield; finally, the Vanguard Total International Index Fund (VGTSX) was down for the month 3.43% for the month while paying a 2.39% yield.
Three of the four funds were up for the month and three of the four were up for the year to date through April. May’s been rocky but we’ll see how it goes.
As I’ve been discussing for awhile, I finally got my asset allocation done for 2010. It took me a long time to do this, partly due to the dynamic nature of the accounts (stocks trade every business day as we all know, and prices fluctuate possibly substantially) and also due to the number of accounts I have.
The majority of my invested money is in my 403(b) which is with Vanguard. I am fortunate that my employer has instituted the Vanguard Brokerage Option (VBO) which I’ve blogged about several times. Trading online in the account is simple and apparently just like a regular Vanguard brokerage account (I don’t have one so I can’t verify this). I exchanged some dollars in one fund for some dollars in another fund–simple. Finally, to get my asset allocation where I wanted, I had to add money from my 403(b) into my VBO and buy more of a fund I was already holding.
I could not figure out a way to do it online.
I called the next day and made the transfer and asked if it was possible to move money from my 403(b) to the VBO online and was told it wasn’t and there were no plans to do so as far as the representative knew; he explained there are so many restrictions on moving money this way for various 401(k) and equivalent plans they weren’t likely to make this part of the online service anytime soon.
In my view, that’s a serious flaw, but otherwise, I’m pretty thrilled with my Vanguard Brokerage Option.
It took me forever and a day but I finally got my asset allocation for 2010 done this past week. I called Vanguard on Tuesday.
Meaning that before the massive drop on Thursday, a five figure amount of money was moved out of the stock market, on its way to the Vanguard GNMA Fund (VFIIX).
All I was was lucky. I could have (actually ought to have) moved that money in February. It just didn’t happen until now.
So, not a genius. Knew nothing more than anyone else and probably a bit less than many. Just happened to luck out.
It was such a great year for stock market investing in 2009 that my portfolio’s asset allocation has been taken totally out of whack.
In early 2009 I rebalanced my portfolio to have a lower than usual allocation (for me) in bonds of 25%, with the remaining 75% in stocks, 50% in domestics and 25% in international.
When I calculated my current allocation this past weekend, I found that my bonds had become just 20.99% of the total portfolio; international stocks had shrunk to just 19.77%; but domestic stocks had grown to 59.24%.
What a year for domestic stocks! It makes it a huge amount to trim from my domestic stock portfolio to balance out better, especially since I’m wanting to get back to a more typical 30% bonds, 50% domestic stocks, 20% international stocks allocation.
I will work on this in the next few days.
It’s been a few months since I’ve been able to access my Treasury Direct account online. I’ve had this problem before, and it’s not fun to resolve.
Treasury Direct has always had a rather… odd method of online security, including the use of a virtual, on screen keyboard to enter a password. Awhile ago they added a security card, which had a grid printed on it which the user referred to and entered a passcode as further security.
I have since been locked out a few times, and have had great difficulty trying to get my access restored, including now. It is really hard for me to get in touch with them by phone, which is what has to happen in order to get access restored. I’ve now called several times a week for about three weeks and not been able to reach a person.
I will keep trying, but it’s not a great situation.
February, of course, is the shortest month of the year, but it seems it was long on gains for our model portfolio. Let’s look at how our funds did last month:
The Vanguard Total Stock Market Index (VTSMX) was up 1.86% in February, while still paying that 1.94% yield. In our international segment, the Vanguard Total International Stock Index (VGTSX) was down 1.44% and paying a 2.51% yield, meaning that while not having a spectacular month, the stock portion of our portfolio had a positive gain.
In the fixed income section of our portfolio, the Vanguard Total Bond Market Index (VBMFX) was essentially flat, up a penny, but a statistical 0.00% increase, with a yield of 3.96%. Our other fixed income fund, the Vanguard GNMA Fund (VFIIX) was up a little more, 0.12% and yielding 3.71%.
So, while it wasn’t a great month, it was a positive one for three of our four funds and the majority of our portfolio. Let’s hope March keeps building on these gains!
As those of you who have followed this blog for awhile know, I have a model portfolio made up of four funds, two stock and two bond, that I track regularly. This is actually essentialy the portfolio I have in my 403(b) as well.
Any portfolio where asset allocation is a consideration–that would be every investment portfolio–needs periodic adjustment. For me, that adjustment happens yearly. Quite frankly, if the adjustments are very minor I often leave the portfolio alone, just because it’s often more trouble than it’s worth. That’s not the case this year.
If making adjustments to your portfolio, please consider fees (commissions from sales, for instance) and taxes (which is not an issue here since these funds are all contained within a 403(b)).
Also, consider what your overall asset mixes are. For instance, last year I decided on a more aggressive than usual 75% stock/25% bond allocation; this year I’m going back to my usual 70% stock/30% bond mix. Of the stock allocation, 47.5% is a domestic stock index and 22.5% is an international stock index; with bonds, 15% will be a total bond index and the other 15% will be a GNMA fund.
To match those up with the funds I discuss in the model portfolio posts, the domestic stock fund is the Vanguard Total Stock Market Index (VTSMX), the international stock fund is the Vanguard Total International Stock Index (VGTSMX), the domestic bond index fund is the Vanguard Total Bond Market Index (VBMFX), and the GNMA fund is the Vanguard GNMA Fund (VFIIX).
Turns out that I will need to take a bit off both my domestic and international stock funds and put them mostly into VFIIX but a little into VBMFX. I will work on that today!
Let’s be honest: 2009 was a banner year for investing. How will 2010 fare? Early in the month it was looking like 2010 would be picking up right where 2009 left off, but the end of the month showed pretty mediocre results:
The Vanguard Total Stock Market Index (VTSMX) ended the month down 5.09%, despite starting the month quite well–remember, this is the largest single component in our portfolio and pays a 1.94% dividend yield. The Vanguard Total International Stock Index (VGTSX) did worse, down 7.44% while paying a 2.51% dividend yield.
In the fixed income portion of our portfolio, the Vanguard Total Bond Market Index (VBMFX) finished January up 1.16% while paying a healthy 3.96% dividend yield and the Vanguard GNMA Fund (VFIIX) up a tiny 0.94% but paying a 3.71% yield.
It wasn’t the best month, but let’s see how the rest of the year goes. Investing year 2010 has just begun!
