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.
June was certainly a downer of a month for investing; our model portfolio was not doing so well that month. July, however, was an absolute reversal from the June debacle.
The Vanguard Total Stock Market Index Fund (VTSMX) was up a stunning 7.41% while paying a decent 2% yield. Its international counterpart, the Vanguard Total International Stock Index Fund (VGTSX) was up an even better 9.64% and pays an even better 2.71% yield, so the stock part of our portfolio soared this month.
In our fixed income section, the Vanguard GNMA Fund (VFIIX) was up 0.73% for the month while paying a 3.19% yield; the Vanguard Total Bond Index Fund (VBMFX) was up 0.65% while paying a 3.62% yield.
It was a great investing month following two months of losses–especially June’s dramatic losses. Let’s hope things continue moving up in August.
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 reviewed my asset allocation, I was reminded of something: this is not difficult.
Four funds, two numbers.
For bonds, the Vanguard GNMA Fund and the Vanguard Total Bond Market Index Fund, and for international stocks, the Vanguard International Stock Market Index–this year, each at 15% asset allocation. For domestic stocks, the Vanguard Total Stock Market Index Fund for the remainder–55% of the asset allocation.
Not hard, not rocket science, not brain surgery. Simple.
I don’t pretend this will be the best performing portfolio in 2010, but year over year, I would put a large wager on it outperforming the vast majority of portfolios out there.
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!
As usual I’ve been giving monthly updates of the performance of our model portfolio, consisting of four different Vanguard funds, the same ones I said I’m definitely not selling. You know these by heart already, so let’s see how they did for the year rather than just the month:
The Vanguard Total Stock Market Index (VTSMX) finished the year up 22.22%. Remember that this fund also yields 1.88% at current and makes up the largest portion of our portfolio. The Vanguard Total International Stock Market Index Fund (VGTSX) did an even better 30.87% and right now pays a dividend yield of 2.24%. As you can see, the stock portion of our portfolio did fabulously.
In the fixed income portion of our portfolio, the Vanguard Total Bond Market Index (VBMFX), was up 1.57% while putting out a very nice 4.04% yield. Similarly, the Vanguard GNMA Fund (VFIIX) was up, but a marginal 0.662% while paying a current yield of 3.99%.
Overall, every single one of these funds was up, and it was a great year for investing (remember, early this year the markets looked like they were on the brink of collapse)! Let’s see how things go in 2010.
I’ve been very happy with the way our model portfolio has performed this year, and I believe that December was just as much of a winner as the year had been to date. Let’s take a look at the numbers and see how things went.
The Vanguard Total Stock Market Index Fund (VTSMX) was again up, less than a percent, but up, 0.92%; in addition remember this fund pays a dividend yield of 1.88%. The Vanguard Total International Stock Index Fund (VGTSX) was actually down, 3.61%, but remember, the fund yields a decent 2.24%. On the fixed income side of the equation, the Vanguard GNMA Fund (VFIIX) was also down, 2.21%, while yielding 3.99%, and the Vanguard Total Bond Market Index (VBMFX) was down as well, 1.71%, with a yield of 4.04%.
Despite the fact that three of the four funds in the portfolio were down for the month, overall the portfolio was up, a combination of the fact that VTSMX was the largest holding in it and all of the dividend yields that the various funds paid.
While it wasn’t a spectacular month for our portfolio, it was a positive one, and I’ll take those any days over the alternative!
