Trailing S&P by 6.35%..Normal?

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Trailing S&P by 6.35%..Normal?

Postby flyingby » Tue Jul 02, 2013 8:37 am

The S&P is up 13.24% year to date, but my 401k is only up 6.9% year to date. I am diversified across USA, International and Bonds so I do expect a divergence from S&P but a 100% difference seems extreme.

My current allocation is

SSgA Russell 3000 Fund 50%
SSgA MSCI EAFE Fund 25%
SSgA MSCI Emerging Market Free Fund 5%
SSgA Barclays Aggregate Bond Fund 20%

Is this just an anomaly or should I be changing by asset allocation?
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Re: Trailing S&P by 6.35%..Normal?

Postby tainted-meat » Tue Jul 02, 2013 8:41 am

Mine is trailing more than that, but I have a high allocation of international funds as part of my investment plan. Stay the course...
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Re: Trailing S&P by 6.35%..Normal?

Postby Wagnerjb » Tue Jul 02, 2013 8:43 am

flyingby wrote:The S&P is up 13.24% year to date, but my 401k is only up 6.9% year to date. I am diversified across USA, International and Bonds so I do expect a divergence from S&P but a 100% difference seems extreme.

My current allocation is

SSgA Russell 3000 Fund 50%
SSgA MSCI EAFE Fund 25%
SSgA MSCI Emerging Market Free Fund 5%
SSgA Barclays Aggregate Bond Fund 20%

Is this just an anomaly or should I be changing by asset allocation?


No, but you should be changing your benchmark. Comparing your asset allocation to a benchmark like the S&P500 is comparing apples to oranges.

Best wishes.
Andy
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Re: Trailing S&P by 6.35%..Normal?

Postby DoWahDaddy » Tue Jul 02, 2013 8:48 am

U.S. Stocks are very strong on the year. International stocks are mostly flattish. Bonds are mostly down. You're lucky to be at only have the stock return for the year.
Me: 75/25 stocks/bonds | Son: 45/45/10 matchbox/hotwheels/thomas & friends
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Re: Trailing S&P by 6.35%..Normal?

Postby staythecourse » Tue Jul 02, 2013 9:00 am

Wagnerjb wrote:No, but you should be changing your benchmark. Comparing your asset allocation to a benchmark like the S&P500 is comparing apples to oranges.


Agreed 100%. I have NEVER understood why folks even look at how broad market indexes are doing when comparing their portfolio's return. Unless you hold 100% LCB then the SP 500 is useless.

For the OP don't succumb to tracking error. You have a well diversified portfolio so don't pay attention to random benchmarks.

As Mr. Gibson states in "Asset Allocation" being well diversified means ALWAYS being unhappy because every year you are going to want to hold less of the underperforming assets and more of those year's stars.

Good luck.
...we all think we're above average investors just like we all think we're above average dressers... -Jack Bogle
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Re: Trailing S&P by 6.35%..Normal?

Postby livesoft » Tue Jul 02, 2013 9:08 am

If you want your 401(k) assets to match the S&P500, then you should invest all your 401(k) assets in a good S&P500 index fund.

The mere fact that you have 20% bonds tells me that you will not match the S&P500. Most years, you will trail it just because you have a bond fund. Of course, with those int'l funds, you will trail even more this year.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Trailing S&P by 6.35%..Normal?

Postby MnD » Tue Jul 02, 2013 9:14 am

flyingby wrote:The S&P is up 13.24% year to date, but my 401k is only up 6.9% year to date. I am diversified across USA, International and Bonds so I do expect a divergence from S&P but a 100% difference seems extreme.

My current allocation is

SSgA Russell 3000 Fund 50%
SSgA MSCI EAFE Fund 25%
SSgA MSCI Emerging Market Free Fund 5%
SSgA Barclays Aggregate Bond Fund 20%

Is this just an anomaly or should I be changing by asset allocation?


It's not extreme, not an anomaly and no, you shouldn't be changing your allocation.
International (developed + emerging markets) is down about 1%, bonds are down 2%.
What you are observing is exactly what one would expect given that 50% of your portfolio is up strongly and 50% is down slightly.
Math works! :happy
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Re: Trailing S&P by 6.35%..Normal?

Postby red5 » Tue Jul 02, 2013 9:18 am

flyingby wrote:The S&P is up 13.24% year to date, but my 401k is only up 6.9% year to date. I am diversified across USA, International and Bonds so I do expect a divergence from S&P but a 100% difference seems extreme.

My current allocation is

SSgA Russell 3000 Fund 50%
SSgA MSCI EAFE Fund 25%
SSgA MSCI Emerging Market Free Fund 5%
SSgA Barclays Aggregate Bond Fund 20%

Is this just an anomaly or should I be changing by asset allocation?


I am up 6.8% for the year, very similar to you. I also have a fairly similar allocation as you. Chalk it up to Emerging Markets and International. Based on my contributions and starting year value, total international is down 2.4% and emerging markets is down 11.7%.

Wait for a good international year and THEN compare your portfolio with the s&p 500.

For what its worth, the Vanguard 2045 fund is up what, 7 or 8 %. That is more in line with your allocation.
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Re: Trailing S&P by 6.35%..Normal?

Postby IlliniDave » Tue Jul 02, 2013 9:30 am

I think all things considered it's to be expected. I'm trailing by a little less overall, maybe 5%, but I'm a little more US-centric and started a substantial ramp-up of my taxable investment contributions in March, so missed a lot of the early year returns with my new money. Ah, well. Hopefully there will be as many or more years where we are ahead of the SP500 by similar amounts.
Don't do something. Just stand there!
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Re: Trailing S&P by 6.35%..Normal?

Postby Investing is boring » Tue Jul 02, 2013 9:47 am

flyingby wrote:The S&P is up 13.24% year to date, but my 401k is only up 6.9% year to date. I am diversified across USA, International and Bonds so I do expect a divergence from S&P but a 100% difference seems extreme.

My current allocation is

SSgA Russell 3000 Fund 50%
SSgA MSCI EAFE Fund 25%
SSgA MSCI Emerging Market Free Fund 5%
SSgA Barclays Aggregate Bond Fund 20%

Is this just an anomaly or should I be changing by asset allocation?


If the S&P were DOWN 15% for the year, and you were DOWN only 6%, would you be concerned or rejoicing? Diversification seems to be working in my opinion...
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Re: Trailing S&P by 6.35%..Normal?

Postby #Cruncher » Tue Jul 02, 2013 9:48 am

As other posters have said, it makes little sense to measure your portfolio's return against that of the S&P 500. A better comparison would be against the Vanguard funds that are most like yours. Here are their YTD returns through 6/30/2013 weighted by your allocation:
Code: Select all
Allocation   Return    Symbol         Fund
----------   ------    ------   -----------------------
    50%      14.03%     VTSMX   Total Stock Market Index
    25%       3.38%     VDMIX   Developed Markets Index
     5%     (10.88%)    VEIEX   Emerging Markets Stock Index
    20%      (2.54%)    VBMFX   Total Bond Market Index
----------   ------
   100%       6.81%             Total / Weighted Average
The weighted average of 6.81% is pretty close to the 6.9% your 401K returned.

flyingby wrote:The S&P is up 13.24% year to date, but my 401k is only up 6.9% year to date
A couple of other things that can affect a comparison like this:
  • Use the exact same periods. Just one day can make a big difference. The S & P 500 index closed at 1,426.19 on 12/31/2012. On 6/30/2013 (actually Friday 6/28/2013) it closed at 1,606.28, up 12.63%. On 7/1/2013 it closed at 1,614.96, up 13.24%. It looks like you're using the latter figure. To be comparable, your 401(k) YTD results should be through the same date.
  • The 13.24% figure excludes dividends, but the results for your 401K almost certainly do include them. You can get results for the S & P 500 index including dividends from Morningstar or from Vanguard's web page for the VFINX 500 fund, which shows a return of 13.82% through 6/30/2013.
Sources:
Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
Vanguard Developed Markets Index Fund Investor Shares (VDMIX)
Vanguard Emerging Markets Stock Index Fund Investor Shares (VEIEX)
Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)
Vanguard 500 Index Fund Investor Shares (VFINX)
Google Finance - S&P 500 (INDEXSP:.INX)
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Re: Trailing S&P by 6.35%..Normal?

Postby Default User BR » Wed Jul 03, 2013 1:37 pm

This is an example of why I don't think most people should be calculating personal rate of return.


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Re: Trailing S&P by 6.35%..Normal?

Postby btenny » Wed Jul 03, 2013 1:54 pm

Go to the Madsinger monthly report here on Bogleheads

viewtopic.php?f=10&t=119097&newpost=1739629

and compare your returns for Wellington or various other portfolios. Most are 60% stocks/40% bonds but others are 40/60 to see how you did versus those.

Bill
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Re: Trailing S&P by 6.35%..Normal?

Postby YDNAL » Wed Jul 03, 2013 2:39 pm

flyingby wrote:The S&P is up 13.24% year to date, but my 401k is only up 6.9% year to date. I am diversified across USA, International and Bonds so I do expect a divergence from S&P but a 100% difference seems extreme.

My current allocation is

SSgA Russell 3000 Fund 50%
SSgA MSCI EAFE Fund 25%
SSgA MSCI Emerging Market Free Fund 5%
SSgA Barclays Aggregate Bond Fund 20%

Is this just an anomaly or should I be changing by asset allocation?

What do you care what the S&P 500 is doing if you invest differently ?
  • No, you shouldn't change your allocation, but change your benchmark instead.
  • My suggestion for benchmark is Vanguard Target Retirement 2030 Fund (VTHRX) (78/22) - and you see it returned 6.89% YTD through 6/30/2013.
    Link: https://personal.vanguard.com/us/funds/ ... =INT#tab=1
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
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Re: Trailing S&P by 6.35%..Normal?

Postby rkhusky » Wed Jul 03, 2013 3:10 pm

btenny wrote:Go to the Madsinger monthly report here on Bogleheads

viewtopic.php?f=10&t=119097&newpost=1739629

and compare your returns for Wellington or various other portfolios. Most are 60% stocks/40% bonds but others are 40/60 to see how you did versus those.

Bill


He should compare to the 2nd group which is supposed to be 80/20.
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Re: Trailing S&P by 6.35%..Normal?

Postby House Blend » Wed Jul 03, 2013 5:57 pm

Default User BR wrote:This is an example of why I don't think most people should be calculating personal rate of return.

Actually I think this is a great example why people should compute returns. Not understanding why your returns seem to be X when something else indicates Y is a great learning opportunity.

Investigating and asking questions when something doesn't make sense is one of the most "actionable" things an investor can do.
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Re: Trailing S&P by 6.35%..Normal?

Postby Peter Foley » Wed Jul 03, 2013 8:44 pm

6 months is also a fairly short time period. When I looked at one year returns for total international the rate of return was much higher. I would guess that if you looked at a one year or two year comparison the divergence would not be so great.
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Re: Trailing S&P by 6.35%..Normal?

Postby Dopey » Wed Jul 03, 2013 10:10 pm

I'm follow a boglehead philosophy, and I'm sure I'll get "corrected" for saying this, but.....

I find it funny how we can poke fun at active manager's who get beaten by the S&P, but then promptly explain away why our portfolio's don't keep up with the S&P....
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Re: Trailing S&P by 6.35%..Normal?

Postby Artsdoctor » Wed Jul 03, 2013 10:21 pm

An active manager who is managing a large-cap core fund SHOULD be compared to the S&P 500.

An active manager who has a small value bent, for example, should not.

No one should be comparing their portfolio performance to the S&P 500 unless their objective is to hold a 100% large cap core portfolio.

I find that choosing a benchmark that closely resembles what you're hoping to achieve can be a reality check but there has to be some similarity to your portfolio.
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