madsinger monthly report

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madsinger
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madsinger monthly report

Post by madsinger »

Here is a big fat collection of portfolios, with their October 2008 returns, 2008 YTD return, and annualized returns since 1999, 2001, 2003 and 2005 (9 years 10 months, 7 years 10 months, 5 years 10 months, 3 years 10 months). I broke them into four categories, roughly corresponding to 100/0, 80/20, 60/40, 40/60 stock/bond portfolios, sorted by Total Return since 2001. The 3 fund is 50/30/20 Total Stock/Total Int'l/Total Bond. The s&d is 10 each of VFINX, VIVAX, NAESX, VISVX, VGSIX, 25 VGTSX, 5 VINEX, 20 VBMFX. The coffeehouse is a 60/40 described at The Coffeehouse Investor. The Newsletter portfolios are from a newsletter following Vanguard funds. William Bernstein's "Sheltered Sam" is an all stock portfolio which is 20% VFINX, 25% VIVAX, 5% NAESX, 15% VISVX, 10% VGSIX, 3% VGPMX, 5% each VEURX, VPACX, VEIEX, and 7% VTRIX.

New for 2008, I've added the "Hot Hands" fund, and the Newsletter "Growth Index" portfolio. I've also rearranged the columns so the far right is the "longest" time period, and the far left is the shortest.

The madsinger portfolio, my real-money portfolio (slice-n-dice, approximately 66/5/3/26 stock/REIT/PM/bond) is included at the end.

-Brad.

Code: Select all

                                      CAGR    CAGR    CAGR    CAGR
                   Oct       YTD      since   since   since   since
                   2008      2008     2005    2003    2001    1999

Hot Hands        -17.98%   -42.65%   -1.42%  10.64%   8.17%  11.08%
Sheltered Sam    -21.04%   -34.99%   -2.35%   6.93%   2.45%   3.83%
VFINX            -16.79%   -32.87%   -3.94%   3.46%  -2.27%  -0.85%

s&d              -17.46%   -29.55%   -1.16%   6.97%   3.19%   4.48%
3 fund           -15.08%   -30.28%   -1.16%   5.86%   1.09%   1.99%
Newsletter G-IND -19.97%   -37.50%   -2.49%   5.14%   1.06%   1.10%
Newsletter G     -19.03%   -36.60%   -2.27%   5.92%   0.94%   5.95%
LS G             -16.61%   -32.08%   -2.54%   4.75%   0.07%   1.12%

Wellington       -12.19%   -23.62%    0.42%   5.47%   3.64%   4.39%
coffeehouse      -14.24%   -22.38%   -0.70%   5.59%   3.62%   4.45%
STAR             -12.99%   -25.61%   -1.30%   4.63%   2.13%   3.50%
LS MG            -13.22%   -25.66%   -1.17%   4.51%   1.32%   2.13%
newsletter CG    -16.24%   -31.90%   -1.90%   5.33%   1.13%   4.14%
                  
Wellesley         -7.19%   -13.65%    1.28%   3.74%   4.31%   4.56%
LS CG            -10.09%   -19.62%   -0.17%   3.92%   2.17%   2.83%
newsletter Inc   -11.76%   -22.70%   -1.63%   3.35%   1.74%   1.99%
                  
madsinger        -16.12%   -27.24%   -0.66%         
edit: for resorting...
Last edited by madsinger on Mon Nov 03, 2008 3:21 pm, edited 1 time in total.
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Post by madsinger »

Well....here it is....

Bright spots? Hmmm...Wellington and Wellesley are both positive in the 3 year 10 month span starting Jan 1, 2005. That's all I got...

In "position switching" news, the 3 fund portfolio jumped up two slots in the "sort by since 2001" ranking. That "almost 8 year return" of 1.09% is looking mighty fine.

So we all know what "didn't work" last month. But what really, REALLY didn't work? The madsinger portfolio's position in REITs and Precious Metals were down -31% and -40% in October. Portfolios with these funds suffered accordingly. "Small" was 4% to 5% laggard to "large".

The madsinger portfolio was significantly rebalanced this month with purchases of LV, Int'l, IV, ISmall, EM, REITS, and Metals/Mining. Basically, every stock asset class purchased from bonds. By Oct 31, all asset classes were within a couple of percentage points of targets. I sure hope this "rebalancing thing" is the right thing to do!

September and October have seriously tested us all on our "risk tolerance". I hope everyone has weathered this storm well. Of course, we can still go down from here...perhaps a lot. If you're a net buyer, that's actually a good thing now. For those in the "withdrawal" phase, I hope you were not "overexposed". My retired mother-in-law was over 80% stocks a couple of years ago. At that time, when she rolled some awful variable annuities to Vanguard, the Vanguard adviser got her to 50/50 (she won't listen to me, but she did listen enough to move her money to Vanguard and listen to them). I'm much happier about her situation now!

Wishing us all some calm seas and smooth sailing...
-Brad.
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Post by LFT_PFT »

Thanks for posting.

October (& this year) can be summed up succintly: OUCH!

And, the returns included a large bump in the last week of Oct.
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Post by BlueEars »

Madsinger, thanks for the excellent perspective. I'm hoping because of the crisis atmosphere and liquidity issues that Oct was the actual bottom -- but I'm not predicting anything and am assuming worse could follow.
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Post by snray02 »

Some time ago Trevor (I think) mentioned that a 50/50 combination of Wellington and Wellesley would make a very nice portfolio. So, I invested a portion of my IRA in this combination and it has paid off nicely. This combo is down half what 500 Index is down this year. Not all active management is bad.
Sam
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Post by sergeant »

snray02 wrote:Some time ago Trevor (I think) mentioned that a 50/50 combination of Wellington and Wellesley would make a very nice portfolio. So, I invested a portion of my IRA in this combination and it has paid off nicely. This combo is down half what 500 Index is down this year. Not all active management is bad.
Sam
You are comparing apples to oranges. Wellington and Wellesley contain bonds which have not dropped as far as equities. I am glad you are happy with your decision.
AA- 20+ Years of Expenses Fixed Income/The remainder in Equities.
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Post by snray02 »

Sarge: I am well aware that 500 Index has no bonds. Nevertheless, the S&P 500 has become the defacto "gold standard" to which nearly all actively managed funds, balanced and otherwise, are compared. I also own 500 Index, by the way, and I am not happy with any of the fund's performance YTD. Is anyone?

The point here is Taylor Larrimore's that there are many roads to Dublin. One doesn't have to be wedded to index funds to enjoy some out-performance occasionally. In Wellington and Wellesley Vanguard offers two outstanding active funds which can boost performance of most portfolios. And they have been doing this for many years.
Sam
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Comparing stock and balanced funds?

Post by Taylor Larimore »

the S&P 500 has become the defacto "gold standard" to which nearly all actively managed funds, balanced and otherwise, are compared.


Hi Sam:

Sorry to disagree, but a balanced fund with stocks and bonds should never be compared with the S&P 500 all-stock index.

Best wishes.
Taylor
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Post by snray02 »

Hi Taylor: I hear you but the real world seems to compare everything to S&P 500. What index would you compare balanced funds to? Sam
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Taylor Larimore
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benchmarks?

Post by Taylor Larimore »

snray02 wrote:Hi Taylor: I hear you but the real world seems to compare everything to S&P 500. What index would you compare balanced funds to? Sam


Assuming we accept the common definition of a balanced fund as one that contains both stocks and bonds (and nothing else), a lose benchmark might be a combination of Total Stock Market and Total Bond Market in the same ratio as the fund's holdings.

I think it is very difficult to accurately compare most balanced funds with a specific index.

Best wishes
Taylor
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Post by madsinger »

snray02 wrote:Hi Taylor: I hear you but the real world seems to compare everything to S&P 500. What index would you compare balanced funds to? Sam
If a 50/50 split of Wellington and Wellesley (which is also approximately 50/50 stock/bonds) is an appropriate asset allocation for your need, willingness, and ability to take risk, then it is a good holding for you.

I don't know what a good benchmark would be, but I can point to the chart at the beginning of this thread and say that Wellington and Wellesley lead their respective "categories" since Jan 1, 2001. As for relatively passive "indexes" to compare to, Wellington has outperformed the Life Strategy Moderate Growth Fund by over 2% (annualized) since 2001, and Wellesley has outperformed the Life Strategy Conservative Growth Fund by over 2% (annualized) since 2001. I would say a combination of these funds has served the 50/50 stock/bond investor well over the years.

-Brad.
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Post by BlueEars »

If I really wanted to analyze that 50/50 split I'd put it in M* Xray and see what the current stock/bond ratio is. Then I'd compare that to a comparable ratio of maybe Total Stk and Total Bond with a little Total International assuming they have some international exposure. But I think these funds vary the ratio from quarter to quarter so to really do a compare for 1yr, 3yr, 5yr, 10yr periods would probably be tough. However, you could select a decent ratio of index funds and do a compare in a spreadsheet assuming rebalancing each year. I would guess they would compare very favorably.
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Post by InvestingMom »

Thanks Madsinger. I look forward to your monthly posts....ugly as it was for October.

My take away is that I could have been in a coffee house portfolio (with 20% more bonds and 20% less international over the (almost) 10 yrs, 8 yrs and 6 yrs, and done just as well as the S&D (which is closer to my portfolio) with a lot less volatility. We didn't sell last month but it was way too close for comfort. Of course even 10 years is not a long enough time, but food for thought!
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Post by btenny »

Why does anyone think that Wellesley or Wellington are any better than D&C Balanced? All three funds are actively managed balanced mutual funds with great long term records and good management teams. Yes recently D&C did some dumb things and is getting hammered for it. But please explain what makes everyone think that the active management of Wellesley or Wellington will not do the same thing next year or the year after?

All three charge more fees than a blend of index funds so the index blend should win out in the long run. Plus if the index funds are kept in the proper tax and tax free accounts the sum of them will have much better after tax performance. In fact, I think it would be a big improvement to the portfolio tracking data if some sort of tax consequences were included in the results data. Say a 5 year after tax performance?

Comments?

Bill

PS. Plus management also affects things like the Vanguard Total Bond Market Index fund. It significantly underperformed the index last year (or the year before) for a few months. I seem to remember that the team that manages this fund blew the tracking and bought the wrong thing so they returned less than the market for a while. So even index funds can miss because they too are still managed, a little.
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Post by Robert T »

.
Thanks Brad,

Also just looked at some past returns for various indexes.

Over the past month and year US equity (market, value and small) generally did better than EAFE equity which generally did better than emerging markets equity. The reverse of what we see over the past 5 yrs. Treasuries seemed to have been the only safe haven during this downturn with positive returns YTD and over the last year. Intermediate treasuries (3-7yrs) have held up over the last month and year with the largest term returns (so far), although this was not the case with credit term. The lower the credit quality combined with longer duration the worst the damage.

Interestingly I’m still above my long-term expected portfolio returns since 2003 IPS, despite the recent downturn. Long may that last...

Code: Select all

Returns (%) to October 31, 2008

                                  MTD       YTD      1 YR     5 YR
MARKET

...MSCI US Broad Mkt           -17.65    -32.88    -36.27     0.80 
...MSCI EAFE                   -20.18    -43.54    -46.62     3.60 
...MSCI EM                     -27.36    -53.18    -46.35     9.51 


VALUE 

...MSCI US MidCap Value        -22.07    -34.86    -39.73     2.43 
...MSCI EAFE Value             -20.57    -44.62    -48.42     3.75 
...MSCI EM Value               -27.14    -51.00    -54.08    12.09 


SMALL 

...MSCI US Small               -21.26    -31.72    -36.81     1.86 
...MSCI EAFE Small             -23.74    -48.10    -53.51     1.84 
...MSCI EM Small               -30.22    -60.70    -63.73     6.01 


TERM 

...LB 1-3yr Treasury             0.96      4.81      6.89     3.80 
...LB 3-7yr Treasury             1.30      6.55     10.29     4.78 
...LB 7-10yr Treasury           -1.24      3.83      7.81     4.89 
...LB 10-20yr Treasury          -3.82      0.24      4.13     5.20 
...LB 20+yr Treasury            -2.02      2.93      7.86     6.63 


DEFAULT 
 
...LB 1-3yr Credit              -1.40     -2.67     -1.50     2.45 
...LB US Intermediate Credit    -4.19     -9.31     -8.20     1.35 
...LB US Long Credit           -10.89    -22.97    -22.99        - 
...iBoxx $ Liquid High Yld     -17.28    -25.34    -26.25    -0.98 


Source: MSCI, Lehman Brothers website, ishares website

Robert
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Post by IlliniSigEp »

What I find funny is when times are good, lots of people post their benchmark beating monthly returns on the madsinger montly report post. When times are bad, all those people seem to vanish...

-Dave
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Post by paulob »

IlliniSigEp wrote:What I find funny is when times are good, lots of people post their benchmark beating monthly returns on the madsinger montly report post. When times are bad, all those people seem to vanish...
-Dave
Well, that group would include me, so I'll post my 100% equity returns:

Our IRA's -16.2%
401-k -31.5%
Son's IRA -3.8%

One reason I had passed on posting previously is that I am now using leveraged funds. My results can be ahead of the other porfolios on one day and then swing wildly negative the next day. The 401-k does not have any leveraged or inverse funds so the results this year are different.

When I was posting results monthly on this thread, I wasn't using leverage. That is why I didn't post, and not that my results had suddenly gone south.
Paul
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Post by gkaplan »

I only post my quarterly returns.
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Post by madsinger »

IlliniSigEp wrote:What I find funny is when times are good, lots of people post their benchmark beating monthly returns on the madsinger montly report post. When times are bad, all those people seem to vanish...

-Dave
Yeah, well, I think you're right. It's no fun posting returns that hurt. But, this is one of the reasons I post each month: to have a benchmark. If someone looks at their statement and sees that they're down -25% YTD, and thinking they must have done something really badly, and then see that "comparable" portfolios are down -20% to -25%, then they should not feel so bad. Also, if one has a portfolio that's up 15%, and then realizes that comparable portfolios are up 20%, then maybe they should be looking deeper to find out why.

Last month, I was "on top" of a rather pathetic pile. This month, with my weightings in REITs and PM, I'm back into the pack. I know why it is, but it's good to know why.

I was feeling pretty smug about rebalancing back to "level" at the end of October a couple of days ago. Now, I'm not feeling so smug anymore! Dow down over 900 points in the last two days...

-Brad.
Last edited by madsinger on Thu Nov 06, 2008 4:26 pm, edited 1 time in total.
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Post by peter71 »

IlliniSigEp wrote:What I find funny is when times are good, lots of people post their benchmark beating monthly returns on the madsinger montly report post. When times are bad, all those people seem to vanish...

-Dave
Well, it's one thing to be a braggart in a bull market but it's REALLY obnoxious to be one in a bear market . . . speaking of which, I have to admit Taleb was relatively inoffensive on CNBC today :D

http://www.cnbc.com/id/15840232?video=921233906&play=1

All best,
Pete
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Post by IlliniSigEp »

Honestly if anyone came in posting a 5% return last month, I would take my hat off to them! For all you that posted returns, and to madsinger who always does, way to man-up!

-Dave
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Post by madsinger »

IlliniSigEp wrote:Honestly if anyone came in posting a 5% return last month, I would take my hat off to them! For all you that posted returns, and to madsinger who always does, way to man-up!

-Dave
:D I thought I was really "manning it up" posting my -27% YTD loss, but Market Timer showed some "heavy mettle" when he posted his -200% loss for all to see!

My main financial goal is to make "market like" returns with my portfolio, with perhaps some "help' from Fama-French's "small" and "value" tilt and some "diversifying" assets like REITs and PM. If I can publicly maintain my rebalanced AA, and hopefully show that it "works", I'll be happy.

(And...if it doesn't work...we'll all be able to see why in "real time").

-Brad.
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Post by DiehardDoc »

1 year return -41%

3 year return -14%

:(
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Post by paulob »

IlliniSigEp wrote:Honestly if anyone came in posting a 5% return last month, I would take my hat off to them! For all you that posted returns, and to madsinger who always does, way to man-up!

-Dave
October:

Negative
401-k -19.5%
My IRA -3.4%

Positive
Wife's IRA 1.2%
Son's IRA 14.3%

P.S. I looked at your other posts on this thread, it seems there is a call to "man-up" but you haven't posted your own returns. To quote Seinfield, "what's up with that?".
Paul
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Post by Bounca »

I have posted results on occasion but really need to be consistent every month. Oh, yes….thank you Brad for these posts. Every month I check in. Please don’t stop.

So for this month CAGRs (and i'll even bold my heinous #s for you :wink: ):

Me IRA - 12.84%

20% BND
5% BSV
5% TIP
5% WTMIX (Westcore Microcap)
5% DLS
10% VEA
5% VWO
5% VNQ
5% VBR
35% VTI

Wife IRA - 19.80%

Don’t ask. :evil: :roll: Portfolio was sloppy mess of active funds, now in transition to index.

Me ROTH - 15.59%

55% EXHAX (Manning and Napier Pro Blend Max)
45% EXBAX (Manning and Napier Pro Blend Moderate)
(ps, I cant argue much with the performance of this 70/30 cocktail of balanced holdings over past year)
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Post by grayfox »

One thing I would like to see for each portfolio is drawdown, i.e. how far down are they from their peak value. To me drawdown is the best measure of downside risk.

The S&P 500's current drawdown is 40.93%. I would like to know how did adding bonds or diversification across 10 asset classes mitigate drawdown.

For instance at the peak my ira had 40% equity evenly split between U.S. and International and my current drawdown is 18.88%.
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Post by Bounca »

Great idea grayfox.

I see Oct 5th as the S&Ps peek last year. So lets say take beginning portfolio value from Oct. 1 last year to ending value Oct. 31 this year.

With taking just my IRA 70% equity slice and dice portfolio above, the forth coming tsunami put me here >>> -22.06%

Some notes during that period:
**There was 4 or 5 single holding-to-holding minor rebalancing. Should have done more, in fact over the period things have tilted more 65/35 roughly.
**The 10% VEA used to be split 5%EFA/5%EFV
**The microcap position was changed from PRCGX to WTMIX a few months ago.
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Post by Bounca »

A little follow up. I just did a quick and dirty calculation over that period for 70% VTI and 30% AGG.

Drawdown result >>> -25.76%
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Post by IlliniSigEp »

paulob wrote: P.S. I looked at your other posts on this thread, it seems there is a call to "man-up" but you haven't posted your own returns. To quote Seinfield, "what's up with that?".
Eh, I have never posted them on the madsinger post, I only calculate returns once a year in January. I am 90/10, so I figure I am down at least 30%, maybe more. I will let you know in January :-)

-Dave
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