madsinger monthly report (December 2019)

[madsinger]

Here is a big fat collection of portfolios, with their December 2019 returns, 2019 YTD return, and annualized returns since 1999, 2010, 2015, and 2017 (21 years, 10 years, 5 years, 3 years). I broke them into four categories, roughly corresponding to 100/0, 80/20, 60/40, 40/60 stock/bond portfolios, sorted by 10 year Total Return. The 3 fund is 50/30/20 Total Stock/Total Int'l/Total Bond. The s&d is 10 each of VFIAX, VVIAX, VSMAX, VSIAX, VGSLX, 25 VTIAX, 5 VINEX, 20 VTABX. 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% VFIAX, 25% VVIAX, 5% VSMAX, 15% VSIAX, 10% VGSLX, 3% IAU, 5% each VEUSX, VPADX, VEMAX, and 7% VTRIX. The madsinger portfolio is my real-world portfolio, roughly 50/6/11/33 stock/REIT/Gold/bond. The madsingerPP portfolio is the "permanent portfolio" portion of my portfolio consisting of 25% each of stock, long bond, cash, gold.

-Brad.

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                                    CAGR    CAGR    CAGR    CAGR
                  Dec      YTD      since   since   since   since
                  2019     2019     2017    2015    2010    1999
VFINX             3.02%   31.46%   15.16%  11.57%  13.41%   6.62%
Sheltered Sam     2.96%   25.50%   10.39%   8.43%  10.51%   7.87%
Hot Hands         2.50%   33.41%    9.16%   5.22%   9.98%  10.44%
                  
Newsletter G      2.99%   27.50%   13.58%  10.25%  12.06%   9.88%
Newsletter G-IND  2.76%   26.50%   12.54%   9.69%  12.06%   7.34%
LS G              2.69%   23.13%   10.97%   7.91%   9.35%   5.84%
3 fund            2.73%   23.60%   11.15%   7.99%   9.04%   6.33%
s&d               2.40%   21.85%    9.11%   7.05%   8.83%   7.44%

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Newsletter CG     2.41%   23.40%   12.36%   9.49%  11.21%   8.40%
Wellington        2.02%   22.51%   10.72%   8.56%   9.90%   7.83%
STAR              2.11%   22.21%   11.03%   7.81%   8.96%   7.02%
coffeehouse       1.59%   19.27%    7.91%   6.38%   8.39%   7.12%
LS MG             1.93%   19.37%    9.30%   6.82%   8.08%   5.67%
                  
Newsletter Inc    1.91%   22.50%   11.83%   8.68%  10.04%   6.56%
Wellesley         1.14%   16.39%    7.70%   6.46%   7.98%   6.88%
LS CG             1.23%   15.68%    7.59%   5.66%   6.61%   5.24%
                  
madsinger         1.92%   18.35%    8.06%   6.13%   7.92%   
madsinger PP      0.97%   16.65%    8.46%   5.63%      

[madsinger]

2019 was a well above average year for the portfolio returns. Virtually all asset classes represented in these portfolios returning above their long term averages. Stock heavy portfolios all returning in the 20% to 30% range. Even "conservative" portfolios with 50% or less stock returned in the upper teens. The "Permanent Portfolio" with only 25% stock (and 25% cash/short bonds) returned over 16% for the year.

A few comments on the "PP" part of my portfolio. This portfolio of four asset classes with low correlation has been doing just what it should. Only one down month for the year ( -1% in September ) and due to the double digit returns of three of the asset classes, higher than expected returns for the year. Only two down months for the S&P 500 this year, but both times, the drops were more than offset by large returns in long bonds for those months.

Another satisfying part of the PP for me, is watching rebalancing "work". On four occasions this year, I rebalanced when one of the classes was up or down 10% from my target allocation. Stocks were purchased and bonds were sold in January and August, and the other way April and November. (Gold also sold in June) As a result, the "internal rate of return" for all three of these assets exceeded the "buy and hold" approach from the beginning of the year:

My Long Bond fund (VLGSX) returned 14.30% for the year, but an XIRR of 15.81% due to rebalancing.

My S&P 500 fund (OGEAX) returned 30.90% for the year, but an XIRR of 31.39% due to rebalancing.

My gold holding (IAU) returned 17.98% for the ETF, but an XIRR of 18.27 due to rebalancing.

While this "bonus" is not guaranteed (if one outperforming class keeps outperforming), but it is satisfying to see "in real life".

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          STOCK  LONG BOND  CASH / SB   GOLD   PORTFOLIO 
January   7.97%    0.42%      0.13%     2.85%    2.71%
February  3.21%   -1.21%      0.16%    -0.47%    0.40%
March     1.91%    5.44%      0.14%    -1.59%    1.40%
April     4.02%   -1.89%      0.14%    -0.73%    0.37%
May      -6.36%    6.66%      0.18%     1.79%    0.56%
June      7.00%    1.02%      0.14%     8.15%    4.01%

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July      1.40%    0.29%      0.15%     0.15%    0.49%
August   -1.42%   11.30%      1.06%     7.69%    4.55%
September 1.82%   -2.56%     -0.04%    -3.16%   -1.00%
October   2.13%   -1.07%      0.52%     2.55%    1.06%
November  3.64%    0.04%      0.01%    -3.32%    0.08%
December  2.97%   -2.98%      0.34%     3.72%    0.97%
               
YTD      31.39%   15.81%      2.99%    18.27%   16.65%

[madsinger]

While I am not a fan of the "Hot Hands" approach to fund picking, the 2019 "Hot Hands" fund, the U. S. Growth fund, performed very well with a 33.41% return. It was the third highest returning Vanguard fund for the year. I have sorted the Vanguard funds by their 2019 returns and selected "my" Hot Hands for the 2020. It's a similar style to the 2019 fund, so we'll see if this style persists as a winner in 2020. The 10 year return for this strategy was about 10%, underperforming the S&P 500 by over 3% annually.

The highest performing "portfolio" in the past 3, 5, and 10 years has been the plain old Vanguard S&P 500 fund. The "tens" decade 2010-2019 was a strong decade for US stock funds, and large cap stocks as well. Any portfolio holding international stocks or bonds did not perform as well. While I would not use a 100% US large stock portfolio myself, it is still the largest portion of my personal portfolio, and I'm happy to ride that wave!

Thanks to all who have been watching these reports for over 15 years! I'll keep doing them as long as there is interest here.

Best wishes for a happy and prosperous 2020!

-Brad.

[iceport]

Happy New Year, Brad! Count me as "interested." I appreciate your efforts in documenting these returns.

Again this year my own portfolio has lagged most of the comparable model portfolios. The primary culprit, as usual, is my heavy allocation (~24%) to "cash" in the form of a stable value fund and some minor money market holdings. With the stable value fund yielding about 3% and my bond holdings yielding far less, I still think the allocation is justified and that changing the composition of the bond portfolio now would be counterproductive over the long term. In some future year, the stable value fund's 3% yield could be the best return of any holding in the portfolio.

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                                    CAGR    CAGR    CAGR
                  Dec      YTD      since   since   since
                  2019     2019     2017    2015    2010
iceport           1.98%   17.19%    8.19%   6.41%   7.53%

My target portfolio allocations, now fixed indefinitely, look like this:
30% US Equity
4% US REIT
4% ex-US Real Estate
18% ex-US Equity
44% Fixed Income

However, during the last 10 years this portfolio was transitioned from 69% equity to 56%, so the longer-term returns are not quite comparable to the model portfolios. (And the comparison is even less favorable for me than it appears.)

My benchmark return was 17.43% for 2019, slightly better than my real-world 17.19%. The closest Vanguard Target Retirement fund — 2025 Fund (VTTVX), 61% equity — returned 19.63% in 2019.

Interestingly, the iceport returns are quite similar to the madsinger returns.

Cheers! And stay the course!

[madsinger]

My target portfolio allocations, now fixed indefinitely, look like this:

30% US Equity
4% US REIT
4% ex-US Real Estate
18% ex-US Equity
44% Fixed Income

Interestingly, the iceport returns are quite similar to the madsinger returns.

Yes, iceport, our returns are very similar...due to our very similar allocations! My asset allocation is basically:

33.33% (1/3) US Equity
16.67% (1/6) ex-US Equity
5.56% (1/18) US REIT
33.33% (1/3) Bonds (divided Long, Int., and short, 1/9, 1/9, 1/9)
11.11% (1/9) Gold (IAU)

If I traded my IAU for Bonds, we'd basically be the same.

Thank you for posting your results. It is interesting and helpful to see other's real life returns.

-Brad.

[iceport]

It is interesting and helpful to see other's real life returns.

-Brad.

I think so too! Glad you don't mind another random portfolio being posted here.

It's just important not to be tempted by the results into making portfolio changes based on past returns.

It's also important to remember that short term returns can have an out-sized effect on long term returns. It wasn't so long ago I recall reading your curated collection of returns and marveling at how remarkably similar the longer-term returns were across the broad range of equity allocations. Actually, that's still the case for the 21-year returns, which span the Great Recession.

[Trader Joe]

Here is a big fat collection of portfolios, with their December 2019 returns, 2019 YTD return, and annualized returns since 1999, 2010, 2015, and 2017 (21 years, 10 years, 5 years, 3 years). I broke them into four categories, roughly corresponding to 100/0, 80/20, 60/40, 40/60 stock/bond portfolios, sorted by 10 year Total Return. The 3 fund is 50/30/20 Total Stock/Total Int'l/Total Bond. The s&d is 10 each of VFIAX, VVIAX, VSMAX, VSIAX, VGSLX, 25 VTIAX, 5 VINEX, 20 VTABX. 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% VFIAX, 25% VVIAX, 5% VSMAX, 15% VSIAX, 10% VGSLX, 3% IAU, 5% each VEUSX, VPADX, VEMAX, and 7% VTRIX. The madsinger portfolio is my real-world portfolio, roughly 50/6/11/33 stock/REIT/Gold/bond. The madsingerPP portfolio is the "permanent portfolio" portion of my portfolio consisting of 25% each of stock, long bond, cash, gold.

-Brad.

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                                    CAGR    CAGR    CAGR    CAGR
                  Dec      YTD      since   since   since   since
                  2019     2019     2017    2015    2010    1999
VFINX             3.02%   31.46%   15.16%  11.57%  13.41%   6.62%
Sheltered Sam     2.96%   25.50%   10.39%   8.43%  10.51%   7.87%
Hot Hands         2.50%   33.41%    9.16%   5.22%   9.98%  10.44%
                  
Newsletter G      2.99%   27.50%   13.58%  10.25%  12.06%   9.88%
Newsletter G-IND  2.76%   26.50%   12.54%   9.69%  12.06%   7.34%
LS G              2.69%   23.13%   10.97%   7.91%   9.35%   5.84%
3 fund            2.73%   23.60%   11.15%   7.99%   9.04%   6.33%
s&d               2.40%   21.85%    9.11%   7.05%   8.83%   7.44%

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Newsletter CG     2.41%   23.40%   12.36%   9.49%  11.21%   8.40%
Wellington        2.02%   22.51%   10.72%   8.56%   9.90%   7.83%
STAR              2.11%   22.21%   11.03%   7.81%   8.96%   7.02%
coffeehouse       1.59%   19.27%    7.91%   6.38%   8.39%   7.12%
LS MG             1.93%   19.37%    9.30%   6.82%   8.08%   5.67%
                  
Newsletter Inc    1.91%   22.50%   11.83%   8.68%  10.04%   6.56%
Wellesley         1.14%   16.39%    7.70%   6.46%   7.98%   6.88%
LS CG             1.23%   15.68%    7.59%   5.66%   6.61%   5.24%
                  
madsinger         1.92%   18.35%    8.06%   6.13%   7.92%   
madsinger PP      0.97%   16.65%    8.46%   5.63%      

Thank you very much for your monthly reports Brad. I really do appreciate your Monthly Reports and I always read them. Please continue if you can.

For myself, I only invest in either VFIAX or VTSAX. I do wonder though, whatever happened to the Paul Merriman Ultimate By and Hold Portfolio. Is this the same portfolio as the Slide and Dice (S&D) listed in your Monthly Report?

[ram]

I always read your report. Keep them coming.

[madsinger]

I do wonder though, whatever happened to the Paul Merriman Ultimate By and Hold Portfolio. Is this the same portfolio as the Slide and Dice (S&D) listed in your Monthly Report?

I think Paul Merriman's Ultimate Buy and Hold is a bit closer to the "Sheltered Sam" portfolio, with US holdings in Large, Large Value, Small, Small Value, REIT, and internationals L, LV, S, SV, EM. This portfolio is 50% international which has not fared as well as US in the past decade, so I suspect it may look a bit lower than most of the others on this chart. The ideas are very similar to Sheltered Sam, and to the Coffeehouse "stock" part of the portfolio.

-Brad.

[madsinger]

I always read your report. Keep them coming.

Thanks for the note, ram! I'll do just that!

-Brad.

[bschultheis]

Brad, I always appreciate the time and effort you put into keeping these numbers current.

All the best in 2020.

Bill