This article is an update to the following articles:
- On July 1, 2015, I wrote an article for Seeking Alpha introducing The ETF Monkey Vanguard Core Portfolio.
- On January 4, 2016, I wrote the 2015 year-end update for the portfolio.
- On April 5, 2016, I followed that up with the 2016 Q1 update.
- On April 13, 2016, I executed a second rebalancing transaction for the year.
In this article, I will report on the performance of the portfolio for the period ended July 18, 2016. I was on vacation on June 30 and unable to capture the required screen shots to document an update as of that date. While this Q2 update is a little late, as it turns out the sharp rebound following the Brexit announcement offers a nice opportunity to evaluate the performance of the portfolio in a rising market.
Evaluating the Portfolio: Q2 2016
Here is the corresponding Google Finance page for the portfolio as of the market's close on 7/18/16. Have a look, and then I will offer a few comments.
As some reference points, the S&P 500 index closed at 2,043.94 on December 31, 2015, 2,059.74 on March 31, 2016, and an all-time closing high of 2,166.89 on July 18, 2016. Relative to this update, the S&P is up 6.02% YTD and 5.20% since the Q1 update.
In addition, the portfolio received dividends totaling $349.83 during this period, bringing the cash balance in the portfolio to $512.81. This came from the 3 ETFs as follows:
- Vanguard Total Stock Market ETF (NYSEARCA:VTI) - $121.94
- Vanguard FTSE All-World ex-US ETF (VEU) - $164.30
- Vanguard Total Bond Market ETF (BND) - $63.59
So how did the portfolio perform? All told, not too badly. The closing value of the portfolio on July 18 was $51,415.41 vs. $49,076.43 as of March 31 and $48,348.37 on December 31, for a gain of 6.34% YTD and 4.77% since the Q1 update. This means the portfolio has beaten the S&P by .32% YTD, while underperforming by .43% during the latest period.
For purposes of a brief overview, I will evaluate each asset class against where it stood as of my April 13 rebalancing transaction.
- Domestic Stocks - During the period 4/13 - 7/18, VTI grew from $27,489.80 to 28,823.60, an increase of $1,333.80 or 4.85%. Add in the $121.94 of dividends and VTI gained $1,455.74 on a base of $27,489.80, a gain of 5.30%. This is a slight outperformance when compared to the 5.20% returned by the S&P 500 index.
- Foreign Stocks - During the period 4/13 - 7/18, VEU was basically flat, growing from $13,636.90 to 13,671.00. However, when factoring in the $164.30 of dividends received, VEU gained $198.40 on a base of $13,636.90, a gain of 1.45%. As compared to the U.S. market, this reflects the continued underperformance of foreign markets.
- Bonds - During the period 4/13 - 7/18, the value of BND grew from $8,293.00 to $8,408.00. Add in the $63.59 of dividends received and BND gained $178.59 on a base of $8,293.00, a healthy increase of 2.15%. Once again defying common wisdom, bond prices remained firm as continuing economic malaise and global uncertainty led to continued doubts as to when, or how often, the Fed might raise interest rates in 2016.
No Transactions or Rebalancing This Period
As of July 18, all asset classes remain close to their target allocations. The greatest variance is in bonds, which at 16.35% of the portfolio are 1.15% below the target weight of 17.5%. However, given the recent rise in bond prices, I do not wish to add further at this time, preferring to leave a little extra sitting in cash to potentially take advantage of better prices in the future.
Summary and Conclusion
Given the continued underperformance of foreign stocks, I feel like the portfolio performed adequately during the quarter, underperforming the S&P 500, my chosen benchmark, by approximately 4/10 of a percentage point. While foreign stocks continue to underperform in the short term, I still believe that a disciplined allocation to this asset class will prove beneficial over the long term.
Disclosure: I am not a registered investment advisor or broker/dealer. Readers are cautioned that the material contained herein should be used solely for informational purposes, and are encouraged to consult with their financial and/or tax advisor respecting the applicability of this information to their personal circumstances. Investing involves risk, including the loss of principal. Readers are solely responsible for their own investment decisions.